SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1998
or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______ .
0-11521
(Commission File Number)
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1701520
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
Great Valley Corporate Center
4 Country View Road
Malvern, Pennsylvania 19355
(Address of principal executive offices)
Registrant's telephone number, including area code: (610) 647-5930
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
33,752,818 * Common shares, $.01 par value, as of May 11, 1998
* After giving effect to a 2-for-1 stock split effected in the form of a
100% stock dividend to be distributed on May 15, 1998 to shareholders of
record on May 1, 1998.
Page 1 of 20 consecutively numbered pages
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
PART I, UNAUDITED FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998 and September 30, 1997
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and 1997
Condensed Consolidated Statements of Operations -
Six Months Ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Operations and Financial Condition
PART II, OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31, September 30,
1998 1997
(UNAUDITED) (NOTE)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,832 $ 29,809
Short-term investments, including
accrued interest of $792 73,409 --
Receivables, including $68,009
and $59,311 of earned revenues
in excess of billings, net of
allowance for doubtful accounts
of $4,553 and $4,098 116,373 100,543
Prepaid expenses and other receivables 11,009 8,473
-------- --------
TOTAL CURRENT ASSETS 227,623 138,825
PROPERTY AND EQUIPMENT--net of
accumulated depreciation 42,837 40,710
CAPITALIZED COMPUTER SOFTWARE COSTS,
net of accumulated amortization 15,688 15,167
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, net of accumulated
amortization 7,742 8,121
OTHER ASSETS AND DEFERRED CHARGES 9,603 6,881
-------- --------
TOTAL ASSETS $303,493 $209,704
======== ========
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31, September 30,
1998 1997
(UNAUDITED) (NOTE)
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,790 $ 10,023
Current portion of long-term debt 735 1,225
Income taxes payable 5,022 5,000
Accrued expenses 27,528 22,649
Deferred revenue 14,857 16,711
-------- --------
TOTAL CURRENT LIABILITIES 57,932 55,608
LONG-TERM DEBT, less current portion 77,510 2,549
DEFERRED TAXES AND OTHER
LONG-TERM LIABILITIES 1,135 1,122
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per
share--authorized 3,000 shares,
none issued
Common stock, par value $.01 per share--
authorized 100,000 shares, issued
35,699 and 35,146 shares 356 352
Capital in excess of par value 93,805 91,064
Retained earnings 76,324 62,578
-------- --------
170,485 153,994
Less
Held in treasury, 2,302 common
shares--at cost (2,959) (2,959)
Notes receivable from stockholders (610) (610)
-------- --------
166,916 150,425
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $303,493 $209,704
======== ========
Note: The condensed consolidated balance sheet at September 30, 1997 has
been derived from the audited financial statements at that date.
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
For the Three Months Ended
March 31,
1998 1997
Revenues:
Outsourcing services $30,121 $23,905
Software sales 22,449 15,364
Maintenance and enhancements 16,312 13,390
Software services 25,907 14,608
Interest and other revenue 1,295 118
------- -------
96,084 67,385
Expenses:
Cost of outsourcing services 24,564 19,469
Cost of software sales and
maintenance and enhancements 17,829 11,131
Cost of software services 18,223 11,880
Selling, general and administrative 22,091 16,622
Interest expense 1,055 540
------- -------
83,762 59,642
Income before income taxes 12,322 7,743
Provision for income taxes 5,021 3,175
------- -------
Net income $ 7,301 $ 4,568
======= =======
Per common share:
Net income
Earnings per common share $ 0.22 $ 0.16
Earnings per share assuming dilution $ 0.20 $ 0.14
Common shares and equivalents outstanding
Common shares 33,348 28,328
Common shares - assuming dilution 35,833 33,526
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
For the Six Months Ended
March 31,
1998 1997
Revenues:
Outsourcing services $ 58,266 $ 45,434
Software sales 44,300 30,094
Maintenance and enhancements 30,658 25,401
Software services 46,966 26,743
Interest and other revenue 3,175 245
-------- --------
183,365 127,917
Expenses:
Cost of outsourcing services 47,470 37,134
Cost of software sales and
maintenance and enhancements 32,710 21,507
Cost of software services 34,125 21,951
Selling, general and administrative 43,937 32,456
Interest expense 1,875 1,123
-------- --------
