<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15 (d) of
the Securities and Exchange Act of 1934
For the Fiscal Year Ended June 30, 1998
OR
( ) Transition Report Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Commission file number 0-4090
ANALYSTS INTERNATIONAL CORPORATION
<TABLE>
<S> <C>
Minnesota 41-0905408
(State of Incorporation) (IRS Identification No.)
7615 Metro Boulevard, Minneapolis, Minnesota 55439
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: 612/835-5900
Securities registered pursuant to Section 12 (b)
of the Act: NONE
Securities registered pursuant to Section 12 (g)
of the Act: Common Stock, par value $.10 per share
Common Share Purchase Rights
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No
--- ---
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant as of August 31, 1998 was $427,725,000 based
upon the closing price as reported by Nasdaq.
As of August 31, 1998 there were 22,490,652 shares of the registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated by reference are (i) portions of the annual report to
shareholders for the year ended June 30, 1998 (Parts I and II) and (ii) proxy
statement dated September 8, 1998 (Part III).
<PAGE>
PART I
ITEM 1. BUSINESS
Analysts International Corporation ("Analysts International" or the
"Company") provides a full range of computer software services to computer
users, computer manufacturers and software developers throughout the United
States and in Canada and the United Kingdom. Over 90% of the Company's
revenues are from services provided to its existing customer base, which
consists primarily of Fortune 500 companies. This high percentage of repeat
business reflects the Company's emphasis on customer satisfaction and
development of long-term relationships with customers who have an ongoing
need for the services which the Company provides.
Analysts International offers its clients a full range of software
service offerings, sometimes referred to by others in the industry as
"solutions," including custom software development under Company project
management, Year 2000 assessment and remediation services, supplemental IT
and software engineering staffing, maintenance of legacy systems, help desk
services and single source staffing of programmers and other software
professionals through the Company's TechWest Division. The Company's
projects involve nearly every type and manufacture of computers and all of
the major operating systems. Examples of the types of projects in which the
Company was involved in during the fiscal year are highlighted in detail in
the Company's 1998 Annual Report.
Analysts International's largest customer is U S West Inc., which is
headquartered in Denver and provides telecommunication services to over 25
million customers in 14 states as well as domestic and international cable
and telephone, wireless communications, directory and information services.
The Company is U S West's single source for supplemental staffing for
2
<PAGE>
U S West's IT/software engineering needs. To meet these needs, and to
facilitate its management of over 1,000 computer programmers and other
technical personnel it has on assignment at U S West, the Company established
its TechWest Division, which fills requirements, manages assigned personnel
and provides time record keeping/billing services through proprietary
software developed specifically for this engagement. The Company's
three-year contract expired May 31, 1998, and the contract was extended
through November 30, 1998. The Company believes the contract will be renewed
for an additional two to three years. Revenues from services provided to U S
West were about 22% of total revenues during the last two fiscal years and
are expected to be about that same percentage for fiscal 1999. Loss of this
business could have a material adverse effect on the Company, although the
Company believes it could replace the business lost if the contract is not
renewed and the replacement business would mitigate or offset the profit lost
from the loss of the U S West business.
The Company has expanded the TechWest service offering to other clients,
including Chevron Information Technology Company (Chevron Corporation's
technology subsidiary) and Salt River Project (the nation's third largest
public power utility). Motorola's Semi-Conductor Products Sector became a
TechWest customer during fiscal 1998. These TechWest customers use the
Company as their sole source for supplemental IT/software engineering
staffing.
Analysts International provided services through 30 of its branch
offices during the year to various divisions of International Business
Machines Corporation (IBM), its second largest customer, as one of a limited
number of national service providers under IBM's National Procurement
initiative. The Company's contract with IBM expires December 31, 2000,
subject to IBM's right to cancel for convenience on 30 days' written notice.
IBM's National Procurement initiative requires the Company and the other
participating vendors to
3
<PAGE>
accept lower hourly rates in return for the opportunity to do a greater
volume of business with IBM. There can be no assurance, however, that volume
will offset lower rates. IBM business under the national contract accounted
for about 16% to 21% of revenues in each of the last three fiscal years, and
loss of this business could have a material adverse effect on the Company.
The Company believes, however, that the prevailing high demand for the
services it provides would permit it to replace the loss of the IBM business
and at least mitigate, if not offset, the resulting loss of profits.
Analysts International provides its services to a wide range of
industries. Its fiscal 1998 revenues were derived from services rendered to
customers in the following industry groups:
<TABLE>
<CAPTION>
Approximate Percent
Industry Group FY 1998 Revenues
- ------------------------------------------------------------------------------
<S> <C>
Telecommunications 25.1%
Electronics 21.5%
Services 10.2%
Manufacturing 11.7%
Financial 6.9%
Oil and Chemical 5.6%
Merchandising 5.4%
Insurance/Health Care 4.9%
Food 2.2%
Government 1.8%
Power and Utility 1.7%
Transportation 1.3%
Other 1.7%
</TABLE>
4
<PAGE>
Analysts International provided services to more than 900 clients during
the fiscal year. Consistent with its practices in prior years, the Company
rendered these services almost exclusively on a time and materials hourly
rate basis under which invoices for services rendered were submitted no less
frequently than monthly with payment due generally net 30 days.
ORGANIZATION AND MARKETING
Analysts International provides its software services through its branch
and field offices, assigned on a geographical basis to one of five regions.
Each branch office is staffed with technical personnel and is managed by a
branch manager, who has primary responsibility for the administration,
personnel and recruiting, customer relations and profitability of the branch.
The branch manager has broad authority to conduct the operation of the
branch, subject to adherence to corporate policies. In general, field
offices are established to support specific projects for one or more specific
customers at locations not served by a local branch office and are managed by
a branch within the same geographical region. A field office may become a
branch office when the volume of business and the prospects for additional
business justify the additional location expenses associated with branch
office status.
During the fiscal year, the Company maintained branch offices in the
following cities: Atlanta, Austin, Boca Raton, Chicago,
Cincinnati/Dayton, Cleveland, Columbus (Ohio), Dallas, Danbury, Denver,
Des Moines, Detroit, Houston, Indianapolis, Kansas City, Iselin (New Jersey),
Lexington (Kentucky), Los Angeles, Minneapolis, New York City, Omaha,
Phoenix, Raleigh/Durham, Rochester (Minnesota), Rochester (New York), St.
Louis, San Francisco, Seattle, Silicon Valley, Tampa, Toronto, Canada and
Tulsa. On July 1, 1998, one additional branch office was established in
Portland, Oregon.
5
<PAGE>
Analysts International utilizes its own direct sales force to sell its
services. At the end of the fiscal year, the Company's sales staff totaled
110 in number. The ability to recruit and hire experienced technical
personnel with backgrounds and experience suitable for customer requirements
is an important factor in the Company's business, and each branch office
employs at least one full time recruiter. At the end of the fiscal year, the
Company's recruiting staff totaled 125 in number.
COMPETITION
Analysts International competes with software consulting divisions of
several large companies (including DEC, Andersen Consulting and IBM) on a
national basis. These organizations and their software consulting divisions
are substantially larger than the Company in terms of sales volume and
personnel and have substantially greater financial resources.
The Company also competes with other national software services
companies such as Computer Task Group, CGA, Keane Inc., and Computer Horizons.
The Company's branches compete in their local market areas with numerous
locally-based software services firms. Most of the locally-based competitors
are approximately the same size as or smaller than the Company's local
branch, although in certain market areas they are larger than the Company's
local branch.
The Company believes its total staff and sales volume are larger than
most of the national and local software services companies, but in some
market areas certain of these competitors may be larger. Although there are
no comprehensive industry statistics available, the Company believes it is
among the ten largest national software services companies in the United
States.
6
<PAGE>
Principal competitive factors in the software services business include
technical expertise, responsiveness to customers' needs, reputation and
credibility, and hourly rates. Analysts International believes it is
competitive in these respects.
PERSONNEL
Analysts International has approximately 5,300 personnel. Of these,
approximately 4,500 are systems analysts, computer programmers and other
technical personnel whose services are billable to clients. Several years of
programming experience is generally a prerequisite to employment with the
Company.
Maintaining the present volume of the Company's business and its
continued growth depend to a significant extent on its ability to attract and
retain qualified technical personnel. Such personnel are in great demand.
Although the Company has been able to attract and retain qualified technical
personnel and believes its personnel relations are satisfactory, there can be
no assurance the Company will be able to continue to attract and retain such
personnel. Its inability to do so would have a material adverse effect on
the registrant's business.
OTHER MATTERS
Analysts International was incorporated under Minnesota law on March 29,
1966. Its principal office is identified in response to Item 2 below. Raw
materials, seasonality, compliance with environmental protection laws, and
patents, trademarks, licenses, franchises or other concessions are not
material to an understanding of the Company's business. No portion of the
Company's business is subject to renegotiation of profits at the election of
the government. Backlog is not material because nearly all of the Company's
contracts for services, including
7
<PAGE>
contracts with the government (which are not material), are terminable by
either the customer or the Company on notice of 30 days or less.
CAUTIONARY STATEMENT UNDER THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Statements included in this document may be "forward-looking statements"
within the meaning of that term in Section 27A of the Securities Act of 1933,
as amended, and of Section 21F of the Securities Exchange Act of 1934, as
amended. Additional oral or written forward-looking statements may be made by
the Company from time to time, and such statements may be included in
documents that are filed with the Securities and Exchange Commission. Words
such as "believes," "intends," "possible," "expects," "estimates,"
"anticipates," or "plans" and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements are based on expectations and assumptions,
and they involve risks and uncertainties which could cause results or
outcomes to differ materially from expectations. Among the risks and
uncertainties important to the Company's business are the continued need of
current and prospective customers for the Company's services, competition,
the availability of qualified professional staff, and the Company's ability
to increase rates as labor and operating costs increase. There may be other
factors, such as general economic conditions which affect businesses
generally, which may cause results to vary from expectations.
ITEM 2. PROPERTIES
Analysts International's principal executive offices are located at 7615
Metro Boulevard, Minneapolis, Minnesota 55439, in a 20,000 square foot office
building which it owns. All branch offices and field offices are held under
leases with varying expiration dates ranging from
8
<PAGE>
30 days to 9 years. See Note H of Notes to Consolidated Financial Statements
at page 24 of the Company's 1998 Annual Report to Shareholders.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party
to or which any of its property is subject, other than ordinary routine
litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of it's 1998 fiscal year.
9
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Frederick W. Lang 73 Chairman and Chief Executive
Officer since 1989; President and
Chief Executive Officer from
1966-1989; Treasurer from 1987-1989.
Victor C. Benda 67 President and Chief Operating
Officer since 1989; Executive Vice
President from 1983 to 1989; Senior
Vice President from 1980 to 1983;
Vice President from 1967 to 1980.
Sarah P. Spiess 57 Executive Vice President since
1996; Senior Vice President during
1996; Vice President and General
Manager of Southern Region from
1992 to 1996; Manager of
Minneapolis Branch 1979 to 1992.
Thomas R. Mahler 52 Secretary since 1979; General
Counsel since 1982.
Gerald M. McGrath 59 Chief Financial Officer since 1996;
Treasurer since 1989; Vice
President, Finance since 1988;
Assistant Treasurer from 1976 to
1989; Controller from 1966 to 1989.
</TABLE>
Terms of office expire October 15, 1998.
10
<PAGE>
PART II
The following portions of the Company's annual report to shareholders
for the fiscal year ended June 30, 1998 are incorporated by reference in
response to Items 5, 6, 7 and 8 as follows:
<TABLE>
<CAPTION>
Items in Form 10-K Caption or Section and Page in Annual Report
- ------------------ --------------------------------------------------------------
<S> <C> <C>
5 Market Price Ranges on Common Stock 25
6 Five-Year Summary 26
7 Management's Discussion and Analysis 16-17
8 Financial Highlights and Statements Inside Front
Cover, 18-26
</TABLE>
(See Index to Consolidated Financial Statements and Schedules set forth in
Item 14 of this Form 10-K.)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no disagreements with or changes in the Company's
independent auditors within the past 24 months.
11
<PAGE>
PART III
The information regarding executive officers required by Item 10 is set
forth under the caption "Executive Officers" in Part I of this Form 10-K.
Other information called for in Part III, including information regarding
directors (Item 10), executive compensation (Item 11) and security ownership
of certain beneficial owners and management (Item 12), is set forth in the
Company's definitive proxy statement for the annual meeting of shareholders
to be held October 15, 1998, filed pursuant to Regulation 14A, as follows:
<TABLE>
<CAPTION>
Items in Form 10-K Caption and Page in Definitive Proxy Statement
- ------------------ ---------------------------------------------------------
<S> <C> <C>
10 Election of Directors 2-3
11 Board Committees and Compensation and
Executive Compensation 3, 5-8
12 Election of Directors and Principal
Shareholders 2-3, 10
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1998:
a. No director, executive officer, nominee for election as a director, holder
of more than five percent of the Company's common stock or members of the
immediate family of any of the foregoing persons had any direct or indirect
material interest in any transaction or series of transactions to which the
Company was a party and in which the amount exceeded $60,000, nor is any
such transaction proposed;
12
<PAGE>
b. The Company was not a party with any entity in which any of the Company's
directors or nominees for election as directors was an executive officer,
held more than a 10% equity interest, was a member of or of counsel to
(in the case of a law firm) or was a partner or executive officer (in the
case of an investment banking firm), in any transaction involving payments
of more than five percent of the gross revenues of either the Company or
such entity, nor is any such transaction proposed; and
c. No director, executive officer or nominee for election as a director or
(i) any member of the immediate family of any of the foregoing, (ii) any
corporation or beneficial holder of ten percent or more of any class of
equity securities, or (iii) any trust or other estate in which such
person served as a trustee or in a similar capacity was indebted to the
Company in excess of $60,000.
Subparagraph d. of this Item is not applicable.
13
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
a.1 CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of Analysts International
Corporation and its subsidiary and the related independent auditors'
report are included on the following pages of its annual report to
shareholders for the fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
Pages in Annual Report
----------------------
<S> <C>
Consolidated Balance Sheets at June 30, 1998 and 1997 18
Consolidated Statements of Income for each of the
three years in the period ended June 30, 1998 19
Consolidated Statements of Cash Flows for each of the
three years in the period ended June 30, 1998 20
Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended June 30, 1998 21
Notes to Consolidated Financial Statements 22-24
Independent Auditors' Report 25
<CAPTION>
a.2 CONSOLIDATED FINANCIAL STATEMENT SCHEDULES Page Herein
-----------
<S> <C>
Independent Auditors' Report 18
Schedule II. Valuation and Qualifying Accounts 19
</TABLE>
Other consolidated financial statement schedules are omitted because
they are not required or the information is presented in the consolidated
financial statements or notes thereto.
14
<PAGE>
a.3 EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page
- -------------- ------------
<S> <C> <C>
3-a Articles of Incorporation, as amended (Exhibit 3-a to Annual
Report on Form 10-K for fiscal year 1988, Commission File
No. 0-4090, incorporated by reference).
3-b Restated Bylaws (Exhibit 3-b to Annual Report on Form 10-K
for fiscal year 1988, Commission File No. 0-4090,
incorporated by reference).
3-c Amendment to Articles of Incorporation to increase
authorized shares to 40 million (Exhibit A to Definitive
Proxy Statement dated September 5, 1996, Commission File No.
0-4090, incorporated by reference).
3-d Amendment to Articles of Incorporation to increase
authorized shares to 60 million.
4-a Specimen Common Stock Certificate for Non-Employee Directors
(Exhibit 4(a) to Annual Report on Form 10-K for fiscal year
1989, Commission File No. 0-4090, incorporated by reference).
4-b Rights Agreement dated as of June 16, 1989 between Analysts
International Corporation and Norwest Bank Minnesota, N.A.,
as Rights Agent which includes the form of Rights
Certificate and Summary of Rights (Exhibit A to the
Registrant's Form 8-A dated June 16, 1989, Commission File
No. 0-4090, incorporated by reference).
4-c First Amendment to Rights Agreement dated as of May 8,1990
between Analysts International Corporation and Norwest Bank
Minnesota, N.A. as Rights Agent (Exhibit 4(c) to Annual
Report on Form 10-K for fiscal year 1991, Commission File
No. 0-4090, incorporated by reference).
4-d Second Amendment to Rights Agreement dated as of April 30,
1996 between Analysts International Corporation and Norwest
Bank Minnesota as Rights Agent (Exhibit 4(d) to Annual
Report on Form 10-K for fiscal year 1996, Commission File
No. 0-4090, incorporated by reference).
4-e Restated Rights Agreement dated as of June 16, 1989 and
restated as of April 16, 1998 between Analysts International
Corporation and Norwest Bank Minnesota, N.A. as Rights
Agent.
15
<PAGE>
a.3 EXHIBITS (con't)
Exhibit Number Exhibit Page
- -------------- ------------
10-a Senior Executive Retirement Plan (Exhibit 10-e to Annual
Report on Form 10-K for fiscal year 1984, Commission File
No. 0-4090, incorporated by reference).
10-b Deferred Compensation Plan (Exhibit 10-g to Annual Report on
Form 10-K for fiscal year 1984, Commission File No. 0-4090,
incorporated by reference).
10-c 1985 Incentive Stock Option Plan (Exhibit 10(d) to Annual
Report on Form 10-K for fiscal year 1991, Commission File
No. 0-4090, incorporated by reference).
10-d 1994 Stock Option Plan (Exhibit A to Definitive Proxy
Statement dated September 6, 1994 for registrant's 1994
Annual Meeting of Shareholders, Commission File No. 0-4090,
incorporated by reference).
10-e 1996 Stock Option Plan for Non-employee Directors (Exhibit B
to Definitive Proxy Statement dated September 5, 1996,
Commission File No. 0-4090, incorporated by reference).