160,117 114,171
Income before income taxes 23,248 13,746
Provision for income taxes 9,502 5,636
-------- --------
Net income $ 13,746 $ 8,110
======== ========
Per common share:
Net income
Earnings per common share $ 0.41 $ 0.29
Earnings per share assuming dilution $ 0.38 $ 0.26
Common shares and equivalents outstanding
Common shares 33,222 28,117
Common shares - assuming dilution 35,867 33,388
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
For the Six Months Ended
March 31,
1998 1997
OPERATING ACTIVITIES
Net income $ 13,746 $ 8,110
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 8,069 6,307
Provision for doubtful accounts 1,584 894
Changes in operating assets and
liabilities:
(Increase) in receivables (17,414) (14,886)
(Increase) in interest receivable (1,083) --
(Increase) in other current
assets (2,536)
(1,431)
Increase in other accrued expenses
and liabilities 4,879 6,610
(Decrease) in deferred revenue (2,085) (2,926)
Other, net (1,903) (481)
--------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,257 2,197
INVESTING ACTIVITIES
Purchase of property and equipment (5,603) (4,517)
Capitalized computer software costs (3,291) (3,286)
Purchase of investments
available-for-sale (128,039) --
Proceeds from sale or maturity of
investments available-for-sale 55,724 --
--------- ---------
NET CASH USED IN INVESTING
ACTIVITIES (81,209) (7,803)
FINANCING ACTIVITIES
Principal payments on short-term debt (1,250) (200)
Proceeds from borrowings, net of
issuance costs 73,278 --
Repurchase and retirement of Company stock -- (1,271)
Proceeds from exercise of stock options 2,947 533
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 74,975 (938)
(DECREASE) IN CASH & CASH EQUIVALENTS (2,977) (6,544)
CASH & CASH EQUIVALENTS-BEGINNING OF PERIOD 29,809 12,303
--------- ---------
CASH & CASH EQUIVALENTS-END OF PERIOD $ 26,832 $ 5,759
========= =========
See notes to condensed consolidated financial statements.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)
NOTE A--INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 1O-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1997. Operating results for the three and six month
periods ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1998.
NOTE B--CASH AND SHORT-TERM INVESTMENTS
Cash Equivalents: Cash and equivalents are defined as highly liquid
investments with a maturity of three months or less at the date of purchase.
Short-Term Investments: Short-term investments consist of commercial paper,
municipal debt securities, and corporate obligations. Management determines
the appropriate classification of debt securities at the time of purchase. At
March 31, 1998, the Company has classified all securities as
available-for-sale. The available-for-sale portfolio is comprised of highly
liquid investments available for current operations and general corporate
purposes and, accordingly, is classified as short-term investments.
Available-for-sale securities are stated at fair value.
Short-term investments at March 31, 1998 are comprised of:
State and municipal securities $31,856
Corporate securities 41,553
-------
$73,409
The contractual maturities of short-term investments held at March 31, 1998
are:
Due in one year or less $56,881
Due after one year through three years 16,528
-------
$73,409
During the six months ended March 31, 1998, gross realized gains on sales of
available-for-sale securities totaled $84.
NOTE C-COMMON STOCK SPLIT
On April 16, 1998, the Company's Board of Directors authorized a two-for-one
stock split effected in the form of a 100% stock dividend to be distributed on
May 15, 1998 to shareholders of record on May 1, 1998. Stockholders' equity
has been restated to give retroactive recognition to the stock split for all
periods presented by reclassifying from capital in excess of par value to
common stock the par value of the additional shares arising from the split.
In addition, all references in the financial statements and Management's
Discussion and Analysis of Operations and Financial Condition to number of
shares and per share amounts have been restated.
NOTE D--LONG-TERM DEBT
On October 22, 1997, the Company issued $65,000 of convertible subordinated
debentures bearing interest at 5% and maturing on October 15, 2004. On
November 6, 1997, pursuant to an underwriters' option, the Company issued an
additional $9,750 of convertible debentures. The debentures are convertible
into common stock of the Company at any time prior to redemption or maturity
at a conversion price of $26.375 per share, subject to change as defined in
the Trust Indenture. The debentures are redeemable at any time after October
15, 2000 at prices decreasing from 102.5% of the principal amount to par on
October 15, 2003.
NOTE E--EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS 128), was effective for periods ending after December 15, 1997. As a
result the Company changed the method used to compute earnings per share and
restated all prior periods presented. Under the new requirements, basic
earnings per share excludes the dilutive effect of stock options and diluted
earnings per share must include the dilutive effect of stock options even if
the dilutive effect is immaterial. A reconciliation of the numerators and the
denominators of the basic and diluted per share calculations follow:
For the three months ended
March 31,
1998 1997
Numerator:
Net income available to common
stockholders, used for basic
earnings per share $7,301 $4,568
Effect of dilutive securities:
6 1/4% convertible debentures -- 286
------ ------
Net income available to common
stockholders after assumed
conversions $7,301 $4,854
====== ======
Denominator:
Denominator for earnings per common
stockholder-weighted average shares 33,348 28,328
Effect of dilutive securities:
Employee stock options 2,485 1,376
6 1/4% convertible debentures -- 3,823
------ ------
Dilutive potential common shares 2,485 5,199
Denominator for earnings per
share, assuming dilution 35,833 33,526
====== ======
Earnings per common share $0.22 $0.16
===== =====
Earnings per share - assuming dilution $0.20 $0.14
===== =====
For the Six months ended
March 31,
1998 1997
Numerator:
Net income available to common
stockholders, used for basic
earnings per share $13,746 $8,110
Effect of dilutive securities:
6 1/4% convertible debentures -- 597
------- -------
Net income available to common
stockholders after assumed
conversions $13,746 $8,707
======= =======
Denominator:
Denominator for earnings per common
Stockholder-weighted average shares 33,222 28,117
Effect of dilutive securities:
Employee stock options 2,645 1,274
6 1/4% convertible debentures -- 3,997
------- -------
Dilutive potential common shares 2,645 5,271
Denominator for earnings per
share, assuming dilution 35,867 33,388
======= =======
Earnings per common share $0.41 $0.29
===== =====
Earnings per share - assuming dilution $0.38 $0.26
===== =====
NOTE F--OTHER
Product development expenditures, including software maintenance
expenditures, for the six months ended March 31, 1998 and 1997, were
approximately $16,936 and $11,948, respectively. After capitalization these
amounts were approximately $13,645 and $8,663, respectively, and were charged
to operations as incurred. For the same periods, amortization of capitalized
software costs amounted to $2,769 and $1,285, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
The purpose of this section is to give interpretive guidance to the reader
of the financial statements.
RESULTS OF OPERATIONS
The following table sets forth: (a) certain income statement items as a
percentage of total revenues and (b) the percentage change for each item
from the prior year comparative period.
% of Total Revenues % Change from
Prior Year
Three Mos. Six Mos. Three Mos. Six Mos.
Ended Ended Ended Ended
March 31, March 31, March 31 March 31
1998 1997 1998 1997
Revenues:
Outsourcing services 31% 35% 32% 35% 26% 28%
Software sales 24% 23% 24% 24% 46% 47%
Maintenance and enhancements 17% 20% 17% 20% 22% 21%
Software services 27% 22% 25% 21% 77% 76%
Interest and other revenue 1% 0% 2% 0% 997% 1196%
---- ---- ---- ----
Total 100% 100% 100% 100% 43% 43%
Expenses:
Cost of services, sales and
maintenance and enhancements 63% 63% 62% 63% 43% 42%
Selling, general and
administrative 23% 25% 24% 25% 33% 35%
Interest expense 1% 1% 1% 1% 95% 67%
Income before income taxes 13% 11% 13% 11% 59% 69%
The following table sets forth the gross profit for each of the following
revenue categories as a percentage of revenue for each such category and the
total gross profit as a percentage of total revenue (excluding interest and
other revenue). The Company does not separately present the cost of
maintenance and enhancements revenue as it is impracticable to separate such
cost from the cost of software sales.
Three Months Six Months
Ended Ended
March 31, March 31,
1998 1997 1998 1997
Gross Profit:
Outsourcing services 18% 19% 19% 18%
Software sales and maintenance
and enhancements 54% 61% 56% 61%
Software services 30% 19% 27% 18%
--- --- --- ---
Total 36% 37% 37% 37%
Revenues
Growth in outsourcing services revenue largely results from significant
contract signings. The 26% and 28% increases in outsourcing services revenue
in the second quarter and first six months of fiscal year 1998 are primarily
the result of (1) contracts signed after the second quarter of fiscal year
1997 including Agrilink Foods, the City of Anaheim, and Keystone Powdered
Metals and (2) first quarter fiscal year 1998 contract signings with Texas
Southern University and Nashville Electric Service.