11 Calculations of Earnings Per Share.
13 1998 Annual Report to Shareholders.
21 Subsidiaries of Registrant.
23 Independent Auditors' Consent.
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
b. Reports on Form 8-K
There were no reports on Form 8-K for the three months ended June 30, 1998.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
Shareholders and Board of Directors
Analysts International Corporation
Minneapolis, Minnesota
We have audited the consolidated financial statements of Analysts
International Corporation and its subsidiary as of June 30, 1998 and 1997,
and for each of the three years in the period ended June 30, 1998, and have
issued our report thereon dated August 17, 1998; such consolidated financial
statements and report are included in your 1998 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of Analysts International
Corporation and subsidiary, listed in Item 14 a.2. This consolidated
financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, this consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
August 17, 1998
17
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning costs and net of at end
Description of period expenses recoveries of period
- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended June 30, 1998 $550,000 $502,000 $302,000 $750,000
Year ended June 30, 1997 500,000 322,000 272,000 550,000
Year ended June 30, 1996 550,000 108,000 158,000 500,000
</TABLE>
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ANALYSTS INTERNATIONAL CORPORATION
BY /s/ F.W. Lang
-------------------------------
DATE September 28, 1998 F. W. Lang, Chairman
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <C> <C>
/s/ F. W. Lang Chairman & Chief Executive Officer
-------------------- (Principal Executive Officer)
F.W. Lang
/s/ G. M. McGrath Vice President, Finance and Treasurer
-------------------- (Principal Finance and Accounting Officer)
G. M. McGrath
/s/ V. C. Benda President and Chief Operating Officer
--------------------
V. C. Benda*
September 28, 1998
/s/ W. K. Drake Director
--------------------
W. K. Drake*
/s/ M. A. Loftus Director
--------------------
M. A. Loftus*
/s/ E. M. Mahoney Director
--------------------
E. M. Mahoney*
/s/ R. L. Prince Director
--------------------
R. L. Prince*
</TABLE>
*F.W. Lang, by signing his name hereto, hereby signs this form 10-K on behalf
of the persons indicated pursuant to powers of attorney filed herewith.
/s/ F. W. Lang
----------------------------------
F. W. Lang, Chairman
19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Page No.*
- -------------- ---------
<S> <C> <C>
3-d Amendment to Articles of Incorporation
4-e Restated Rights Agreement
11 Calculations of Earnings Per Share.
13 1998 Annual Report to Shareholders.
21 Subsidiaries of Registrant.
23 Independent Auditors' Consent.
24 Powers of Attorney.
27 Financial Data Schedule
</TABLE>
*Reference is to the page number in the sequential numbering system.
For a list of exhibits incorporated by reference and not filed with this Form
10-K, see Item 14 a.3 at pages 15-16 of this Form 10-K.
20
<PAGE>
The total authorized number of shares of the Corporation shall be
60,000,000 common shares of the par value of ten cents (10 CENTS) per share.
The shareholders shall have no preemptive or other rights to subscribe
for any shares, or securities convertible into shares of the corporation.
There shall be no cumulative voting of shares of the corporation.
The Board of Directors is hereby authorized and empowered to accept or
reject subscriptions for shares made after incorporation and to issue
authorized but unissued shares from time to time for such consideration as
the Board of Directors may determine, but not less than the par value of the
shares so issued.
The Board of Directors is hereby authorized and empowered to fix the
terms, provisions and conditions of option, warrants or rights to purchase or
subscribe for shares of corporation, including the price or prices at which
shares may be purchased or subscribed for and to authorize the issuance
thereof.
<PAGE>
________________________________________________________________________________
ANALYSTS INTERNATIONAL CORPORATION
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Rights Agent
Restated
Rights Agreement
Dated as of June 16, 1989
Amended and Restated as of April 16, 1998
________________________________________________________________________________
<PAGE>
RESTATED RIGHTS AGREEMENT
Agreement effective as of June 16, 1989 and amended and restated as of
April 16, 1998 between ANALYSTS INTERNATIONAL CORPORATION, a Minnesota
corporation (the "Company"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(the "Rights Agent").
On June 15, 1989, the Board of Directors of the Company authorized and
declared a dividend of one common share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding on June 30,
1989 (the "Record Date"), each Right representing the right to purchase one
Common Share, $0.10 par value, of the Company, upon the terms and subject to the
conditions therein set forth, and further authorized and directed the issuance
of one Right with respect to each Common Share which becomes outstanding between
June 30, 1989 and the earliest of the Distribution Date, the Redemption Date and
the Final Expiration Date (as such terms are hereinafter defined).
The Company and the Rights Agent entered into that certain Rights
Agreement dated as of June 16, 1989. The Board of Directors subsequently
adopted amendments to the Agreement, and thereafter pursuant to Section 27 of
the Agreement the Company and the Rights Agent executed the First Amendment and
Second Amendment to the Rights Agreement.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby restate their agreement as
follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
then outstanding, but shall not include the Company, any Subsidiary (as such
term is hereinafter defined) of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan, or any Person who acquires Common
Shares from the Company in a transaction approved by the Board of Directors.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common Shares of the
Company then outstanding; PROVIDED, HOWEVER, that if a Person shall become the
Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
Common Shares of the Company, then such Person shall be deemed to be an
"Acquiring Person". Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
Acquiring Person, as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer
2
<PAGE>
be an Acquiring Person, as defined pursuant to the foregoing provisions of
this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purpose of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise;
PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; PROVIDED, HOWEVER, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement, arrangement
or understanding (whether or not in writing) (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the provision of Section l (d) (ii)
(B)) or disposing of any securities of the Company; PROVIDED HOWEVER, that in no
case shall an officer or director of the Company be deemed (A) the beneficial
owner of any securities beneficially owned by another officer or director of the
Company or (B) the beneficial owner of securities held of record by the trustee
of any employee benefit plan of the Company or any Subsidiary of the Company for
the benefit of any employee of the Company or any Subsidiary of the Company,
other than the officer or director, by reason of any influence that such officer
or director may have over the voting of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Minnesota and the State of
New York are authorized or obligated by law or executive order to close.
3
<PAGE>
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Minneapolis time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 P.M., Minneapolis time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
shares of the Common Shares, $0.10 par value, of the Company. "Common Shares"
when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(g) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day after the Shares Acquisition Date or (ii) the Close of
Business on the tenth day (or such later date as may be determined by action of
the Board of Directors prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement of, or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or entity holding Common Shares for or pursuant to the
terms of any such plan or any Person acquiring Common Shares from the Company in
a transaction approved by the Board of Directors) to commence, a tender or
exchange offer (within the meaning of Rule 14e-2(a) under the Exchange Act), the
consummation of which would result in beneficial ownership by a Person of 15% or
more of the then outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights).
(h) "Equivalent Common Shares" shall have the meaning set forth in
Section 11 (b) hereof.
(i) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(j) [Deleted]
(k) "Person" shall mean any individual, firm, corporation, partnership
or other entity, and shall include any successor (by merger or otherwise) of
such entity.
(l) "Record Date" shall have the meaning set forth in the second
paragraph at the beginning of this Agreement.
(m) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(n) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, but not be
limited to, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(o) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(p) [Deleted]
4
<PAGE>
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the Distribution
Date, (i) the Rights will be evidenced (subject to the provisions of Section
3(b) hereof) by the certificates for Common Shares registered in the names of
the holders thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates, and (ii) the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares. As soon as practicable after the Distribution Date,
the Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit A hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per Common Share
has been made pursuant to Section 11(i) hereof, at the time of distribution of
the Right Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Common Shares, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this Section 3(c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between ANALYSTS INTERNATIONAL
CORPORATION and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION dated as of
June 16, 1989 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of ANALYSTS INTERNATIONAL CORPORATION. Under
certain circumstances, as set forth in
5
<PAGE>
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
ANALYSTS INTERNATIONAL CORPORATION will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt
of a written request therefor. Under certain circumstances, Rights
beneficially owned by Acquiring Persons (as defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding.
Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase Common Shares and of assignment to be printed on
the reverse thereof) shall be substantially the same as Exhibit A hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation
service on which the Rights may from time to time be listed or quoted, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Right Certificates, whenever distributed, shall be dated as of the Record
Date (or in the case of Rights issued with respect to Common Shares issued by
the Company after the Record Date, as of the date of issuance of such Common
Shares) and on their face shall entitle the holders thereof to purchase such
number of Common Shares as shall be set forth therein at the price per Common
Share set forth therein (the "Purchase Price"), but the number and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the Company
by its President or any Vice President, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof,
and shall be attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent, and issued and delivered by the Company with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
6
<PAGE>
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal offices, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a)
Subject to the provisions of Section 14 hereof, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close of Business on
the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) or Section 13 hereof
or that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of
Common Shares (or, following an event specified in Section 11(a)(ii) or Section
13, other securities, cash or other property as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged at the
principal offices of the Rights Agent. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Right Certificate until the registered holder shall have
completed and signed the Certificate contained in the form of assignment on the
reverse side of such Right Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS: PURCHASE PRICE: EXPIRATION DATE OF
RIGHTS. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal offices of the Rights Agent,
together with payment of the Purchase Price for each Common Share as to which
the Rights are exercised, at or prior to the earlier of (i) the close of
business on April 16, 2008 (the "Final Expiration Date"), (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date")
or (iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
7
<PAGE>
(b) The Purchase Price for each Common Share pursuant to the exercise
of a Right shall initially be $160, shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the number of Common Shares (or other
securities, cash or other property, as the case may be) to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9 hereof in cash, or by
certified check or cashier's check payable to the order of the Company, the
Rights Agent shall thereupon promptly (i) requisition from any transfer agent of
the Common Shares certificates for the number of Common Shares to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate. The payment of the
Purchase Price (as such amount may be reduced (including to zero) pursuant to
Section 11(a)(iv) hereof) may be made in cash or by certified bank check or bank
draft payable to the order of the Company. In the event that the Company is
obligated to issue other securities of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding any other provision of this Agreement, neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless and until the registered holder
shall have completed and signed the certificate contained in the form of
election to purchase shares set forth on the reverse side thereof and shall have
provided such additional evidence of the identity of the Beneficial Owner and
former Beneficial Owner (and Associates and Affiliates of the foregoing) as the
Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company,
8
<PAGE>
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF COMMON SHARES. (a) The
Company covenants and agrees that it will use its best efforts to cause to be
reserved and kept available out of its authorized and unissued Common Shares or
any reacquired Common Shares, the number of Common Shares that, except as may
otherwise be permitted by Section 11(a)(iv), will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Common Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Common Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
(c) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Common Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depository receipts for the Common
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depository receipts for Common Shares upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Right Certificate at the time of surrender) or until it
has been established to the Company's satisfaction that no such tax is due.
(d) The Company further covenants and agrees that it will use its best
efforts (i) as soon as practicable following the earliest date after the
Distribution Date as of which the consideration to be delivered by the Company
upon exercise of the Rights has been determined pursuant to this Agreement,
including in accordance with Section 11(a)(iv), or as soon as is required by law
following the Distribution Date, as the case may be, to file, a registration
statement under the Securities Act of 1933, as amended (the "Act"), with respect
to the Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
rights are no longer exercisable for such securities or (B) the Final Expiration
Date. The Company will also take such action as may be appropriate under the
blue sky or securities laws of the various states. The Company may temporarily
suspend, for a period of time not to exceed 90 days after the Distribution Date,
the exercisability of the Rights in order to prepare and file any required
registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained.
9
<PAGE>
Section 10. COMMON SHARE RECORD DATE. Each person in whose name any
certificate for Common Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Common Shares
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; PROVIDED,
HOWEVER, that if the date of such surrender and payment is a date upon which the
Common Share transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Common Share
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be entitled to
any rights of a holder of Common Shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends of other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number and kind of shares or other property
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares into a smaller number of Common Shares or (D) issue any shares of
its capital stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of capital stock which, if such Right had been exercised immediately
prior to such date and at a time when the Common Share transfer books of the
Company were open, he or she would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification; PROVIDED, HOWEVER, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
If an event occurs that would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) Subject to Section 23 and Section 24 of this Agreement, in the
event any Person shall become an Acquiring Person, proper provision shall be
made so that each holder of a Right, except as provided below, shall thereafter
have a right to receive, upon exercise thereof in accordance with the terms of
this Agreement, at a price equal to the then current Purchase Price multiplied
by the number of Common Shares for which a Right is then exercisable, in
accordance with the terms of this Agreement, in lieu of the number of Common
Shares otherwise issuable pursuant to the Right, such number of Common Shares as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the number of Common Shares for which a Right is then exercisable (or
would be exercisable if the Distribution Date had occurred) and dividing that
product by (y) 50% of the then current per share market price of the Common
Shares (determined pursuant to Section 11(d)) on the
10
<PAGE>
date of the occurrence of such event; PROVIDED, HOWEVER, that if the
transaction that would otherwise give rise to the foregoing adjustment is
also subject to the provisions of Section 13 hereof, then only the provisions
of Section 13 hereof shall apply and no adjustment shall be made pursuant to
this Section 11(a)(ii). In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action which would eliminate or diminish the benefits intended
to be afforded by the Rights.
Notwithstanding the foregoing, upon the occurrence of such event, any
Rights that are or were acquired or beneficially owned by an Acquiring Person
(or any Associate or Affiliate of such Acquiring Person) shall become void and
any holder of such Rights shall thereafter have no right to exercise such Rights
under any provision of this Agreement. No Right Certificate shall be issued
pursuant to Section 3 that represents Rights beneficially owned by an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights would be
void pursuant to the preceding sentence or any Associate or Affiliate thereof or
to any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence shall be canceled.
(iii) In the event that there shall not be sufficient issued but not
outstanding, or authorized but unissued, Common Shares to permit the exercise in
full of the Rights in accordance with the foregoing Section 11(a)(ii), the
Company shall, subject to the provisions of Section 11(A)(iv) hereof, take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exercise of the Rights.
(iv) In lieu of issuing shares of Common Shares in accordance with
Section 11(a)(ii) upon the exercise of the Rights, the Company may, if the Board
of Directors determines that such action is necessary or appropriate and not
contrary to the interests of holders of Rights, elect to issue or pay uniformly
with respect to all outstanding Rights, upon the exercise of the Rights, cash
(including an offset against the Purchase Price), property, other securities or
any combination thereof having an aggregate value per Right, as of the date
immediately preceding the public announcement of such election, equal to the
current per share market price (as determined pursuant to Section 11(d)) as of
such date of the shares of Common Shares that otherwise would have been issuable
pursuant to Section 11(a)(ii), which value shall be determined by an investment
banking firm selected by a majority of the Board of Directors. Any such election
by the Board of Directors must be made and publicly announced within 30 days
after the date on which the event (i.e., any Person shall become an Acquiring
Person) described in Section 11(a)(ii) above occurs. Following the occurrence of
one of such events, a majority of the Board of Directors may suspend the
exercisability of the Rights for a period of up to 30 days following the
occurrence of such event to the extent that the Board of Directors has not
determined whether to exercise the Company's right of election under this
Section 11(a)(iv). In the event of any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Shares entitling them (for
a period expiring within 45 calendar days after such record date) to subscribe
for or purchase Common Shares or shares having the same rights, privileges and
preferences as the Common Shares ("Equivalent Common Shares") or securities
convertible into Common Shares or Equivalent Common Shares at a price per Common
Share or Equivalent Common Share (or having a conversion price per
11
<PAGE>
share, if a security convertible into Common Shares or Equivalent Common
Shares) less than the then current per share market price of the Common
Shares or Equivalent Common Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the number
of Common Shares and Equivalent Common Shares (if any) outstanding on such
record date plus the number of Common Shares or Equivalent Common Shares
which the aggregate offering price of the total number of Common Shares
and/or Equivalent Common Shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered)
would purchase at such current market price and the denominator of which
shall be the number of Common Shares and Equivalent Common Shares outstanding
on such record date plus the number of additional Common Shares and/or
Equivalent Common Shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon
the exercise of one right be less than the aggregate par value of capital
stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in part or all in a form of consideration
other than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent. Common Shares
and Equivalent Common Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed
and, in the event that such rights, options or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Shares or any class or series of
Equivalent Common Shares (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation) of cash, evidences of indebtedness or assets (other than
a regular quarterly cash dividend or a dividend payable in Common Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the then current per share market
price of a Common Share or Equivalent Common Share (as defined in Section 11(d))
on such record date, less the fair market value (as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to one Common Share or Equivalent Common Share and the
denominator of which shall be such current per share market price of the Common
Shares or Equivalent Common Share; PROVIDED, HOWEVER, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of capital Stock of the Company issuable upon exercise of
one Right. Such adjustments shall be made successively whenever such a record
date is fixed and, in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, the "current per
share market price" of the Common Shares, whether of the Company or any Person
other than the Company, on any date shall be deemed to be the average of the
daily closing prices per share of such Common Shares for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; PROVIDED, HOWEVER, that in the event that the current per share market
price of the Common Shares is determined during a period following the
12
<PAGE>
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares or (B) any subdivision, combination or
reclassification of such Common Shares, and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or distribution or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per Common Share or Equivalent
Common Share. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Shares selected by the
Board of Directors of the Company. If on any such date no such market maker is
making a market in the Common Shares, the fair value of the Common Shares on
such date as determined in good faith by the Board of Directors shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, a Business Day. If
the Common Shares are not publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one ten-thousandth of a
Common Share or other share as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the date of the expiration of
the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a),
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Common Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Sections 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10 and 13 with respect to the Common Shares shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Common Shares that may
be purchased from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
13
<PAGE>
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Common Shares
(calculated to the nearest one ten-thousandth of a Common Share) obtained by (i)
multiplying (A) the number of Common Shares covered by a Right immediately prior
to this adjustment by (B) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of Common Shares for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Common Shares issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price and the number of shares which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Common Shares
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Common Shares
at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
14
<PAGE>
event the issuing to the holder of any Right exercised after such record date of
the Common Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Common Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, prior
to the Distribution Date, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any consolidation or subdivision of the
Common Shares, issuance wholly for cash of any Common Shares at less than the
current per share market price, issuance wholly for cash of Common Shares or
securities which by their terms are convertible into or exchangeable for Common
Shares, dividends on Common Shares payable in Common Shares or issuance of
rights, options or warrants referred to hereinabove in Section 11(b), hereafter
made by the Company to holders of its Common Shares shall not be taxable to such
shareholders.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (x) the
number of Common Shares purchasable after such event upon proper exercise of
each Right shall be determined by multiplying the number of Common Shares so
purchasable immediately prior to such event by a fraction, the numerator of
which is the number of Common Shares outstanding immediately before such event
and the denominator of which is the number of Common Shares outstanding
immediately after such event, and (y) each Common Share outstanding immediately
after such event shall have issued with respect to it that number of Rights
which each Common Share outstanding immediately prior to such event had issued
with respect to it. The adjustments provided for in this Section 11(n) shall be
made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected. If an event occurs which
would require an adjustment under Section 11(a)(ii) and this Section 11(n), the
adjustments provided for in this Section 11(n) shall be in addition and prior to
any adjustment required pursuant to Section 11(a)(ii).
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25 hereof.
15
<PAGE>
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. (a) In the event that, following the Shares Acquisition Date,
directly or indirectly, (i) the Company shall consolidate with, or merge with
and into, any other Person (other than any employee benefit plan of the Company
or any entity holding Common Shares for or pursuant to the terms of any such
plan), (ii) any Person (other than any employee benefit plan of the Company or
any entity holding Common Shares for or pursuant to the terms of any such plan)
shall consolidate with the Company or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person (or the
Company) or cash or any other property or (iii) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than the Company or one or more of
its wholly owned Subsidiaries, THEN, and in each such case, proper provision
shall be made so that (A) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof in
accordance with the terms of this Agreement, such number of Common Shares of
such other Person (including the Company as successor thereto or as the
surviving corporation) as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of Common Shares for
which a Right is then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii)) and (2) dividing that product by
50% of the then current per share market price of the Common Shares of such
other Person (determined pursuant to Section 11(d)) on the date of consummation
of such consolidation, merger, sale or transfer; (B) the issuer of such Common
Shares shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (c) the term "Company" shall thereafter be
deemed to refer to such issuer, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such issuer following the
first occurrence of a Section 13 event, and (D) such issuer shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights.
Notwithstanding the foregoing, upon the occurrence of any of the events
specified in this Section 13(a), any Rights that are or were acquired or
beneficially owned by an Acquiring Person (or any Associate or Affiliate of such
Acquiring Person) shall become null and void and any holder of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Agreement.
(b) If, for any reason, the Rights cannot be exercised for Common
Shares of such issuer as provided in Section 13(a), then each holder of Rights
shall have the right to exchange its Rights for cash from such issuer in an
amount equal to the number of Common Shares that it would otherwise be entitled
to purchase times 50% of the current per share market price, as determined
pursuant to Section 11(d) hereof, of such Common Shares of such issuer. If, for
any reason, the foregoing formulation cannot be applied to determine the cash
amount into which the Rights are exchangeable, then the Board of Directors,
based upon the advice of one or more recognized investment banking firms, and
based upon the total value of the Company, shall determine such amount
reasonably and with good faith to the holder of Rights. Any such determination
shall be final and binding on the Rights Agent.
16
<PAGE>
(c) The Company shall not consummate any Section 13 transaction unless
the issuer shall have a sufficient number of authorized Common Shares that have
not been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the Company
and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such issuer shall, upon consummation of
such Section 13 event, assume this Rights Agreement in accordance with Section
13(a) hereof; that all rights of first refusal or preemptive rights in respect
of the issuance of Common Shares of such issuer upon exercise of outstanding
Rights have been waived; that there are no rights, warrants, instruments or
securities outstanding or any agreements or arrangements which, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights, and that such transaction
shall not result in a default by such issuer under this Rights Agreement, and
further providing that, as soon as practicable after the date of such Section 13
event such issuer will, at its expense:
(i) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Final Expiration Date or redemption pursuant to
Section 23, and similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on NASDAQ, and
(iii) deliver to holders of the Rights historical financial
statements for such issuer which comply in all respects with the requirements
for registration on Form 10 (or any successor form) under the Exchange Act.
In the event that at any time after the occurrence of the event set
forth in Section 11(a)(ii) some or all of the Rights shall not have been
exercised at the time of a transaction described in this Section 13, the Rights
which have not theretofore been exercised shall thereafter be exercisable in the
manner described in Section 13(a) (without taking into account any prior
adjustment required by Section 11(a)(ii)).
(d) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
17
<PAGE>
average of the closing bid and asked prices, regular way, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Common
Shares upon exercise of the Rights or to distribute certificates which evidence
fractional Common Shares. In lieu of fractional Common Shares, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Common Share. For purposes of this Section 14(b),
the current market value of a Common Share shall be the closing price of a
Common Share as determined pursuant to the second and third sentence of Section
11(d) hereof for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce or otherwise act in respect of, his or
her right to exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) Prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) After the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal offices of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate forms and certificates
fully executed; and
18
<PAGE>
(c) Subject to Sections 6(a), 11 and 13 hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificates
or the associated Common Shares certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Common Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in connection with this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of, any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the corporate
trust business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Right Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt
19
<PAGE>
the countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company) and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining
20
<PAGE>
of the existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether
any Common Shares will, when issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the President, any Vice President, the Secretary or the Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days notice in writing mailed to the Company and to each transfer agent
of the Common Shares by registered or certified mail, and to the holders of the
Right Certificates by first class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares by registered or certified mail, and to the holders
of the Right Certificates by first class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the
21
<PAGE>
holder of a Right Certificate (who shall, with such notice, submit his or her
Right Certificate for inspection by the Company), then the registered holder
of any Right Certificate may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation or trust
company organized and doing business under the laws of the United States or
of the State of Minnesota (or of any other state of the United States so long
as such corporation or trust company is authorized to do business as a
banking institution in the State of Minnesota), in good standing, having an
office in the State of Minnesota, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million or is a
member of a bank holding company system, which bank holding company system
has an aggregate combined capital and surplus of at least $50 million,
provided that the Rights Agent's separate capital and surplus shall at all
times be at least $10 million. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as
if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares, and mail a notice thereof
in writing to the registered holders of the Right Certificates. Failure to
give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. REDEMPTION. (a) the Board of Directors of the Company may,
at its option, at any time prior to the Close of Business on the earlier of the
tenth day after the Shares Acquisition Date or the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.001 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). The redemption
of the Rights by the Board of Directors may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. Notwithstanding anything contained in this Agreement
to the contrary, the rights shall not be exercisable pursuant to Section
11(a)(ii) hereof prior to the expiration of the Company's right of redemption
hereunder.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; PROVIDED, HOWEVER, that the failure
to give or any defect in any such notice shall not affect the validity of such
redemption. Within ten days after such action of the Board of Directors
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
22
<PAGE>
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
(c) [Deleted]
(d) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (b) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights shall terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; PROVIDED, HOWEVER, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights pursuant to paragraph (b), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. EXCHANGE. (a) The Board of Directors of the Company may,
at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) and Section 13 hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to Section 24(a) and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; PROVIDED,
HOWEVER, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their
last addresses as
23
<PAGE>
they appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute preferred shares or Equivalent Common Shares, or a
combination thereof, for Common Shares exchangeable for Rights, at such a rate
of preferred share or Equivalent Common Share for each Common Share that the
preferred share or Equivalent Common Share delivered in lieu of each Common
Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
preferred shares or Equivalent Common Shares issued but not outstanding, or
authorized but unissued, to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall either (i) take all such
action as may be necessary to authorize additional Common Shares or preferred
shares or Equivalent Common Shares for issuance upon exchange of the Rights, or
(ii) alternatively, at the option of a majority of the Board of Directors, with
respect to each Right (A) pay cash in an amount equal to the Purchase Price, in
lieu of issuing Common Shares in exchange therefor, or (B) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value
of the Common Shares (as defined hereinafter) exchangeable for each such Right,
where the value of such securities shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors by
majority vote of the Board of Directors, or (C) deliver any combination of cash,
property, Common Shares and/or other securities having a value equal to the
Current Value in exchange for each Right. The Current Value shall be the product
of the current per share market price of Common Shares (determined pursuant to
Section 11(d) on the date of the occurrence of the event described above in
Section 24(a)) multiplied by the number of Common Shares for which the Right
otherwise would be exchangeable if there were sufficient shares available. To
the extent that the Company determines that some action need be taken pursuant
to clauses (A), (B) or (C) of the first sentence of this Section 24(d), the
Board of Directors may temporarily suspend the exercisability of the Rights for
a period of up to 60 days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of distribution
to be made pursuant to the above provision and to determine the value thereof.
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this Section
24(e), the current market value of a whole Common Share shall be the closing
price of a Common Share (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day (as defined in Section 11(d)(i))
immediately prior to the date of exchange pursuant to this Section 24.
24
<PAGE>
(f) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and in good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(g) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to Section 24(f) and without any further action
and without any notice, the right to exercise such Rights shall terminate and
the only right thereafter of a holder of such Rights shall be to receive that
number of rights in exchange therefor as has been determined by the Board of
Directors in accordance with Section 24(f) above. The Company shall give public
notice of any such exchange; PROVIDED, HOWEVER, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
transfer agent for the Common Shares of the Company. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the Rights will be effected.
Section 25. (a) NOTICE OF CERTAIN EVENTS. In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Common Shares or to make any other distribution to the holders of its Common
Shares (other than a regular quarterly cash dividend) or (ii) to offer to the
holders of its Common Shares rights or warrants to subscribe for or to purchase
any additional Common Shares or shares of stock of any class or any other
securities, rights or options or (iii) to effect any reclassification of its
Common Shares (other than a reclassification involving only the subdivision of
outstanding Common Shares) or (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more transactions,
of 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person or (v) to effect the
liquidation, dissolution or winding-up of the Company or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least 20 days prior to the record date for determining
holders of the Common Shares for purposes of such action, and in the case of any
such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares, whichever shall be the earlier.
(b) In the case the event (i.e., any Person shall become an Acquiring
Person) set forth in Section 11(a)(ii) of this Agreement shall occur, then, in
such a case, the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which shall specify the event and the consequences
of the event to holders of Rights under Section 11(a)(ii) hereof.
25
<PAGE>
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
ANALYSTS INTERNATIONAL CORPORATION
7615 Metro Boulevard
Minneapolis, Minnesota 55435-3983
Attention: Chairman
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
NORWEST BANK MINNESOTA, N.A.
161 North Concord Exchange
P.O. Box 738
South St. Paul, Minnesota 55075
Attention: Stock Transfer Department
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; PROVIDED, HOWEVER, that from and after such time as any Person becomes an
Acquiring Person, this Agreement shall not be amended in any manner which would
adversely affect the interests of the holders of Rights that are not or will not
become void pursuant to the terms of Section 11(a)(ii), Section 13 or any other
section hereof. Without limiting the foregoing, the Company may at any time
prior to such time as any Person becomes an Acquiring Person amend this
Agreement to lower the thresholds set forth in Sections l(a) and 3(a) hereof
from 15% to not less than the greater of (i) any percentage greater than the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of any
such plan) and (ii) 10%. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment unless the Rights Agent shall have determined in
good faith that such supplement or amendment would adversely affect its
interests under this Agreement. Prior
26
<PAGE>
to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. For
all purposes of this Agreement, any calculations of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) under the Exchange Act. The Board of Directors of the Company
(and, where specifically provided for herein, the Continuing Directors) shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or the Company
(or, where specifically provided for herein, the Continuing Directors) or, as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (a) interpret the
provisions of this Agreement and (b) make all determinations deemed necessary or
advisable for the administration of this Agreement (including a determination to
redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board (or, where specifically provided for herein, by the Continuing
Directors) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights Certificates and all other
parties and (y) not subject the Board or the Continuing Directors to any
liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Minnesota and for all purposes shall be governed
27
<PAGE>
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: ANALYSTS INTERNATIONAL CORPORATION
By_________________________ By_________________________
Colleen M. Davenport Thomas R. Mahler
Assistant Secretary Secretary and General Counsel
Attest: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By_________________________ By_________________________
Title________________________
28
<PAGE>
FORM OF RIGHT CERTIFICATE EXHIBIT A
Certificate No. R- ____________________ Rights
NOT EXERCISABLE AFTER APRIL 16, 2008 OR EARLIER IF REDEMPTION OCCURS. THE RIGHTS
ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 11(a)(ii)
AND SECTION 13 OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY ACQUIRING
PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [IF
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE WERE ISSUED TO A PERSON WHO WAS
AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), THIS RIGHT CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 11(a)(ii) AND SECTION 13 OF THE RIGHTS AGREEMENT.]*
Right Certificate
ANALYSTS INTERNATIONAL CORPORATION
This certifies that ___________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Restated Rights Agreement, dated as of April 16, 1998 (the "Rights Agreement"),
between ANALYSTS INTERNATIONAL CORPORATION, a Minnesota corporation (the
"Company"), and NORWEST BANK MINNESOTA, N.A., (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M. (Minneapolis time) on
April 16, 2008 at the principal offices of the Rights Agent, or at the office of
its successor as Rights Agent, one fully paid nonassessable Common Share, $0.10
par value (the "Common Shares"), of the Company, at a purchase price of $160 per
one Common Share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of Common
Shares which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of April
16, 1998, based on the Common Shares as constituted at such date.
As provided in the Restated Rights Agreement, the Purchase Price and
the number of Common Shares which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Restated Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Restated Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Restated Rights Agreement are on file at the
principal executive offices of the Company and the offices of the Rights Agent.
* The portion of the legend in brackets shall be inserted only if applicable.
29
<PAGE>
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal offices of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Common Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate may, but are not required to, be redeemed by
the Company at a redemption price of $.001 per Right.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Restated Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Common Shares
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Restated Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Restated Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in the Restated Rights
Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal. Dated as of _______________ , 19___.
ATTEST: ANALYSTS INTERNATIONAL
CORPORATION
By _________________________ By_________________________
Colleen M. Davenport Thomas R. Mahler
Assistant Secretary Secretary and General Counsel
Countersigned:
NORWEST BANK MINNESOTA, N.A.
By_________________________
Authorized Signature
30
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED_____________________________________________________________
hereby sells, assigns and transfers unto_______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ____________________, 19___
-----------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Restated Rights Agreement).
-----------------------
Signature
- --------------------------------------------------------------------------------
31
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires to exercise
the Right Certificate.)
To: ANALYSTS INTERNATIONAL CORPORATION
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Right Certificate to
purchase the Common Shares issuable upon the exercise of such Rights and
requests that certificates for such Common Shares be issued in the name of:
Please insert social security or other identifying number_______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security or other identifying number_______________________
________________________________________________________________________________
(Please print name and address)
Dated: ___________________, 19___
-----------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Restated Rights Agreement).
-----------------------
Signature
- --------------------------------------------------------------------------------
32
<PAGE>
Form of Reverse Side of Right Certificate -- continued
NOTICE
The signatures in the foregoing Forms of Assignment and Election must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Forms of
Assignment and Election is not completed, the Company will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Restated Rights
Agreement) and, in the case of an Assignment, will affix a legend to that effect
on any Right Certificates issued in exchange for this Right Certificate.
33
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES
On June 15, 1989, the Board of Directors of ANALYSTS INTERNATIONAL
CORPORATION (the "Company") declared a dividend of one common share purchase
right (a "Right") for each outstanding share of the Common Shares, $0.10 par
value (the "Common Shares"), of the Company. The dividend is payable on June 30,
1989 to the shareholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one Common Share of the Company,
at a price of $160 per Common Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Restated
Rights Agreement, dated as of June 16, 1989 and amended and restated as of April
16, 1998 (the "Restated Rights Agreement"), between the Company and NORWEST BANK
MINNESOTA, N.A., as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding Common Shares or (ii) 10 days
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of June 30, 1989, by such Common Share certificate with a copy of
this Summary of Rights attached thereto.
The Restated Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Common Shares. Until
the Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after June 30, 1989 upon transfer or new
issuance of the Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares, outstanding as of June 30, 1989, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on April 16, 2008 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by the
Company, in each case as described below.
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Common
Shares, (ii) upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price, or securities
convertible into Common Shares with a conversion price, less than the then
current market price of the Common Shares or (iii) upon the distribution to
holders of the Common Shares of
34
<PAGE>
evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
Common Shares) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights and the number of Common Shares
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares or subdivisions, combinations or consolidations of the
Common Shares, occurring, in any such case, prior to the Distribution Date.
Common Shares purchasable upon exercise of the Rights will be
identical to other Common Shares of the Company.
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power is sold, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. Subject to redemption
or exchange, in the event that any person becomes an Acquiring Person, proper
provision will be made so that each holder of a Right, other than Rights that
are beneficially owned by the Acquiring Person (which will thereafter be void),
will thereafter have the right to receive upon exercise that number of Common
Shares having a market value of two times the then current exercise price of the
Right.
At any time after the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 15% or more of the outstanding
Common Shares and prior to the acquisition by such person or group of 50% or
more of the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which have
become void), in whole or in part, at an exchange ratio of one Common Share (or
of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges, or cash), per Right (subject to
adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Common Shares will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Shares on the last trading date prior to the date of exercise.