Software sales increased 46% in the second quarter of fiscal year 1998
compared to the second quarter of fiscal year 1997 due primarily to increased
BANNER software licenses to the higher education market and increased licenses
of BANNER Customer Information System (CIS) software to the utility market.
These increases were off set by decreases, compared to the prior-year period,
in software licenses in the local government market. Software sales increased
47% in the first six months of fiscal year 1998 compared with the first six
months of fiscal year 1997 due primarily to the aforementioned reasons
combined with the increased licenses of BANNER software to the higher
education market and ADAGE Enterprise Resource Planning (ERP) software to the
manufacturing market in the first quarter of fiscal year 1998.
The 22% and 21% increases in maintenance and enhancements revenue in the
second quarter and first six months of fiscal year 1998, respectively, were
the result of the growing installed base of clients in the higher education
marketplace. The Company continues to experience a high annual renewal rate on
existing maintenance contracts.
Software services revenue increased 77% and 76% in the second quarter and
first six months of fiscal year 1998 compared to the prior year periods as the
result of increases in implementation and integration services in the
manufacturing, utility and higher education markets. These increases were
offset by decreases, compared to the prior-year period, in services provided
to the international utility market.
The increase in interest and other revenue in the second quarter and first six
months of fiscal year 1998 is attributable to increased interest revenue
resulting from the increased cash and short-term investments balance during
the three and six month periods ending March 31, 1998 as compared to the
respective prior year periods and to a one-time $695,000 gain on the sale of
an inactive product line in the first quarter of fiscal year 1998.
Gross Profit
Gross profit decreased as a percentage of total revenue (excluding interest
and other revenue) from 37% in the second quarter of fiscal year 1997 to 36%
for the second quarter of fiscal year 1998. The total gross profit percentage
decreased primarily because of decreases in the software sales and maintenance
and enhancements gross profit which makes up the greatest percentage of the
Company's total gross profit. This decrease was primarily the result of a
decrease in the gross profit margin of the manufacturing and government
markets. In the manufacturing market continuing investment caused a cost
increase without a corresponding increase in revenues and in the government
market software licenses decreased compared to the prior year period. This
decrease was off set by growth in license fee revenue in the higher education
and utility markets where the gross profit margin remained strong. The
software services margin increased primarily as a result of increases in the
utility and manufacturing businesses' gross margin. The Company is continuing
to focus on installation and systems integration services in each of its
markets. An increase in services revenue as a percentage of total revenue
historically has resulted in a lower overall profit margin since service
margins historically have been lower than the margins derived from software
sales and maintenance and enhancements.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL POSITION
On October 22, 1997, the Company issued $65 million of convertible
subordinated debentures bearing interest at 5% and maturing on October 15,
2004. On November 6, 1997, pursuant to an underwriters' option, the Company
issued an additional $9.75 million of convertible debentures. The debentures
are convertible into common stock of the Company at any time prior to
redemption or maturity at a conversion price of $26.375 per share, subject to
change as defined in the Trust Indenture. The debentures are redeemable at
any time after October 15, 2000 at prices decreasing from 102.5% of the
principal amount to par on October 15, 2003.
The Company's cash and cash equivalents balance was $26.8 million and $29.8
million at March 31, 1998 and September 30, 1997, respectively; and the
short-term investments balance increased to $73.4 million at March 31,
1998 as a result of the first quarter fiscal year 1998 debenture offering.
Cash provided by operating activities was $3.3 million for the first six
months of fiscal year 1998 compared with $2.2 for the first six months of
fiscal year 1997. Operating cash flows have increased primarily due to an
increase in income before depreciation and amortization. The increases in
accounts receivable at March 31, 1998 compared to September 30, 1997 balances
are due to increases in revenues and the timing of billings on the Company's
software services contracts and software licenses. The increase in other
assets at March 31, 1998 compared with September 30, 1997 is the result of
increased accrued interest on investments.
The Company provides outsourcing services and software-related services,
including systems implementation and integration services. Contract fees from
outsourcing services are typically based on multi-year contracts ranging from
five to 10 years in length, and provide a recurring revenue stream throughout
the term of the contract. Software services contracts, including systems
implementation and integration services, usually have shorter terms than
outsourcing services contracts, and billings are sometimes milestone based.