At any time until 10 days after public announcement that a person or
group of affiliated or associated persons has acquired beneficial ownership of
15% or more of the outstanding Common Shares, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights, including an
amendment to lower the threshold for exercisability of the Rights from 15% to
not less than the greater of (i) any percentage greater than the largest
percentage of the outstanding Common Shares then known to the Company to be
beneficially owned by any person or group of
35
<PAGE>
affiliated or associated persons and (ii) 10%; except that from and after the
date there is an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors, except pursuant to an
offer conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors since the Rights may be redeemed by the Company at the
Redemption Price prior to or on 10 days after the time that a person or group
has acquired beneficial ownership of 15% or more of the Common Shares.
The Restated Rights Agreement, specifying the terms of the Rights and
including the form of Right Certificate, and the form of press release
announcing the declaration of the Rights dividend are attached hereto as
exhibits. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Restated Rights Agreement,
which is hereby incorporated herein by reference.
36
<PAGE>
ARTICLE V
The total authorized number of shares of the Corporation shall be
60,000,000 common shares of the par value of ten cents (10 cents) per share.
The shareholders shall have no preemptive or other rights to subscribe
for any shares, or securities convertible into shares of the corporation.
There shall be no cumulative voting of shares of the corporation.
The Board of Directors is hereby authorized and empowered to accept or
reject subscriptions for shares made after incorporation and to issue
authorized but unissued shares from time to time for such consideration as
the Board of Directors may determine, but not less than the par value of the
shares so issued.
The Board of Directors is hereby authorized and empowered to fix the
terms, provisions and conditions of option, warrants or rights to purchase or
subscribe for shares of corporation, including the price or prices at which
shares may be purchased or subscribed for and to authorize the issuance
thereof.
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
EXHIBIT 11
(Page 1 of 2)
CALCULATION OF BASIC EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net earnings $12,418,000 $16,381,000 $22,610,000
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of
common shares outstanding 21,852,000 22,095,000 22,376,000
----------- ----------- -----------
----------- ----------- -----------
Net earnings per common share,
based upon weighted average
number of shares outstanding $.57 $.74 $1.01
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
EXHIBIT 11
(Page 2 of 2)
CALCULATION OF DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net earnings $12,418,000 $16,381,000 $22,610,000
----------- ----------- -----------
----------- ----------- -----------
Weighted average number
of common shares outstanding 21,852,000 22,095,000 22,376,000
Dilutive effect of stock
options outstanding after
application of treasury
stock method 369,000 449,000 453,000
----------- ----------- -----------
22,221,000 22,544,000 22,829,000
----------- ----------- -----------
----------- ----------- -----------
Net earnings per common and
common equivalent share, based
upon weighted average number
of shares outstanding $.56 $.73 $.99
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
ANALYSTS INTERNATIONAL CORPORATION
The Company offers a wide range of computer software
services, including consulting, project management,
systems analysis and design, programming,
Year 2000 software compliance, software maintenance and training.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 % INCREASE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1998 1997 (DECREASE)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Professional services revenues:
Provided directly . . . . . . . . . . . . . . . . . . . . $ 454,339 $ 344,790 31.8
Provided through sub-suppliers. . . . . . . . . . . . . . 133,072 94,756 40.4
----------- -----------
Total revenues . . . . . . . . . . . . . . . . . . . . 587,411 439,546 33.6
Income before income taxes . . . . . . . . . . . . . . . . . 37,687 27,210 38.5
Net income . . . . . . . . . . . . . . . . . . . . . . . . . 22,610 16,381 38.0
Per share of common stock:*
Net income (diluted). . . . . . . . . . . . . . . . . . . .99 .73 35.6
Shareholders' equity. . . . . . . . . . . . . . . . . . . 3.70 2.97 24.6
Dividends declared. . . . . . . . . . . . . . . . . . . . .31 .24 29.2
Average common and common equivalent shares outstanding* . . 22,829,000 22,544,000 1.3
Number of personnel. . . . . . . . . . . . . . . . . . . . . 5,300 4,650 14.0
Return on equity . . . . . . . . . . . . . . . . . . . . . . 30.3% 27.3% 11.0
Current ratio. . . . . . . . . . . . . . . . . . . . . . . . 2.59 2.68 (3.4)
Working capital. . . . . . . . . . . . . . . . . . . . . . . $ 67,474 $ 55,009 22.7
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 -
</TABLE>
*Adjusted to reflect the 3 for 2 common stock split in the form of a stock
dividend distributed December 3, 1997.
- -------------------------------------------------------------------------------
About the cover:
The emblem pictured on the cover is awarded in the form of a
medallion to AiC employees to recognize outstanding performance.
The words -- "Excellence, Integrity, Innovation" -- are the
principles that have guided the Company since its founding.
- -------------------------------------------------------------------------------
<PAGE>
[GRAPHIC]
VICTOR C. BENDA AND
FREDERICK W. LANG
- -------------------
TO OUR SHAREHOLDERS
- -------------------
Analysts International Corporation again reached new highs in revenues and
net income in fiscal 1998.
Revenues were $587,411,000, up 34% from the previous year.
Net income grew to $22,610,000, up 38% from 1997. Diluted earnings per
share increased to 99 cents in 1998, up from 73 cents the year before.
The after-tax margin on our conventional professional services business,
excluding supplemental revenues resulting from sub-supplier billings, was
5.0% compared to 4.8% last year. Including revenues from sub-supplier
billings, net margin was 3.8%, compared with 3.7% in 1997.
Analysts International paid regular quarterly dividends of 8 cents per
share during fiscal 1998. At their meeting in August 1998, the Board of
Directors voted to increase the quarterly dividend to 10 cents, reflecting
the Company's strong earnings performance.
BUILDING ON OUR SUCCESS 1
<PAGE>
INDUSTRY GROWTH CONTINUES
The professional services segment of the software industry has in recent
years experienced rapid growth which shows no sign of abating. While current
industry forecasts project 15% annual expansion, Analysts International has
traditionally exceeded this figure. We currently target a growth rate in
excess of 25% annually.
Corporations increasingly are outsourcing many of their software needs,
particularly for the maintenance of legacy systems. They turn to companies
such as Analysts International when they need specialized expertise, both for
development of new systems and for maintenance of their mission-critical
software.
COMPANY EXPANDS STAFF, LOCATIONS
The Company's staff increased to a total of 5,300 at year-end, a gain of
650 people over the end of fiscal 1997. Most of the increase was in billable
technical personnel. The 38% profit increase with a 14% staff increase is
evidence of our ongoing strategy to achieve higher margins through
value-added engagements.
During the year our field office in Portland, Oregon, attained branch
office status, increasing the number of branches to 33. Each branch office is
a self-contained business unit with local management, a sales and recruiting
staff, and the resident technical personnel who support and manage client
projects. We also have 14 field offices to serve the needs of specific
customer projects.
As part of our quality assurance program, our Dallas branch office
became ISO 9001 certified, affirming that its quality management procedures
comply with international standards, with other branches to follow. An
obsession with delivery of quality services is one of the fundamental
principles that guides our company and is a key factor in our success.
To meet the needs of our clients for skilled information technology
people, we have an extensive recruiting program and have increased our
retention efforts with various programs. More than 120 professional
recruiters work full-time performing this important function which is an
integral part of every Analysts International branch. Demand for skilled
people continues to far outstrip the supply, and recruiting continues to be a
significant challenge.
2 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
MORE THAN 90% OF BUSINESS FROM REPEAT CLIENTS
We provided services to more than 900 clients during 1998, with more
than 90% of our total revenues representing additional business from existing
clients. This longevity of client relationships is a hallmark of Analysts
International. We have built strong relationships with clients as a result of
superior work over an extended period of time. We take great pride in our
clients and the work we have accomplished with them.
COMPANY-MANAGED OUTSOURCE CONTRACTS
As part of the services we provide under some contracts, the Company is
responsible for managing both our own personnel and the employees of
sub-suppliers. The supplemental billings for these sub-suppliers accounted
for approximately $133 million of our revenues. These relationships, while
undertaken at lower profit margins than those which characterize our other
work, enable us to provide a valuable service to key clients, reinforce the
client relationship and, over time, expand the volume of work we perform
under the contract.
Analysts International is designated as a national service provider by
IBM. Under this contract, we provide services to IBM and to its customers. We
also manage sub-suppliers under this contract. Our IBM business totaled $96
million in 1998, up 5% from the previous year.
NATIONAL PRACTICE STRATEGY EMPHASIZES HIGHER MARGIN BUSINESS
During the year, we continued to develop our national practices
strategy, under which we provide our extensive branch network with
headquarters-level experts and other resources to enable them to handle an
increasing volume of higher margin, value-added projects in designated
vertical markets and technical practice areas.
This strategy recognizes that one of Analysts International's great
strengths is its extensive branch network and the entrepreneurial spirit that
has built the Company to this level. This new thrust concentrates on offering
more value-added services and will allow clients everywhere to take advantage
of our specialized knowledge in a number of areas while retaining our
traditional strength in local service delivery.
BUILDING ON OUR SUCCESS 3
<PAGE>
THREE NATIONAL PRACTICES ESTABLISHED, MORE COMING
We established two additional national practices areas in 1998 -- Rapid
Application Design and Development and The Lawson Software Practice. Together
with the existing Year 2000 Practice, we now have three national practices.
THE RAPID APPLICATION DESIGN AND DEVELOPMENT (RADD-TM-) PRACTICE addresses
projects requiring quick turnaround and specialized skills. Using a variety
of software tools, Analysts International's team can complete critical
software projects on a very short time frame. At this time RADD-TM- is deployed
nationally at approximately 30% of our branches. This initiative is expected
to assist our offices in the future by providing more value-added services to
our clients where quick response is desirable.
THE LAWSON SOFTWARE PRACTICE works with customers of Lawson Software,
Inc., to provide customized tailoring of Lawson's business software to meet
their needs. Analysts International provides this support nationwide as a
Lawson Global Alliance Integrated Network-TM- (GAIN) partner. We also work
directly with Lawson in the development of new packages and improvements to
Lawson's existing lines of financial software products.
THE YEAR 2000 PRACTICE combines highly developed project management
capabilities with customized methodology and the best available software to
identify and repair date-sensitive areas of computer code. The Year 2000
problem, "Y2K" for short, stems from the inability of older computer software
to correctly recognize dates occurring after the turn of the century.
Companies and government agencies are spending several hundred billion
dollars to fix the problem. In its 1998 fiscal year, Analysts International
handled approximately $61 million of Y2K projects, which is about 10% of
total revenues. We are making good use of the opportunities for cross-selling
and enhanced positioning which these engagements provide. The Year 2000
Practice Group at headquarters serves as a resource to all of Analysts
International's branches as they work with customers on remedial action.
4 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
CASE HISTORIES
The case histories in this report focus on the national practices,
together with other specialized value-added services provided by various
Analysts International branches.
One example among the branch-level specialized practices is the AiC
INTERCHANGES-TM- PRACTICE of our Dallas branch, which provides Internet and
e-commerce solutions. The Internet is predicted to fundamentally change our
society, and Analysts International develops the software our customers need
to cope with new ways of buying, selling and communicating using the Internet.
THE ORACLE PRACTICE is another specialized branch-level consulting unit
that has been instrumental in developing new customers for the company. This
practice is in its second year of operation and has established a successful
track record of providing Oracle-related database administration and
development support to our clients in Phoenix, Denver, Los Angeles and Las
Vegas as well as project management assignments.
We plan to place greater emphasis on these and other higher margin,
value-added services during the coming year.
1999 EXPECTED TO BE ANOTHER GROWTH YEAR
With the continued deployment of our National Practice Groups and the
ongoing high demand for our services in the coming year, we are anticipating
strong growth and look forward to reporting to you on our progress.
Sincerely,
/s/ Frederick W. Lang /s/ Victor C. Benda
FREDERICK W. LANG VICTOR C. BENDA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF OPERATING OFFICER
AUGUST 20, 1998
BUILDING ON OUR SUCCESS 5
<PAGE>
The RAPID APPLICATION DESIGN AND DEVELOPMENT (RADD-TM-)
PRACTICE tackles projects requiring quick turnaround
and specialized skills
[GRAPHIC]
NSP PROVIDES ELECTRICITY TO CUSTOMERS IN MINNESOTA, WISCONSIN, NORTH DAKOTA,
SOUTH DAKOTA AND MICHIGAN.
[GRAPHIC]
(FROM LEFT) NICK GIBNEY, AiC DEVELOPER; CREG SCHUMAN, AiC RADD PRACTICE
MANAGER; LARRY CARLSON, MANAGER OF NSP'S APPLICATION DEVELOPMENT CENTER; ROGER
J. FILKE, SENIOR DEVELOPMENT PRODUCT SUPPORT ANALYST FOR NSP.
- -----------------------------------------------------------------------------
"AiC OFFERED A SET OF 'BEST PRACTICES' AND THE TOOL EXPERTISE THAT MADE
FOR A GOOD MATCH BETWEEN OUR TWO ENVIRONMENTS."
- -----------------------------------------------------------------------------
THE CLIENT Northern States Power Company (NSP) is a major Minnesota-based
energy utility, serving electricity to 1.4 million customers in five
Midwestern states and natural gas to more than 440,000 customers. Through its
subsidiaries, the company also has growing non-regulated operations in
domestic and foreign markets.
THE CHALLENGE NSP wanted to unify and simplify the administration of its
multiple computer security systems and create an improved monitoring
capability within them. With its own staff dedicated to maintaining and
enhancing existing applications, the company faced the challenge of quickly
assembling the specialized expertise needed for this short-term project. "For
us to find space and workstations, go out and contract vendors to get the
skills we need, then try to put a team together would have meant a
significant delay in start-up," said Larry Carlson, Manager of NSP's
Application Development Center.
THE SOLUTION "We decided to turn the project over to an outside resource,
and AiC was the best we looked at," Carlson said. "AiC offered a set of 'best
practices' and the tool expertise that made for a good match between our two
environments."
THE RESULT The assignment was completed within time and cost estimates. "AiC
managed the resources," Carlson said. "We were pleased with the savings in
staff time and AiC's continuing availability for follow-up help. We're using
the RADD group again on another project now."
6 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
The OUTSOURCE LEGACY MAINTENANCE PRACTICE enables clients to pursue exciting
new technologies without jeopardizing essential existing systems
[GRAPHIC]
(FROM LEFT) RANDY VIAPONTO AND PAM CUNDIFF OF AiC WITH AGL RESOURCE'S JOHN H.
MOBLEY, JR., VICE PRESIDENT, INFORMATION SYSTEMS; CHARLES C. MOORE, JR., VICE
PRESIDENT, BUSINESS SUPPORT AND TREASURER, AND RICHARD F. YONCE, DIRECTOR,
SOLUTIONS DELIVERY.
- -----------------------------------------------------------------------------
"THE ARRANGEMENT HAS ENABLED US TO HAVE OUR OWN EMPLOYEES FOCUS ON NEW
TECHNOLOGY PROJECTS."
- -----------------------------------------------------------------------------
THE CLIENT Atlanta-based AGL Resources is the parent company of Atlanta Gas
Light Company (AGLC), the largest distributor of natural gas in the
Southeast, serving more than 1.45 million customers. AGL Resources also
maintains interests in nonutility businesses in retail and wholesale natural
gas, electricity, and propane marketing; energy-related consumer products and
services; and gas supply services.
THE CHALLENGE Deregulation of Georgia's natural gas industry opened the door
to multiple competitive opportunities for AGL Resources. That landmark event
made it necessary to shift information technology staff members from their
work on maintaining critical legacy financial systems to developing software
applications needed to support the company's new initiatives.
THE SOLUTION "It was essential for us to leverage the knowledge, skills and
experience of our staff to meet these new challenges and at the same time
come up with a way to maintain and support our existing systems," said John
H. Mobley, Jr., Vice President, Information Systems for AGL. "By transferring
the maintenance of some of these legacy systems to AiC, we were able to
realign members of our current staff so they could help meet the needs
created by deregulation and competition."
THE RESULT "The arrangement has enabled us to have our own employees focus
on new technology projects, while developing new systems for the nonutility
operations," Mobley said. "That approach has worked out well."
BUILDING ON OUR SUCCESS 7
<PAGE>
The INTERCHANGES-TM- INTERNET PRACTICE offers
leading-edge e-commerce talent for
virtual enterprises
[GRAPHIC]
AiC INTERCHANGES CREATED A POPULAR WEB SITE FOR KOAI 107.5 THE OASIS,
REACHABLE AT http://www.1075theoasis.com.
[GRAPHIC]
(FROM LEFT) DERRICK RICKETTS, THE OASIS; DENNIS OUELLETTE, AiC; MIKE FISCHER,
THE OASIS; ANN MASON, AiC.
- -----------------------------------------------------------------------------
"WE FINALLY FOUND THE RIGHT PARTNERSHIP IN AiC'S INTERNET PRACTICE GROUP."
- -----------------------------------------------------------------------------
THE CLIENT The OASIS 107.5 FM is a CBS Radio affiliate in Dallas-Fort Worth
known as the "Smooth Jazz" station. It plays a blend of contemporary jazz
instrumentals and smooth vocals, and sponsors six to eight major concerts a
year, some drawing more than 50,000 fans.
THE CHALLENGE The OASIS knew from surveys that "Smooth Jazz" fans tended to
be Internet fans. Was there a way to use the Internet to broaden the
station's connection with these listeners? Several companies offered
proposals. None delivered.
THE SOLUTION "We finally found the right partnership in AiC's Internet
Practice group," said Mike Fischer, OASIS Program Director."Their vision of
technology for database building, for interactive audience appeal and for
potential new revenue sources was exactly what we needed." The AiC group,
known as AiC InterchangesTM, created an Internet presence with a "Smooth
Jazz" look - a colorful visual oasis offering profiles and photos of featured
artists and on-the-air personalities, a chat room, and information about
concerts. It provides a way for listeners to enter station-sponsored
contests, to buy OASISware merchandise and to order their favorite artists'
CDs. It also provides the station with another medium for ads and promotional
messages, and a channel for messages from artists and disk jockeys.
THE RESULT "We had 45,000 hits the first two weeks," Fischer said. A contest
offering international travel as a prize drew a thousand Internet entries in
one week. Average time on line: eight minutes. "As a radio station, we are a
non-picture medium - non-visual," Fischer said. "This gives us a picture
medium. The Web makes us multi-dimensional."
8 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
The MULTIMEDIA PRACTICE blends technology
and artistry to create computer-based tools
for its clients
- -----------------------------------------------------------------------------
"WE HAVE BEEN VERY IMPRESSED WITH THE TECHNICAL AND CREATIVE SKILLS OF THE
GROUP HERE IN LEXINGTON. THEY'VE BEEN ABLE TO TAKE OUR IDEAS AND MAKE MORE
OUT OF THEM THAN WE THOUGHT POSSIBLE."
- -----------------------------------------------------------------------------
[GRAPHIC]
VALVOLINE COMPANY, BASED IN LEXINGTON, KENTUCKY, MARKETS ITS PRODUCTS IN MORE
THAN 140 COUNTRIES.
[GRAPHIC]
PHOTO AT RIGHT: MEMBERS OF THE MULTIMEDIA PRACTICE TEAM: (FROM LEFT) DAN
MORGAN, PROJECTS MANAGER; ERIC COPELAND, MULTIMEDIA DEVELOPER; RICHARD MCCOY,
SENIOR MEDIA DEVELOPER; LAURA LEE CUNDIFF, SENIOR GRAPHIC DESIGNER.
THE CLIENT With sales in more than 140 countries, the Valvoline Company
markets automotive and industrial oils, automotive chemicals and
environmental services. Registered in 1873, Valvoline-Registered Trademark-
is the oldest name and trademark for a lubricating oil in the United States.
The company, a division of Ashland Inc., is based in Lexington, Kentucky.
THE CHALLENGE Valvoline wanted to find a way to make OSHA-required safety
training more employee-friendly and at the same time eliminate extensive
plant shutdowns required by traditional methods. In addition to being
time-consuming, group training sessions typically missed some employees and
did not provide for timely training of new hires.
THE SOLUTION Valvoline turned to AiC's Multimedia Practice team to create a
series of computer-based, interactive training modules on CD-ROM so that
employees could teach themselves. The series covers subjects such as hearing
conservation, fire extinguisher training and - for an EPA requirement -
training on the Resource Conservation Recovery Act. AiC is currently
developing two additional modules covering forklift safety and hazardous
materials shipping requirements.
THE RESULT Training that formerly consumed three hours has been cut to 20
minutes -- with improved employee understanding. Employees take the courses
individually, eliminating plant shut-downs. "We couldn't create something as
effective and technically sophisticated as the AiC people have," said Tracy
Smith, Manager of Health and Safety. "We have been very impressed with the
technical and creative skills of the group here in Lexington. They've been
able to take our ideas and make more out of them than we thought possible."
BUILDING ON OUR SUCCESS 9
<PAGE>
The LAWSON SOFTWARE PRACTICE provides customized tailoring of Lawson's
business software applications
THE CLIENT Dunlop Tire Corporation, a privately held company headquartered
in Amherst, New York, employs more than 3,500 workers in the production and
sale of a full line of technologically-advanced tires for passenger cars,
light and medium trucks, all-terrain and sports utility vehicles and
motorcycles.
THE CHALLENGE Dunlop Tire installed Lawson Software packages to enhance its
ability to manage business-critical customer service processes. However,
Dunlop needed to build additional flexibility into the feature-rich Lawson
Accounts Receivable and Order Entry modules -- to individualize these
packages to handle several unique Dunlop procedures.
THE SOLUTION AiC, a Lawson Global Alliance Integrated NetworkTM (GAIN)
partner, was selected by Lawson to help Dunlop develop the needed custom
modification on a fast-track timetable. "I felt that AiC would do everything
possible to provide us with what we needed 'yesterday,' as opposed to the
typical four to six weeks lead time," said John Short, Regional Service
Manager for Lawson Software's Northeast Region. AiC handled the assignment
off-site at its Customer Support Facility in Minneapolis, sending code and
other information to Dunlop via modem. Despite the distance, the companies
worked in extremely close collaboration, with Dunlop handing off more and
more of the project to AiC as the project unfolded.
THE RESULT All of the modifications were delivered in less than four weeks.
"AiC's analysts were able to interpret our business needs," said Paul Roder,
General Manager of Information Systems for Dunlop. "We needed timely results
and someone with overall system knowledge. AiC provided both."
- -----------------------------------------------------------------------------
"WITH AiC'S KNOWLEDGE OF OUR SYSTEMS, THEY ARE ABLE TO HELP US AS A
SOFTWARE PROVIDER TO DELIVER REAL VALUE TO OUR JOINT CLIENTS."
- -----------------------------------------------------------------------------
[GRAPHIC]
(FROM LEFT) MARNE SALL, AiC ACCOUNT MANAGER, RICHARD LAWSON, LAWSON
SOFTWARE'S CHAIRMAN OF THE BOARD AND EXECUTIVE VICE PRESIDENT OF INTERNET
PRODUCTS; SARAH SPIESS, EXECUTIVE VICE PRESIDENT OF AiC.
A UNIQUE STRATEGIC ALLIANCE
Through its Global Alliance Integrated Network-TM-, Lawson Software has
teamed with an elite group of companies that it describes as
"best-of-class" providers of technology expertise to enhance support of
customers around the world. The AiC-Lawson combination is a prime
example of how the arrangement leverages the strengths of two leading
companies to the ultimate benefit of the customer. Focusing on core
competencies, Lawson develops and delivers a full spectrum of business
applications; AiC provides the technical services to customize and
interface Lawson solutions with other business applications. In the
words of Richard Lawson, Lawson Software's Chairman of the Board and
Executive Vice President of Internet Products: "With AiC's knowledge of
our systems, they are able to help us as a software provider to deliver
real value to our joint clients."
10 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
LAWSON SOFTWARE IS A LEADING PROVIDER OF WEB-DEPLOYABLE CLIENT/SERVER
BUSINESS APPLICATIONS, SPECIALIZING IN FINANCIALS, HUMAN RESOURCES,
PROCUREMENT AND SUPPLY CHAIN MANAGEMENT.
[GRAPHIC]
THIS ARGOS SUPERSTORE IN MANCHESTER, ENGLAND, IS ONE OF MORE THAN 440 OUTLETS
OPERATED BY THE UNITED KINGDOM'S ARGOS DISTRIBUTORS LTD.
- -----------------------------------------------------------------------------
"THEY PROVIDED US WITH A BETTER UNDERSTANDING OF THE SYSTEM - AND A GOOD SET
OF REQUIREMENTS."
- -----------------------------------------------------------------------------
THE CLIENT Argos Distributors Ltd. is Europe's leading catalogue store chain
and third largest in the world. It currently operates more than 440 outlets
from its headquarters in the United Kingdom and is growing at the rate of
about 25 new stores a year.
THE CHALLENGE Lawson financial software allows Argos to centralize all
financial information, providing comprehensive views of data and linkage to
key operating systems. However, Argos also wanted to individualize the Lawson
software in some areas, for example, in order to retain Argos' traditional
look in paperwork that accompanied checks to suppliers. The company also
sought to develop a products payment mechanism that would permit electronic
billing instead of sending hard copies by mail.
THE SOLUTION AiC, which had done previous work with Lawson in Europe, was
chosen for the assignment - despite some initial concerns on the part of
Argos over the six-hour time difference between Argos headquarters and AiC's
Lawson Customer Support Facility in Minneapolis. More important
considerations were AiC's international experience and its history of success
in customizing Lawson applications as one of the elite few companies
certified to work with Lawson clients.
THE RESULTS "We did some wide-ranging work with the AiC team," said Nick
Carter, Argos Project Manager. "They provided us with a better understanding
of the system - and a good set of requirements. The payment device has been
implemented. We're now in a position to go live with invoice production. As
for being separated by the Atlantic - that wasn't a problem."
[GRAPHIC]
BUILDING ON OUR SUCCESS 11
<PAGE>
Analysts International's IT CONTRACT SERVICES
CAPABILITY reduces costs and management burden
THE CLIENT Eli Lilly and Company is a global research-based pharmaceutical
corporation headquartered in Indianapolis that is dedicated to creating and
delivering innovative pharmaceutical-based health care solutions which enable
people to live longer, healthier and more active lives.
THE CHALLENGE In line with an initiative to enhance its competitive
capabilities by selecting vendors based on quality, service and price, Lilly
wanted to develop fewer but deeper relationships with suppliers in
strategically important areas. For IT services and consulting, Lilly had been
working with scores of service providers, encountering widely varying
capabilities and procedures.
THE SOLUTION Lilly applied a rigorous competitive selection process,
assessing vendors' management structure, stability, recruiting ability,
quality assurance, billing and reporting capabilities, pricing, and overall
IT capabilities. "Over 90 companies started in the evaluation," said Jeffrey
Wooden, Lilly's manager of U.S. Flexible Staffing Services. "We narrowed that
down until we were able to select nine as preferred vendors." AiC was one of
the nine, drawing assignments to provide professional IT services and
consulting throughout Lilly's Indiana operations and at its Sphinx
Pharmaceuticals subsidiary in Raleigh, North Carolina. AiC's national network
of offices was a plus, along with its performance record during more than a
dozen years as a resource to Lilly, Wooden said. "AiC has consistently been
able to supply us with professional, stable and - from a technical competency
standpoint - mature contract professionals. The quality of its people has met
our expectations."
THE RESULT "The overall program has been working out well," Wooden said.
"We've presented our preferred vendors with very high expectations. We're
glad to have AiC as one of our strategic suppliers, and we look forward to
its continued growth in helping us to achieve success."
[GRAPHIC]
HEADQUARTERED IN INDIANAPOLIS, ELI LILLY AND COMPANY HAS RESEARCH AND
MANUFACTURING FACILITIES IN 23 COUNTRIES.
[GRAPHIC]
(FROM LEFT) JOHN BIELSTEIN, BRENDA BRINK AND JORGE NAVARRO OF AiC WITH
JEFFREY WOODEN, LILLY'S MANAGER OF U.S. FLEXIBLE STAFFING SERVICES.
- -----------------------------------------------------------------------------
"AiC HAS CONSISTENTLY BEEN ABLE TO SUPPLY US WITH PROFESSIONAL, STABLE AND -
FROM A TECHNICAL COMPETENCY STANDPOINT - MATURE CONTRACT PROFESSIONALS."
- -----------------------------------------------------------------------------
12 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
THE COMPANY'S STRATEGIC SOURCING CAPABILITY PROVIDES VALUE-ADDED SERVICE
WITH A FOCUS ON MEETING CLIENT BUSINESS OBJECTIVES.
[GRAPHIC]
METLIFE, THE LARGEST ISSUER OF LIFE INSURANCE IN NORTH AMERICA, HAS BEEN
HEADQUARTERED IN NEW YORK CITY FOR 130 YEARS.
[GRAPHIC]
(FROM LEFT) METLIFE'S JULIANNE R. HARRISON, DIRECTOR OF INFORMATION
TECHNOLOGY RESOURCE MANAGEMENT, AND FRANCISCO A. ORBE, VICE PRESIDENT OF
INFORMATION TECHNOLOGY SERVICES, WITH AiC'S MICHAEL BEVAN, NATIONAL ACCOUNT
MANAGER.
- -----------------------------------------------------------------------------
"AiC PROVIDES VALUE-ADDED SERVICE AND HAS DEMONSTRATED COMMITMENT BY
WORKING WITH US TO ACHIEVE OUR OBJECTIVES."
- -----------------------------------------------------------------------------
THE CLIENT Headquartered in New York City since 1868, MetLife is one of the
world's largest financial services companies. The MetLife family of companies
has offices throughout the United States and operations in North and South
America, Europe and Asia. A mutual insurance company, MetLife is the largest
issuer of life insurance in North America, with more than $1.5 trillion of
insurance in force.
THE CHALLENGE Historically, Information Technology at MetLife was somewhat
decentralized, with more than 120 consulting firms providing technical
resources to the company through Corporate Information Systems (CIS) and
other line-of-business information technology departments. The absence of a
central process for contracting with outside vendors presented a series of
challenges and inefficiencies.
THE SOLUTION MetLife consolidated technical organizations to concentrate
resources and expertise in a new organization called I/T Services. Within
this shared service, the Resource Management function is responsible for
providing skilled resources to I/T Service's divisions through a centralized,
managed process. An important byproduct of the new organization was an
initiative to reduce the number of consulting firms by building strategic
relationships with a group of five National Preferred Vendors and ten
Regional Preferred Vendors. MetLife selected AiC as one of the five National
Vendors.
THE RESULT AiC was able to provide a single-point-of-contact sourcing
capability that supports the requirements of over 20 MetLife locations across
the U.S. Utilizing in-house developed applications customized to communicate
electronically with Resource Management, AiC is able to track all activity,
measure results and report to MetLife management on AiC's performance in
meeting MetLife's business objectives on a regular basis. Working in
partnership, MetLife was able to develop a streamlined, simplified process
for obtaining high quality, cost-effective I/T consulting resources. "AiC
provides value-added service and has demonstrated commitment by working with
us to achieve our objectives," said Julianne R. Harrison, Director of
Information Technology Resource Management for MetLife. "We are very pleased
with the contracting resources AiC provides MetLife, as well as the
attentiveness and support AiC has shown regarding our contractor acquisition
process within I/T Services."
BUILDING ON OUR SUCCESS 13
<PAGE>
Analysts International's YEAR 2000 PRACTICE:
Helping clients solve the 'Y2K problem'
THE CLIENT Quest International is a worldwide supplier of fragrance
compounds and ingredients for consumer products. A recognized world leader in
olfactory research, Quest designs and manufactures products ranging from
flavors and food additives to aroma and perfume fragrances.
THE CHALLENGE Year 2000 Compliance! Quest is focused on ensuring the
integrity of the business and supply chain for their customers into the next
millennium. Quest's challenge was to assess the technology used to conduct
business, develop and implement strategies for compliance, and coordinate
testing efforts across multiple platforms and locations to verify compliance.
THE SOLUTION AiC provided a unique and customized approach that blended the
project management and technical expertise necessary for the challenges of
Quest's Year 2000 effort with the ability to provide supplemental staffing in
key Quest positions to free staff to fully participate in the Year 2000
effort. The combined AiC and Quest staff addressed the complete impact to the
organization across mainframe, client/server, embedded systems and
infrastructure environments.
THE RESULT At Quest the rewards for implementing and achieving Year 2000
compliance reach much further than ensuring reliability into the next
millennium. Quality change-control procedures, advanced asset tracking
initiatives and comprehensive re-usable test cases ensure Quest will continue
to enjoy a competitive advantage by assuring their customers that Quest will
be there for them not only through 2000, but also throughout the next
millennium. "With the assistance of AiC, Quest was able to meet the
established targets for reaching compliance on all aspects of its Year 2000
program," said John Torbett, Vice President Information Systems.
[GRAPHIC]
QUEST INTERNATIONAL, A WORLDWIDE FRAGRANCE AND FLAVOR BUSINESS, HAS OFFICES
AND PRODUCTION FACILITIES IN MORE THAN 30 COUNTRIES.
[GRAPHIC]
MEMBERS OF THE AiC-QUEST TEAM (SEATED) DAVID GRAY AND CINDY REEDER, AiC
ENGAGEMENT MANAGERS; (STANDING FROM LEFT) QUEST'S NICK ROMANO, CFO NORTH
AMERICA; CAROLYN BARKER, QUANTUM REGIONAL PROJECT LEADER; JEROME DEMARTINO,
COMMERCIAL DIRECTOR, AND JOHN TORBETT, VICE PRESIDENT INFORMATION SYSTEMS.
14 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
[GRAPHIC]
BELL ATLANTIC
[GRAPHIC]
(FROM LEFT) SANTOSH KOLHATKAR, BADG MANAGER, PHOTOCOMPOSITION; VALERIE DALE,
BADG MANAGER, TESTING & HELPDESK; RICHARD KIRK, JR., BADG PROJECT LEADER;
JOHN STEWART, AiC ENGAGEMENT MANAGER.
THE CLIENT Bell Atlantic Directory Graphics (BADG), located in the historic
Valley Forge area of Pennsylvania, is Bell Atlantic's Yellow Pages production
and design center. Here Bell Atlantic Information System Group engineers
combine the latest in graphics, communication, database, photocomposition and
page production technology to bring to Bell Atlantic customers the best in
Yellow Pages information and advertising.
THE CHALLENGE With applications running across three different operating
systems, VAX/VMS, UNIX and Client/Server, BADG needed to expedite the
assessment of its Year 2000 exposure and risk. "The unique situation we faced
at BADG was that, due to the sales cycles, the Y2K issue had to be resolved
18 months ahead of actual year 2000," said Santosh Kolhatkar, Manager,
Photocomposition.
THE SOLUTION BADG teamed with AiC to gauge the business risk and determine
the scope of the conversion effort necessary to adapt its business systems.
Based on AiC's initial findings report, BADG engaged AiC to work with the
BADG Year 2000 Team to develop application conversion plans, schedules and
budgets. AiC business consultants also designed and implemented source code
change-management and version-control processes to improve base-line
functionality as a value-added service in the Y2K activities of inventory,
analysis, code remediation and compliance testing.
THE RESULT The company was able to implement change-management and
version-control processes and procedures to control the Year 2000 software
conversion without disrupting ongoing business application development and
maintenance. "With BADG Subject Matter Experts teaming with Analysts
International consultants and the tools provided by Analysts International,
we passed a crucial milestone in July '98," Kolhatkar said. "We are well
underway to be Y2K compliant by the end of 1998."
GETTING READY FOR THE MILLENNIUM
Analysts International's Year 2000 Practice provides a customized approach
that blends proven methodology, effective project management and the in-depth
technical expertise needed to meet the challenges associated with Year 2000
compliance. The Y2K problem threatens computer havoc for corporations,
institutions and government agencies that fail to update the way date
information is processed by software to correctly handle dates in the new
millennium.
BUILDING ON OUR SUCCESS 15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
As a means of better explaining the Company's operations and results, the
following table illustrates the relationship between revenues and expense
categories for the three years ended June 30, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
PERCENT OF REVENUES
YEAR ENDED JUNE 30, 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Professional services revenues:
Provided directly . . . . . . . . . . . . . . . . . . . 77.3% 78.4% 81.1%
Provided through sub-suppliers. . . . . . . . . . . . . 22.7 21.6 18.9
- --------------------------------------------------------------------------------------------
Total revenues . . . . . . . . . . . . . . . . . . . . 100.0 100.0 100.0
Salaries, contracted services and direct charges. . . . 77.9 77.4 76.6
Selling, administrative and other operating costs . . . 15.9 16.6 17.4
Non-operating income. . . . . . . . . . . . . . . . . . 0.2 0.2 0.3
- --------------------------------------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . 6.4 6.2 6.3
Income taxes. . . . . . . . . . . . . . . . . . . . . . 2.6 2.5 2.5
- --------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . 3.8% 3.7% 3.8%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Revenues provided directly increased approximately $110 million, or 31.8%, in
fiscal 1998 over 1997. Approximately 65% of this increase is the result of an
increase in billed hours and 35% from increases in hourly rates. Fiscal 1997
revenues provided directly increased 29.0% over fiscal 1996. Approximately
76% of this increase is the result of an increase in billed hours and 24%
from increases in hourly rates. While the Company has been able to increase
rates somewhat over the prior fiscal year, there can be no assurance the
Company will be able to continue this as competitive conditions in the
industry make it difficult for the Company to continually increase the hourly
rates it charges for services. Revenues provided through sub-supplier
billings, primarily with U S WEST and IBM, increased 40.4% in fiscal 1998
over 1997 and had increased 52.3% in fiscal 1997 over fiscal 1996. These
increases in sub-supplier revenues resulted almost exclusively from increases
in billable hours of service rendered to clients.
Personnel totalled 5,300 at June 30, 1998, compared to 4,650 at June 30,
1997 and 3,770 at June 30, 1996. Substantially all of the increases consist
of billable technical staff.
Salaries, contracted services and direct charges, which represent
primarily the Company's direct labor costs, were 77.9% of revenues in fiscal
1998 compared to 77.4% of revenues in fiscal 1997 and 76.6% in fiscal 1996.
The increase in this expense category as a percentage of revenues is mostly a
consequence of the increase in business done through sub-suppliers. The fees
which the Company pays to these sub-suppliers are higher per hour than the
labor costs for its own employees. Excluding both sub-suppliers revenues and
labor costs associated with these contracts, this category of expense was
71.4% of revenues in fiscal 1998, 71.3% in fiscal 1997 and 71.2% in fiscal
1996. The Company's efforts to control these costs involve controlling labor
costs, passing on labor cost increases through increased billing rates where
possible, and maintaining productivity levels of its billable technical
staff. Labor costs, however, are difficult to control because the highly
skilled technical personnel the Company seeks to hire and retain are in great
demand. Intense competition in the industry makes it difficult to pass cost
increases on to customers, and unfavorable economic conditions could
adversely affect productivity. While the Company has taken steps to control
this category of expense, there can be no assurance the Company will be able
to maintain gross margins at the levels experienced.
Selling, administrative and other operating costs include commissions
paid to sales representatives and recruiters, employee fringe benefits and
location costs. These costs, as a percentage of revenues, were 15.9% in
fiscal 1998, 16.6% in 1997 and 17.4% in 1996. Excluding the sub-supplier
revenues associated with the contracts referred to above, this percentage
would have been 20.6% for fiscal 1998, 21.1% for fiscal 1997 and 21.4% for
fiscal 1996. While the Company is committed to careful management of these
costs, there can be no assurance the Company will be able to maintain these
costs at their current relationship to revenues.
Net income in fiscal 1998 increased 38.0% over fiscal 1997 and fiscal
1997's net income increased 31.9% over fiscal 1996. As a percentage of total
revenues, net income was 3.8% in fiscal 1998 as compared to 3.7% in fiscal
1997 and 3.8% in fiscal 1996. The Company's net income as a percentage of
revenues provided directly was 5.0%, 4.8% and 4.6% for fiscal years 1998,
1997 and 1996, respectively.
Inflation has not had a major impact on the Company's operations because
revenues are derived primarily from services billed at hourly rates, which
are generally subject to renegotiation on a semi-annual basis.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1998 was $67.5 million, up 22.7% from the $55.0
million at June 30, 1997 which was up 16.3% from the $47.3 million at June
30, 1996. This includes cash and cash equivalents of $11.9 million at June
30, 1998 compared to $17.9 million at June 30, 1997 and $17.0 million a year
earlier and accounts receivable of $94.3 million at June 30, 1998 compared to
$67.0 million at June 30, 1997 and $49.5 million a year earlier. The decrease
in cash and cash equivalents is the result of the increase in accounts
receivable associated with the increase in revenues as well as the increase
in expenditures for capital items.
See additional discussion of these items below.
REVENUES
(IN MILLIONS OF DOLLARS)
587
440
330
1996 1997 1998
NET INCOME
(IN MILLIONS OF DOLLARS)
22.6
16.4
12.4
1996 1997 1998
16 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
The Company's primary need for working capital is to support accounts
receivable resulting from the growth in its business and to fund the time lag
between payroll disbursement and receipt of fees billed to clients. Over the
past three years, the Company has been able to support the growth in its
business with internally generated funds. The Company's sub-supplier
contracts have not and are not expected to burden working capital, even
though the ratio of current assets to current liabilities has declined as a
consequence of the Company's use of sub-suppliers to perform substantial
amounts of the work, because the Company generally does not pay its
sub-suppliers until after collection from the client.
In fiscal 1998 the Company made capital investments totaling $7,722,000,
compared to capital expenditures of $2,955,000 and $2,932,000 in fiscal years
1997 and 1996, respectively. Fiscal 1998 capital expenditures consisted of
(i) $4,247,000 for computer equipment and furniture and to enlarge certain
branch and corporate facilities as a result of the increased level of
business, (ii) $1,392,000 to purchase, develop and implement new financial
systems throughout the Company (in part to achieve Year 2000 compliance) and
(iii) $2,083,000 for progress payments related to the new
corporate/Minneapolis branch facility being built under a January 1998
agreement. All of these capital expenditures were funded through working
capital. Fiscal 1999 capital spending will exceed fiscal 1998 as the Company
completes the construction of its new corporate headquarters building, total
cost of which is expected to be approximately $22,000,000 and which will be
financed through a combination of unsecured debt and cash reserves.
During fiscal 1998, the Company increased its regular quarterly cash
dividends to $.08 per share, up from $.06 declared during fiscal 1997 and the
$.05 declared during fiscal 1996. The amount of the quarterly dividend is
based on results of operations, available cash and anticipated cash
requirements of the business.
The Company adopted Statements of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," and No. 123, "Accounting for Stock-Based
Compensation," in the first quarter of 1997. The adoption of these standards
did not have a significant effect on the Company's financial position and
operating results.
The Company also adopted Statements of Financial Accounting Standards
No. 128, "Earnings per Share" in the second quarter of 1998. This statement
replaces the presentation of primary EPS with a presentation of basic EPS.
In June 1997, the FASB issued Statements of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and No. 131,
"Disclosures About Segments of An Enterprise and Related Information." These
statements will be effective for the Company's 1999 fiscal year. The Company
does not expect these statements to have a significant effect on its
financial position and operating results.
On July 1, 1996, the Company acquired specific assets and assumed
certain liabilities of DPI, Inc. and DPI Services, Inc., a wholly owned
subsidiary of DPI, Inc., primarily engaged in the business of providing
software services in the San Jose, California market. The amount paid in
connection with the purchase was approximately $5.6 million which was paid
entirely with internal funds.
The Company believes funds generated from its business, current cash
balances and the above mentioned financing are adequate to meet demands
placed upon its resources by its operations, capital investments and the
payment of quarterly dividends.
The Company intends to achieve Year 2000 compliance by replacing its
computer systems with new, Y2K compliant hardware and software which is
currently being subjected to compliance testing. It is expected that the new
hardware/software system will be ready for use in production by November 1,
1998, which will allow more than one full year of operation before the
millennium date change. The cost of the new system is expected to be
approximately $2,000,000, of which $1,600,000 has already been incurred. The
Company depends on its computer system for critical business functions,
including the time record keeping, billing, payroll, and accounts payable and
receivable. The loss of these capabilities would have a material adverse
impact on the Company. The Company believes, however, that its new computer
systems will be ready in time for the millennium date change, and accordingly
no contingency plan has been developed at this time. If Y2K compliance
testing currently being performed exposes weaknesses (Y2K or otherwise) in
the new system, or if implementation into production is deferred
beyond January 1, 1999, the Company intends to develop a contingency plan,
which will likely take into account the fact it has a staff of over 4,500
computer programmers as well as a national Y2K practice which can assist in
achieving Y2K compliance. The Company's business does not depend on raw
materials, parts or other goods supplied by third parties and therefore, the
Company believes that the inability of its vendors to achieve Y2K compliance
would not have a material adverse impact on the Company. The Company does use
utility services (electricity, telecommunication, natural gas and the like)
for its offices, and interruption of these services could have a material
adverse impact on the Company's operations. The inability of the Company's
clients to achieve Y2K compliance could have an impact on their ability to
pay the Company for the services it renders to them, with consequent adverse
impact on the Company's cash flow. Nearly all of the Company's revenue is
derived from services rendered to Fortune 1000 companies, and the Company
considers it unlikely that a material number of its customers would encounter
Y2K compliance issues which would prevent them from paying the Company's
invoices in a timely manner.
The Company's services addressing the Year 2000 problem involve key
aspects of its clients' computer systems. A failure in a client's system
could result in a claim for substantial damages against the Company,
regardless of the Company's responsibility for such failure. Litigation,
regardless of its outcome, could result in substantial cost to the Company.
Accordingly, any contract liability claim or litigation against the Company
could have an adverse effect on the Company's business, operations and
financial results.
SHAREHOLDERS' EQUITY
(IN MILLIONS OF DOLLARS)
83.0
66.1
53.7
1996 1997 1998
RETURN ON EQUITY
(IN PERCENT)
30.3
27.3
25.1
1996 1997 1998
BUILDING ON OUR SUCCESS 17
<PAGE>
CONSOLIDATED BALANCE SHEETS
ANALYSTS INTERNATIONAL CORPORATION
<TABLE>
<CAPTION>
June 30
--------------------
(Dollars in thousands except per share amount) 1998 1997
- ---------------------------------------------- ---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,868 $ 17,888
Accounts receivable, less allowance for
doubtful accounts of $750 and $550, respectively 94,294 66,954
Prepaid expenses and other current assets 3,808 2,989
-------- --------
Total current assets 109,970 87,831
Property and equipment 10,360 6,121
Intangible assets, net of accumulated
amortization of $554 and $277, respectively 3,597 3,874
Other assets 8,734 7,544
-------- --------
$132,661 $105,370
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,236 $ 18,131
Dividend payable 1,795 1,336
Salaries and vacations 15,669 11,513
Other, primarily self-insured health
care reserves 2,161 1,647
Income taxes payable 1,635 195
-------- --------
Total current liabilities 42,496 32,822
Long-term liabilities 7,171 6,444
Commitments (Note H) -- --
Shareholders' equity:
Common stock, par value $.10 a share;
authorized 60,000,000 shares; issued and
outstanding 22,439,743 and 22,274,774 shares,
respectively 2,244 2,228
Additional capital 12,604 11,318
Retained earnings 68,146 52,558
-------- --------
Total shareholders' equity 82,994 66,104
-------- --------
$132,661 $105,370
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
18 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
ANALYSTS INTERNATIONAL CORPORATION
<TABLE>
<CAPTION>
Year Ended June 30
---------------------------------------
(Dollars in thousands except per share amounts) 1998 1997 1996
- ----------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Professional services revenues:
Provided directly $ 454,339 $ 344,790 $ 267,317
Provided through sub-suppliers 133,072 94,756 62,227
----------- ----------- -----------
Total revenues 587,411 439,546 329,544
Expenses:
Salaries, contracted services and direct charges 457,318 340,483 252,518
Selling, administrative and other operating costs 93,705 72,898 57,314
----------- ----------- -----------
551,023 413,381 309,832
----------- ----------- -----------
Operating income 36,388 26,165 19,712
Non-operating income 1,299 1,045 1,027
----------- ----------- -----------
Income before income taxes 37,687 27,210 20,739
Income taxes 15,077 10,829 8,321
----------- ----------- -----------
Net income $ 22,610 $ 16,381 $ 12,418
----------- ----------- -----------
----------- ----------- -----------
Per common share:
Net income (basic) $ 1.01 $ .74 $ .57
----------- ----------- -----------
----------- ----------- -----------
Net income (diluted) $ .99 $ .73 $ .56
----------- ----------- -----------
----------- ----------- -----------
Average common shares outstanding 22,376,000 22,095,000 21,852,000
----------- ----------- -----------
----------- ----------- -----------
Average common and common equivalent shares
outstanding 22,829,000 22,544,000 22,221,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
BUILDING ON OUR SUCCESS 19
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
ANALYSTS INTERNATIONAL CORPORATION
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- -------------- ---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 22,610 $ 16,381 $ 12,418
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,454 2,562 2,191
Amortization of Goodwill 277 277 --
Loss on disposal of assets 4 4 25
Increase in deferred income tax benefit (1,192) (531) (469)
Tax benefit from stock options 336 513 --
Appreciation of annuities and cash surrender values (549) (478) (448)
Increase in accounts receivable (27,340) (15,915) (7,788)
(Increase) decrease in prepaid expenses (268) (186) 21
Increase in accounts payable 3,105 6,582 3,808
Increase in salaries and vacations 4,156 3,897 871
Increase (decrease) in other accrued expenses 514 (30) 57
Increase (decrease) in income taxes payable 1,440 (187) (208)
Increase in long-term liabilities 727 448 644
-------- -------- --------
Net cash provided by operating activities 7,274 13,337 11,122
Cash flows from investing activities:
Property and equipment additions (7,722) (2,955) (2,932)
Investment purchases -- (120) (130)
Payments for acquisitions -- (5,153) --
Proceeds from property and equipment sales 25 32 21
-------- -------- --------
Net cash used in investing activities (7,697) (8,196) (3,041)
Cash flows from financing activities:
Cash dividends (6,563) (5,083) (4,223)
Proceeds from exercise of stock options 966 812 545
-------- -------- --------
Net cash used in financing activities (5,597) (4,271) (3,678)
-------- -------- --------
Net (decrease) increase in cash and equivalents (6,020) 870 4,403
Cash and equivalents at beginning of year 17,888 17,018 12,615
-------- -------- --------
Cash and equivalents at end of year $ 11,868 $ 17,888 $ 17,018
-------- -------- --------
-------- -------- --------
Supplemental cash flow information:
Cash paid during the year for:
Income taxes $ 14,565 $ 11,034 $ 8,998
Interest -- -- --
</TABLE>
See notes to consolidated financial statements.
20 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ANALYSTS INTERNATIONAL CORPORATION
<TABLE>
<CAPTION>
(Dollars in thousands except Common Additional Retained
per share amounts) Stock Capital Earnings
- ------------------- ------- ---------- --------
<S> <C> <C> <C>
Balances at June 30, 1995 as previously reported $ 1,452 $ 10,224 $ 33,458
Effect of stock split 726 (726)
------- -------- --------
Balances at June 30, 1995 as restated 2,178 9,498 33,458
Common stock issued - 200,697 shares
upon exercise of stock options 20 525
Cash dividends ($.20 per share) (4,379)
Net income 12,418
------- -------- --------
Balances at June 30, 1996 2,198 10,023 41,497
Common stock issued - 297,815 shares
upon exercise of stock options 30 782
Income tax benefit from stock
option plans 481
Stock based compensation 32
Cash dividends ($.24 per share) (5,320)
Net income 16,381
------- -------- --------
Balances at June 30, 1997 2,228 11,318 52,558
Common stock issued - 153,601 shares
upon exercise of stock options 16 950
Income tax benefit from stock
option plans 264
Stock based compensation 72
Cash dividends ($.31 per share) (7,022)
Net income 22,610
------- -------- --------
Balances at June 30, 1998 $ 2,244 $ 12,604 $ 68,146
------- -------- --------
------- -------- --------
</TABLE>
See notes to consolidated financial statements.
BUILDING ON OUR SUCCESS 21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business - Analysts International Corporation furnishes
analytical and programming services. These services include consulting, systems
analysis, design, programming and instruction in the use of computer programs.
Consolidation - The consolidated financial statements include the accounts of
the Company and its subsidiary. All intercompany accounts and transactions have
been eliminated.
Depreciation - Property and equipment is being depreciated using the
straight-line method over the estimated useful lives (3-40 years) of the assets
for financial statement purposes and accelerated methods for income tax
purposes.
Revenues - The Company grants credit without collateral to customers, a
significant portion of whom are engaged in the electronics and
telecommunications industries. One customer and their various divisions and
operating units accounted for approximately 22%, 22% and 23% of revenues in
fiscal 1998, 1997 and 1996, respectively. Another customer accounted for 16%,
21% and 18% of revenues in fiscal 1998, 1997 and 1996, respectively. Revenue is
recognized on contracts as services are performed.
Intangible assets - Intangible assets consists of goodwill, the excess of the
purchase price over the appraised fair value of assets acquired in acquisitions.
Intangibles are amortized on a straight-line basis over 15 years. At the balance
sheet date, management assessed whether there has been a permanent impairment in
the value of goodwill and the amount of such impairment by comparing anticipated
undiscounted future operating income from the acquired business unit with the
carrying value of the related goodwill. The factors considered by management in
performing this assessment include current operating results, trends and
prospects, as well as the effects of demand, competition and other economic
factors.
Net income per share - Basic and diluted earnings per share (EPS) are presented
in accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share". This statement specifies the computation, presentation,
and disclosure requirements for EPS and is effective for financial statements
issued for periods ending after December 15, 1997. This statement replaces the
presentation of primary EPS with a presentation of basic EPS. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. The
difference between average common shares and average common and common
equivalent shares is the result of outstanding stock options.
Cash equivalents - Temporary cash investments in money market accounts and
Treasury Bills are considered to be cash equivalents.
Shares reserved - At June 30, 1998, there were approximately 25,507,000 shares
reserved for issuance under the stock option plans and the shareholders' rights
plan.
Estimates - The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions affecting the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
B. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
June 30
------------------------
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Cost:
Land $ 1,940 $ 74
Building and improvements 2,565 1,931
Office furniture & equipment 19,820 15,672
-------- --------
Total 24,325 17,677
Accumulated depreciation (13,965) (11,556)
-------- --------
$ 10,360 $ 6,121
-------- --------
-------- --------
</TABLE>
C. DEFERRED COMPENSATION
The Company has a Deferred Compensation Plan for key management employees as
determined by the Board. Included in long-term liabilities at June 30, 1998 and
1997 is $7,171,000 and $6,444,000, respectively, representing the Company's
liability under the Plan. This liability is being funded by the purchase of life
insurance and annuity contracts. Included in other assets at June 30, 1998 and
1997 is $5,697,000 and $5,148,000, respectively, representing the carrying value
of annuities, which approximates market value, and insurance cash value.
Deferred compensation expense for the fiscal years 1998, 1997 and 1996 was
approximately $727,000, $448,000 and $718,000, respectively.
D. COMMON STOCK
In December 1997, the Board of Directors approved an amendment to the Company's
Articles of Incorporation increasing the number of shares of Common Stock
authorized for issuance to 60,000,000 shares. Also, in December 1997, the
Company distributed a three- for-two stock split effected in the form of a stock
dividend. All share and per share data has been adjusted to reflect this stock
split.
E. STOCK OPTION PLANS
The Company has three stock-based compensation plans, which are described below.
SFAS 123 requires companies to either recognize compensation expense for grants
of stock options and other equity instruments based on fair value or to disclose
pro forma
22 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
net income and earnings per share in the notes to the financial
statements. The Company has adopted the disclosure provisions of SFAS 123 and
has continued to apply APB Opinion 25 and related interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for two of
its stock option plans. The compensation that has been charged against income
for its non-employee directors plan was $72,000 and $32,000 in fiscal years 1998
and 1997, respectively, fiscal year 1997 being the first year of the plan. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates as calculated in
accordance with SFAS 123, the Company's net income and earnings per share for
the years ended June 30, 1998, 1997 and 1996 would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (in thousands):
As reported $22,610 $16,381 $12,418
Pro forma 21,539 15,400 12,246
Net income per share (basic):
As reported $1.01 $.74 $.57
Pro forma .96 .70 .56
Net income per share (diluted):
As reported $.99 $.73 $.56
Pro forma .94 .68 .55
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not likely to
be representative of the effects on reported net income in future years. SFAS
123 does not apply to awards prior to 1996, and additional awards in future
years are anticipated.
The fair market value of each stock option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions for each year presented: an expected life of 5 years, expected
volatility of 44%, a dividend yield of 1.0% and a risk-free interest rate of
7.5%. The weighted average fair value of options granted during the years ended
June 30, 1998, 1997 and 1996 was $9.15, $9.47 and $5.73, respectively.
The Company has options outstanding under three option plans, two of which
remain active. Under the 1994 Stock Option Plan, the Company may grant options
to its employees for up to 1,200,000 shares of common stock. Under the 1996
Stock Option Plan for Non-employee Directors the Company may grant options to
its non-employee directors for up to 240,000 shares of common stock. Under the
1996 Non-employee Directors Plan, options to purchase 6,000 shares are
automatically granted on January 3 of each year to each eligible non-employee
director. Under all plans, the exercise price of each option equals the market
price of the Company's stock on the date of grant and an option's maximum term
is generally 10 years. Options are exercisable 25% annually beginning one year
after date of grant.
A summary of the status of the Company's stock option plans as of June 30, 1998,
1997 and 1996, and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- --------------------------- ---------------------------
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 981,060 $ 12.03 1,182,804 $ 8.98 954,642 $ 6.07
Granted 107,407 27.91 176,738 19.57 505,269 12.41
Exercised (188,207) 9.07 (370,982) 5.91 (271,107) 5.18
Expired (10,500) 12.20 (7,500) 11.36 (6,000) 6.42
Outstanding at -------- --------- ---------
end of year 889,760 $ 14.58 981,060 $ 12.03 1,182,804 $ 8.98
-------- --------- --------- --------- --------- ---------
-------- --------- --------- --------- --------- ---------
</TABLE>
The following table summarizes information about stock options outstanding at
June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------- -----------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 6/30/98 Contractual Life Exercise Price at 6/30/98 Exercise Price
<S> <C> <C> <C> <C> <C>
$ 6.42 -$12.09 233,895 1.83 years $ 7.77 113,130 $ 7.53
12.59 - 19.33 501,004 3.72 14.09 183,132 13.49
22.83 - 29.06 116,717 9.15 24.71 12,237 23.14
30.00 - 34.94 38,144 9.54 31.75 -- --
------- -------
$ 6.42 -$34.94 889,760 4.19 $ 14.58 308,499 $ 11.69
------- -------
------- -------
</TABLE>
F. SHAREHOLDERS' RIGHTS PLAN
On June 15, 1989 the Board of Directors adopted a common stock shareholders'
rights plan. Under this plan, the Board of Directors declared a dividend of one
common share purchase right for each outstanding share of common stock and stock
options granted and available for grant. The Board of Directors amended the plan
on April 29, 1996 and April 16, 1998. The rights, which expire on April 16,
2008, are exercisable only under certain conditions, and when exercisable the
holder will be entitled to purchase from the Company one share of common stock
at a price of $160.00, subject to certain adjustments. The rights will become
exercisable after a person or group acquires beneficial ownership of 15 percent
or more (or as low as 10 percent as the Board of Directors may determine) of the
Company's common stock or after a person or group announces an offer, the
consummation of which would result in such person or group owning 15 percent or
more of the common stock.
If the Company is acquired at any time after the rights become exercisable, the
rights will be adjusted so as to entitle a holder to purchase a number of shares
of common stock of the acquiring company at one-half of their market value. If
any person or group acquires beneficial ownership of 15 percent or more of the
Company's shares, the rights will be adjusted so as to entitle a
BUILDING ON OUR SUCCESS 23
<PAGE>
holder (other than such person or group whose rights become void) to purchase
a number of shares of common stock of Analysts International Corporation at
one-half of their market value or the Board of Directors may exchange the
rights, in whole or in part, at an exchange ratio of one common share per
right (subject to adjustment).
At any time prior to an acquisition by a person or group of beneficial ownership
of 15 percent or more of the Company's shares, the Board of Directors may redeem
the rights at $.01 per right.
G. INCOME TAXES
The provision for income taxes charged was as follows:
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
(IN THOUSANDS)
Currently payable:
Federal $ 13,627 $9,486 $7,399
State 2,642 1,874 1,391
------ ------ ------
16,269 11,360 8,790
Deferred:
Federal (1,002) (439) (408)
State (190) (92) (61)
------ ------ ------
(1,192) (531) (469)
------ ------ ------
Total $15,077 $10,829 $8,321
------ ------ ------
------ ------ ------
</TABLE>
Net deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
June 30
---------------------
(IN THOUSANDS) 1998 1997
---- ----
<S> <C> <C>
Deferred compensation $ 2,869 $ 2,565
Accrued vacation and compensatory time 1,538 1,262
Self-insured health care reserves 760 597
Allowance for doubtful accounts 300 219
Depreciation 115 (182)
Other 333 236
------- -------
Deferred tax assets 5,915 4,697
Other (152) (126)
------- -------
Deferred tax liabilities (152) (126)
------- -------
Net deferred tax assets $ 5,763 $ 4,571
------- -------
------- -------
Whereof:
Current $ 2,726 $ 2,175
Noncurrent 3,037 2,396
------- -------
$ 5,763 $ 4,571
------- -------
------- -------
</TABLE>
The provision for income taxes differs from the amount of income tax determined
by applying the federal statutory income tax rates to pretax income as a result
of the following differences:
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rates 35.0% 35.0% 35.0%
State and local taxes,
net of federal benefit 4.2% 4.3 4.2
Other 0.8% 0.5 0.9
---- ---- ----
Effective tax rates 40.0% 39.8% 40.1%
---- ---- ----
---- ---- ----
</TABLE>
H. COMMITMENTS
At June 30, 1998 aggregate net minimum rental commitments under noncancelable
operating leases having an initial or remaining term of more than one year are
payable as follows:
<TABLE>
(In thousands)
<S> <C>
Year ending June 30, 1999 $5,707
2000 5,356
2001 4,216
2002 2,401
2003 2,128
Later 1,406
-------
Total minimum obligation $21,214
-------
-------
</TABLE>
Rent expense, primarily for office facilities, for the years ended June 30,
1998, 1997 and 1996 was $4,900,000, $3,812,000 and $2,841,000, respectively.
The Company has compensation arrangements with its five senior executives and
certain other employees which provide for certain payments in the event of a
change of control of the Company.
The Company also sponsors a 401(k) plan. Substantially all employees are
eligible to participate and may contribute up to 15% of their pretax earnings,
subject to IRS maximum contribution amounts. The Company makes matching
contributions to the plan up to a specified percentage. The Company's
contributions vest after the employee has completed seven years of service and
for 1998, 1997 and 1996 amounted to approximately $1,347,000, $792,000 and
$611,000, respectively.
In January 1998 the Company entered into an agreement to build a facility for
use as its corporate headquarters and its Minneapolis branch operations. The
Company expects construction and related costs will be approximately
$22,000,000, of which $2,083,000 was funded through June 30, 1998, with the
remaining costs to be financed through a combination of unsecured debt and use
of cash reserves.
24 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Analysts International Corporation
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheets of Analysts
International Corporation and its subsidiary (the Company) as of June 30, 1998
and 1997 and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended June 30, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as of June
30, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1998, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
August 15, 1998
REPORT OF MANAGEMENT
The consolidated financial statements of Analysts International Corporation
published in this report were prepared by company management, which is
responsible for their integrity and objectivity. The statements have been
prepared in accordance with generally accepted accounting principles applying
certain estimates and judgments as required. The financial information
elsewhere in this report is consistent with the statements.
AiC maintains an internal control structure adequate to provide
reasonable assurance its transactions are appropriately recorded and
reported, its assets are protected and its established policies are followed.
The structure is enforced by written policies and procedures, internal audit
activities and a qualified financial staff.
Our independent auditors, Deloitte & Touche LLP, provide an objective
independent review by audit of AiC's consolidated financial statements and
issuance of a report thereon. Their audit is conducted in accordance with
generally accepted auditing standards.
The Audit Committee of the Board of Directors, comprised solely of
outside directors, meets with the independent auditors and representatives
from management to appraise the adequacy and effectiveness of the audit
functions, internal control structure and quality of our financial accounting
and reporting.
/s/ Frederick W. Lang /s/ Gerald M. McGrath
Frederick W. Lang Gerald M. McGrath
CHAIRMAN AND CHIEF EXECUTIVE OFFICER VICE PRESIDENT, TREASURER AND
CHIEF FINANCIAL OFFICER
STOCK DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
MARKET RANGE DIVIDEND TRAILING 12-MONTH
FISCAL 1998 HIGH LOW CLOSE DECLARED P/E RATIO
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fourth Quarter $31.63 $26.38 $28.38 $.08 29
Third Quarter 36.00 25.25 29.25 .08 32
Second Quarter 36.50 25.58 34.50 .08 41
First Quarter 29.17 20.83 25.83 .07 32
FISCAL 1997
- -------------------------------------------------------------------------------------
Fourth Quarter $24.50 $14.17 $22.23 $.06 31
Third Quarter 19.67 14.67 14.67 .06 21
Second Quarter 20.33 15.33 18.83 .06 29
First Quarter 15.50 11.67 15.33 .06 25
</TABLE>
The Company's common shares are traded on The Nasdaq Market-SM- under the
symbol ANLY. As of August 14, 1998, there were approximately 1,300
shareholders of record and approximately 8,500 shareholders for whom
securities firms act as nominees. The above table sets forth for the periods
indicated the market prices for the Company's Common Stock as reported by
Nasdaq, dividends declared and the trailing 12-months closing price/earnings
ratio for each quarterly period.
The Board of Directors has adopted a policy of declaring regular
quarterly dividends subject to favorable earnings and cash flow. Accordingly,
the Company declared quarterly dividends of $.08 a share in fiscal 1998 and
$.06 a share in fiscal 1997.
On August 20, 1998, the Board of Directors increased the quarterly cash
dividend to $.10 a share.
- -------------------------------------------------------------------------------
BUILDING ON OUR SUCCESS 25
<PAGE>
QUARTERLY REVENUES AND INCOME
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) QUARTER QUARTER QUARTER QUARTER ANNUAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal 1998
Total revenues . . . . . . . . . . . . . . . . $135,158 $141,265 $150,011 $160,977 $587,411
Income before income taxes . . . . . . . . . . 8,967 8,384 9,215 11,121 37,687
Income taxes . . . . . . . . . . . . . . . . . 3,587 3,353 3,687 4,450 15,077
Net income . . . . . . . . . . . . . . . . . . 5,380 5,031 5,528 6,671 22,610
Net income per share (basic)*. . . . . . . . . .24 .23 .24 .30 1.01
Net income per share (diluted)*. . . . . . . . .24 .22 .24 .29 .99
Fiscal 1997
Total revenues . . . . . . . . . . . . . . . . $98,022 $101,847 $113,693 $125,984 $439,546
Income before income taxes . . . . . . . . . . 6,503 6,526 6,936 7,245 27,210
Income taxes . . . . . . . . . . . . . . . . . 2,635 2,621 2,775 2,798 10,829
Net income . . . . . . . . . . . . . . . . . . 3,868 3,905 4,161 4,447 16,381
Net income per share (basic)*. . . . . . . . . .18 .17 .19 .20 .74
Net income per share (diluted)*. . . . . . . . .17 .17 .19 .20 .73
</TABLE>
*Adjusted to reflect the 3 for 2 common stock split in the form of a stock
dividend distributed December 3, 1997.
- --------------------------------------------------------------------------------
FIVE YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Professional services revenues:
Provided directly. . . . . . . . . . . . . . $454,339 $344,790 $267,317 $213,785 $175,982
Provided through sub-suppliers . . . . . . . 133,072 94,756 62,227 4,641 --
- ------------------------------------------------------------------------------------------------------------------------
Total revenues. . . . . . . . . . . . . . 587,411 439,546 329,544 218,426 175,982
Salaries, contracted services
and direct charges . . . . . . . . . . . . . 457,318 340,483 252,518 155,743 125,285
Non-operating income . . . . . . . . . . . . . 1,299 1,045 1,027 760 241
Income before income taxes . . . . . . . . . . 37,687 27,210 20,739 18,530 12,775
Income taxes . . . . . . . . . . . . . . . . . 15,077 10,829 8,321 7,274 4,824
- ------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . 22,610 16,381 12,418 11,256 7,951
Total assets . . . . . . . . . . . . . . . . . 132,661 105,370 81,445 67,533 51,210
Long-term liabilities. . . . . . . . . . . . . 7,171 6,444 5,996 5,352 4,793
Shareholders' equity . . . . . . . . . . . . . 82,994 66,104 53,718 45,134 36,571
Per share data:*
Net income (diluted) . . . . . . . . . . . . . .99 .73 .56 .51 .37
Cash dividends . . . . . . . . . . . . . . . .31 .24 .20 .17 .16
Shareholders' equity . . . . . . . . . . . . 3.70 2.97 2.44 2.07 1.71
Average common and common
equivalent shares outstanding* . . . . . . . 22,829,000 22,544,000 22,221,000 21,822,000 21,636,000
Number of personnel. . . . . . . . . . . . . . 5,300 4,650 3,770 3,170 2,600
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Per share data and average shares outstanding were restated for the effect
of the 3 for 2 common stock split in the form of a 50% stock dividend paid
December 3, 1997.
- -------------------------------------------------------------------------------
26 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
[GRAPHIC]
BOARD OF DIRECTORS: PRINCE, DRAKE, BENDA, LANG, MAHONEY, LOFTUS.
BOARD OF DIRECTORS
FREDERICK W. LANG
Chairman and Chief Executive Officer
VICTOR C. BENDA
President and Chief Operating Officer
WILLIS K. DRAKE
Retired Chairman of the Board
Data Card Corporation
MARGARET A. LOFTUS
Principal
Loftus Brown-Wescott, Inc.
EDWARD M. MAHONEY
Retired Chairman and Chief Executive Officer
Fortis Investors, Inc.
and Fortis Advisers, Inc.
ROBB L. PRINCE
Retired Vice President and Treasurer
Josten's, Inc.
OFFICERS
FREDERICK W. LANG
Chairman and Chief Executive Officer
VICTOR C. BENDA
President and Chief Operating Officer
SARAH P. SPIESS
Executive Vice President
GERALD M. MCGRATH
Vice President, Treasurer and
Chief Financial Officer
THOMAS R. MAHLER
Secretary and General Counsel
RICHARD J. CHIAPPETTA
Vice President, Central Region
PHILIP P. COLLIGAN
Vice President, Eastern Region
MICHAEL J. LAVELLE
Vice President, Southern Region
ROBERT J. PUGH
Vice President, Midwest Region
ROMAN E. ROWAN
Vice President, Western Region
RICHARD A. FERRERA
Vice President, Program Management
PAULETTE M. QUIST
Vice President, National Business Practices
GEORGE R. ZAK
Vice President, Investor Relations
MARTI R. CHARPENTIER
Controller and Assistant Treasurer
COLLEEN M. DAVENPORT
Associate General Counsel and
Assistant Secretary
BUILDING ON OUR SUCCESS 27
<PAGE>
REGIONAL, BRANCH AND FIELD OFFICES
[MAP]
WORLD HEADQUARTERS
7615 Metro Boulevard
Minneapolis, Minnesota 55439-3050
Tele: (612) 835-5900
Tele: (800) 800-5044
Fax: (612) 897-4555
REGIONAL OFFICES
Central
5750 Castle Creek Parkway N, Suite 259
Indianapolis, Indiana 46250-4335
Tele: (317) 577-3569
Fax: (317) 577-3573
Eastern
One Penn Plaza, Suite 2228
New York, New York 10119-0002
Tele: (212) 465-1660
Fax: (212) 465-1724
Midwest
600 Emerson Road, Suite 200
St. Louis, Missouri 63141-6708
Tele: (314) 997-1746
Fax: (314) 997-4234
Southern
2300 Highland Village Road, Suite 540
Highland Village, Texas 75077-7159
Tele: (972) 317-7339
Fax: (972) 317-0133
Western
44 Montgomery Street, Suite 2365
San Francisco, California 94104-4710
Tele: (415) 352-0760
Fax: (415) 352-0766
DIVISIONS
AiC TechWEST
7800 E Union Avenue, Suite 630
Denver, Colorado 80237-2755
Tele: (303) 721-0341
Tele: (800) 721-0772
Fax: (303) 779-3559
AiC National Projects Office
621 NW 53rd Street, Suite 140
Boca Raton, Florida 33487-8211
Tele: (561) 241-5912
Tele: (800) 597-5912
Fax: (404) 252-4732
National Contracts Division
600 N Westshore Boulevard, Suite 304
Tampa, Florida 33609-1145
Tele: (561) 288-0058
Tele: (800) 360-9575
Fax: (813) 289-9475
BRANCH OFFICES
Atlanta
Perimeter 400 Center, Suite 850
1100 Johnson Ferry Road NE
Atlanta, Georgia 30342-1746
Tele: (404) 256-5190
Tele: (800) 597-5995
Fax: (404) 252-4732
Austin
LaCosta Green
1033 LaPosada Drive, Suite 300
Austin, Texas 78752-3824
Tele: (512) 206-2700
Tele: (800) 654-8194
Fax: (512) 206-2720
Boca Raton
621 NW 53rd Street, Suite 140
Boca Raton, Florida 33487-8211
Tele: (561) 241-5912
Tele: (800) 597-5912
Fax: (561) 241-6705
Chicago
1101 Perimeter Drive, Suite 500
Schaumburg, Illinois 60173-5060
Tele: (847) 619-4673
Fax: (847) 605-9489
Cincinnati/Dayton
Governor's Pointe
4770 Duke Drive, Suite 207
Mason, Ohio 45040-9374
Tele: (513) 398-7811
Tele: (800) 960-9682
Fax: (513) 398-7894
Cleveland
Corporate Plaza I, Suite 350
6450 Rockside Woods Boulevard S
Cleveland, Ohio 44131-2230
Tele: (216) 524-8990
Tele: (800) 541-5859
Fax: (216) 524-9535
Columbus
471 E Broad Street, Suite 2001
Columbus, Ohio 43215-3861
Tele: (614) 224-6790
Tele: (888) 832-6242
Fax: (614) 224-1935
Dallas
3030 LBJ Freeway, Suite 820, LB52
Dallas, Texas 75234-7703
Tele: (972) 243-2001
Tele: (800) 800-8699
Fax: (972) 243-7468
Danbury
100 Mill Plain Road, 2nd Floor
Danbury, Connecticut 06811-5188
Tele: (203) 825-3940
Tele: (800) 552-5995
Fax: (203) 825-3950
Denver
7800 E Union Avenue, Suite 600
Denver, Colorado 80237-2755
Tele: (303) 721-6200
Fax: (303) 721-6403
Des Moines
1200 Valley West Drive, Suite 704
West Des Moines, Iowa 50266-1908
Tele: (515) 221-9822
Tele: (800) 755-4900
Fax: (515) 221-0173
Detroit
3000 Town Center, Suite 570
Southfield, Michigan 48075-1297
Tele: (248) 353-7230
Tele: (888) 353-7230
Fax: (248) 353-5139
Houston
1415 N Loop West, Suite 300
Houston, Texas 77008-1645
Tele: (713) 869-3420
Tele: (800) 487-1881
Fax: (713) 869-8462
Indianapolis
5750 Castle Creek Parkway N, Suite 259
Indianapolis, Indiana 46250-4335
Tele: (317) 842-1100
Tele: (800) 783-1101
Fax: (317) 842-1157
28 ANALYSTS INTERNATIONAL CORPORATION
<PAGE>
Kansas City
Broadway Summit
3101 Broadway, Suite 101
Kansas City, Missouri 64111-2416
Tele: (816) 531-5050
Tele: (800) 530-5259
Fax: (816) 531-5636
Lexington
2365 Harrodsburg Road, Suite B450
Lexington, Kentucky 40504-3342
Tele: (606) 223-0001
Tele: (800) 279-8433
Fax: (606) 224-4389
Los Angeles
7700 Irvine Center Drive, Suite 280
Irvine, California 92618-2924
Tele: (949) 450-8930
Tele: (800) 555-0012
Fax: (949) 450-8940
Minneapolis
8200 Normandale Boulevard, Suite 400
Minneapolis, Minnesota 55437-1074
Tele: (612) 897-4590
Tele: (800) 776-3553
Fax: (612) 897-4551
New Jersey Metro
111 Wood Avenue S
Iselin, New Jersey 08830-2703
Tele: (732) 906-0100
Tele: (800) 745-5995
Fax: (732) 906-8808
New York Metro
One Penn Plaza, Suite 2228
New York, New York 10119-0002
Tele: (212) 465-1660
Tele: (800) 473-7333
Fax: (212) 465-1724
Omaha
6910 Pacific Street, Suite 204
Omaha, Nebraska 68106-1045
Tele: (402) 558-2800
Tele: (800) 735-3300
Fax: (402) 558-5544
Phoenix
11024 N 28th Drive, Suite 240
Phoenix, Arizona 85029-4379
Tele: (602) 789-7200
Tele: (800) 735-7573
Fax: (602) 789-6077
Portland
One SW Columbia Street, Suite 710
Portland, Oregon 97258-2008
Tele: (503) 727-0200
Tele: (800) 510-4850
Fax: (503) 727-0222
Raleigh/Durham
Gateway Centre Park, Suite 900
2700 Gateway Centre Boulevard
Morrisville, North Carolina 27560-9137
Tele: (919) 460-6141
Tele: (800) 669-2772
Fax: (919) 460-6433
Rochester, Minnesota
1530 Greenview Drive SW, Suite 205
Rochester, Minnesota 55902-1080
Tele: (507) 280-6663
Tele: (800) 657-0030
Fax: (507) 280-9213
Rochester, New York
16 W Main Street, Suite 500
Rochester, New York 14614-1601
Tele: (716) 325-6640
Tele: (800) 864-6816
Fax: (716) 325-6273
St. Louis
600 Emerson Road, Suite 200
St. Louis, Missouri 63141-6708
Tele: (314) 997-1746
Tele: (800) 998-5995
Fax: (314) 997-4929
San Francisco-East Bay
1850 Gateway Boulevard, Suite 100
Concord, California 94520-3299
Tele: (925) 687-5522
Tele: (800) 698-9411
Fax: (925) 687-5552
Seattle
10655 NE 4th Street, Suite 800
Bellevue, Washington 98004-5022
Tele: (425) 454-2500
Tele: (800) 442-9242
Fax: (425) 454-4288
Silicon Valley
151 Martinvale Lane
San Jose, California 95119-1319
Tele: (408) 629-9300
Tele: (800) 750-2922
Fax: (408) 629-0141
Tampa
600 N Westshore Boulevard, Suite 304
Tampa, Florida 33609-1145
Tele: (813) 281-0458
Tele: (800) 949-5995
Fax: (813) 289-9475
Toronto
36 Toronto Street, Suite 530
Toronto, Ontario M5C 2C5, Canada
Tele: (416) 603-3822
Tele: (877) 603-3822
Fax: (416) 603-4989
Tulsa
Corporate Place
5800 E Skelly Drive, Suite 1100
Tulsa, Oklahoma 74135-6448
Tele: (918) 663-0030
Tele: (800) 898-6164
Fax: (918) 663-1812
FIELD OFFICES
Akron/Canton, Ohio (330) 899-9000
Boulder, Colorado (303) 442-7338
Charlotte, North Carolina (704) 676-9732
Jacksonville, Florida (904) 996-3705
Las Vegas, Nevada (702) 221-1914
Little Rock, Arkansas (501) 372-0338
Miami, Florida (800) 597-5912
Ottawa, Ontario, Canada (613) 751-4445
Sacramento, California (916) 565-7458
Salt Lake City, Utah (801) 561-1008
San Francisco, California (415) 352-0760
Vancouver, Washington (360) 693-4604
Washington, D.C. (703) 573-4400
AiC Analysts Limited
Cambridge, England 011 44 1223 500055
CORPORATE INFORMATION
10-K AVAILABLE
A copy of the Company's 1998 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission, is available to AiC security holders without
charge upon request to the Treasurer, Analysts International Corporation, 7615
Metro Boulevard, Minneapolis, Minnesota 55439-3050.
STOCK TRANSFER AGENT
Boston EquiServe
c/o State Street Bank & Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
(800) 426-5523
http://www.equiserve.com
EXPECTED DIVIDEND PAYMENT DATES
November 13, 1998
February 12, 1999
May 14, 1999
August 13, 1999
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Minneapolis, Minnesota
ANNUAL MEETING
The 1998 Annual Meeting of Shareholders will be held on October 15, 1998 at 3
p.m. at the Edina Country Club, 5100 Wooddale Avenue, Edina, Minnesota.
QUARTERLY REPORTS
Analysts International Corporation sends quarterly earnings releases directly
to shareholders, instead of traditional printed quarterly reports. Many
companies now follow this approach, which gives shareholders pertinent
information faster, at lower cost to the Company.
WORLD WIDE WEB ADDRESS
http://www.analysts.com
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
State or Percentage
Jurisdiction of Voting
Subsidiaries of Incorporation Securities Owned
- ------------ ---------------- -----------------
<S> <C> <C>
AiC Analysts Limited United Kingdom 100%
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-19180, 33-89896, 33-25244 and 33-87626 of Analysts International
Corporation on Form S-8 of our reports dated August 17, 1998, appearing and
incorporated by reference in this Annual Report on Form 10-K of Analysts
International Corporation for the year ended June 30, 1998.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
September 28, 1998
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
POWER OF ATTORNEY
TO SIGN
ANNUAL REPORT ON FORM 10-K
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby appoints
F.W. Lang or Thomas R. Mahler, or either of them, my true and lawful
attorneys in fact, for me and in my name, place and stead, to sign and affix
my name as a Director of Analysts International Corporation to the Annual
Report on Form 10-K for the year ended June 30, 1998 and all amendments
thereto to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C. as required by Section 13 of the Securities
Exchange Act of 1934, as amended granting and giving unto said attorneys in
fact, or any one of them, full authority and power to do and perform any and
all acts necessary or incidental to the performance and execution of powers
herein expressly granted, with full power to do and perform all acts
authorized hereby as fully to all intents and purposes as I might or could do
if personally present, with full power of substitution.
IN TESTIMONY WHEREOF, I have hereunto set my hand this ___ day of
September, 1998.
--------------------------------
Willis K. Drake
STATE OF MINNESOTA )
) ss
COUNTY OF HENNEPIN )
On the ____ day of September, 1998, before me, personally came Willis K.
Drake to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free
act and deed.
--------------------------------
Notary Public
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
POWER OF ATTORNEY
TO SIGN
ANNUAL REPORT ON FORM 10-K
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby appoints
F.W. Lang or Thomas R. Mahler, or either of them, my true and lawful
attorneys in fact, for me and in my name, place and stead, to sign and affix
my name as a Director of Analysts International Corporation to the Annual
Report on Form 10-K for the year ended June 30, 1998 and all amendments
thereto to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C. as required by Section 13 of the Securities
Exchange Act of 1934, as amended granting and giving unto said attorneys in
fact, or any one of them, full authority and power to do and perform any and
all acts necessary or incidental to the performance and execution of powers
herein expressly granted, with full power to do and perform all acts
authorized hereby as fully to all intents and purposes as I might or could do
if personally present, with full power of substitution.
IN TESTIMONY WHEREOF, I have hereunto set my hand this ___ day of
September, 1998.
--------------------------------
Margaret Loftus
STATE OF MINNESOTA )
) ss
COUNTY OF HENNEPIN )
On the ____ day of September, 1998, before me, personally came Margaret
Loftus to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free
act and deed.
--------------------------------
Notary Public
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
POWER OF ATTORNEY
TO SIGN
ANNUAL REPORT ON FORM 10-K
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby appoints
F.W. Lang or Thomas R. Mahler, or either of them, my true and lawful
attorneys in fact, for me and in my name, place and stead, to sign and affix
my name as a Director of Analysts International Corporation to the Annual
Report on Form 10-K for the year ended June 30, 1998 and all amendments
thereto to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C. as required by Section 13 of the Securities
Exchange Act of 1934, as amended granting and giving unto said attorneys in
fact, or any one of them, full authority and power to do and perform any and
all acts necessary or incidental to the performance and execution of powers
herein expressly granted, with full power to do and perform all acts
authorized hereby as fully to all intents and purposes as I might or could do
if personally present, with full power of substitution.
IN TESTIMONY WHEREOF, I have hereunto set my hand this ___ day of
September, 1998.
--------------------------------
Edward M. Mahoney
STATE OF MINNESOTA )
) ss
COUNTY OF HENNEPIN )
On the ____ day of September, 1998, before me, personally came Edward M.
Mahoney to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free
act and deed.
--------------------------------
Notary Public
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
POWER OF ATTORNEY
TO SIGN
ANNUAL REPORT ON FORM 10-K
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby appoints
F.W. Lang or Thomas R. Mahler, or either of them, my true and lawful
attorneys in fact, for me and in my name, place and stead, to sign and affix
my name as a Director of Analysts International Corporation to the Annual
Report on Form 10-K for the year ended June 30, 1998 and all amendments
thereto to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C. as required by Section 13 of the Securities
Exchange Act of 1934, as amended granting and giving unto said attorneys in
fact, or any one of them, full authority and power to do and perform any and
all acts necessary or incidental to the performance and execution of powers
herein expressly granted, with full power to do and perform all acts
authorized hereby as fully to all intents and purposes as I might or could do
if personally present, with full power of substitution.
IN TESTIMONY WHEREOF, I have hereunto set my hand this ___ day of
September, 1998.
--------------------------------
Robb Prince
STATE OF MINNESOTA )
) ss
COUNTY OF HENNEPIN )
On the ____ day of September, 1998, before me, personally came Robb Prince
to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as his free act and
deed.
--------------------------------
Notary Public
<PAGE>
ANALYSTS INTERNATIONAL CORPORATION
POWER OF ATTORNEY
TO SIGN
ANNUAL REPORT ON FORM 10-K
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby appoints
F.W. Lang or Thomas R. Mahler, or either of them, my true and lawful
attorneys in fact, for me and in my name, place and stead, to sign and affix
my name as a Director of Analysts International Corporation to the Annual
Report on Form 10-K for the year ended June 30, 1998 and all amendments
thereto to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C. as required by Section 13 of the Securities
Exchange Act of 1934, as amended granting and giving unto said attorneys in
fact, or any one of them, full authority and power to do and perform any and
all acts necessary or incidental to the performance and execution of powers
herein expressly granted, with full power to do and perform all acts
authorized hereby as fully to all intents and purposes as I might or could do
if personally present, with full power of substitution.
IN TESTIMONY WHEREOF, I have hereunto set my hand this ___ day of
September, 1998.
--------------------------------
Victor C. Benda
STATE OF MINNESOTA )
) ss
COUNTY OF HENNEPIN )
On the ____ day of September, 1998, before me, personally came Victor C.
Benda to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free
act and deed.
--------------------------------
Notary Public
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 11,868
<SECURITIES> 0
<RECEIVABLES> 95,044
<ALLOWANCES> 750
<INVENTORY> 0
<CURRENT-ASSETS> 109,970
<PP&E> 24,325
<DEPRECIATION> 13,965
<TOTAL-ASSETS> 132,661
<CURRENT-LIABILITIES> 42,496
<BONDS> 7,171
0
0
<COMMON> 2,244
<OTHER-SE> 80,750
<TOTAL-LIABILITY-AND-EQUITY> 132,661
<SALES> 587,411
<TOTAL-REVENUES> 587,411
<CGS> 457,318
<TOTAL-COSTS> 457,318
<OTHER-EXPENSES> 93,505
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 37,687
<INCOME-TAX> 15,077
<INCOME-CONTINUING> 22,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,610
<EPS-PRIMARY> 1.01
<EPS-DILUTED> .99
</TABLE>