During the beginning of a typical outsourcing services contract, services are
performed and expenses are incurred by the Company at a greater rate than in
the later part of the contract. Billings usually remain constant during the
term of the contract and, in some cases, when a contract term is extended, the
billing period is also extended over the new life of the contract. In certain
systems integration services contracts, payments are milestone based. In these
particular systems integration contracts, services are performed by the
Company but cannot be billed until the milestone is attained. Revenue is
usually recognized as work is performed. The resulting excess of revenues
over billings is reflected on the Company's Consolidated Balance Sheet as
unbilled accounts receivable. The remaining unbilled accounts receivable
balance is comprised of software sales for which product has been shipped and
revenue has been recognized but amounts have not been billed due to payment
terms established. As an outsourcing services contract proceeds, services are
performed and expenses are incurred at a lesser rate, resulting in billings
exceeding revenue recognized, which causes a decrease in the unbilled accounts
receivable, as will the achievement of a milestone in a systems integration
services contract.
Cash used in investing activities was $81.2 million for the first six months
of fiscal year 1998 compared with $7.8 million for the first six months of
fiscal year 1997. The Company's primary use of cash for investing activities
was the purchase of investments available-for-sale from the proceeds of the
bond offering during the first quarter of fiscal year 1998.
The Company signed a long-term lease agreement in May 1997 for a new office
building at its Malvern campus. The Company will begin to incur fit-up and
remodeling costs in the third quarter of fiscal year 1998 with rent payments
beginning shortly thereafter. Additionally the Company is planning to build a
new office building adjacent to its existing building in Columbia, SC. Fiscal
year 1998 total product development expenditures are expected to increase in
proportion to expected growth in revenues.
Cash provided by financing activities was $75.0 million for the first six
months of fiscal year 1998 primarily as the result of the net proceeds of the
bond offering of $73.3 million. Additionally, cash was provided by the
exercise of stock options by the Company's employees.
The Company has a $30 million senior revolving credit facility available for
general corporate purposes. The credit facility agreement expires in June
1999 with optional annual renewals. As long as borrowings are outstanding,
and as a condition precedent to new borrowings, the Company must comply with
certain covenants established in the agreement. Under the covenants, the
Company is required to maintain certain financial ratios and other financial
conditions. The covenants allow the Company to pay non-stock dividends,
repurchase capital stock, and make distributions of assets to shareholders as
long as the aggregate amount does not exceed $5 million in any fiscal year and
to pay stock dividends. There were no borrowings outstanding under the credit
facility at March 31, 1998.
The Company believes that its cash and cash equivalents, short-term
investments, and borrowing arrangements together with net cash provided by
operations should satisfy its financing needs for the foreseeable future.
On April 16, 1998, the Company's Board of Directors authorized a two-for-one
stock split effected in the form of a 100% stock dividend to be distributed on
May 15, 1998 to shareholders of record on May 1, 1998. Stockholders' equity
has been restated to give retroactive recognition to the stock split for all
periods presented by reclassifying from capital in excess of par value to
common stock the par value of the additional shares arising from the split.
In addition, all references in the financial statements and Management's
Discussion and Analysis of Operations and Financial Condition to number of
shares and per share amounts have been restated.
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS 128), was effective for periods ending after December 15, 1997. As a
result the Company changed the method used to compute earnings per share and
restated all prior periods presented. Under the new requirements, basic
earnings per share excludes the dilutive effect of stock options and diluted
earnings per share must include the dilutive effect of stock options even if
the dilutive effect is immaterial. Basic common shares increased in the
second quarter and first six months of fiscal year 1998 compared to the
prior-year periods as a result of shares issued pursuant to the May 1997
redemption of $27.3 million principal amount of convertible subordinated
debentures, and employee stock option exercises during the fiscal year 1998
periods. Shares used in the diluted income per share calculation increased in
the 1998 three and six-month periods versus 1997 for the aforementioned
reasons and as a result of an increased dilutive effect of stock options
related to the Company's rising stock price.
Statement of Position 98-4, "Deferral of Certain Provisions of SOP 97-2" was
issued in April 1998, which defers for one year (i.e., until fiscal years
beginning after December 15, 1998) the application of certain provisions of
Statement of Position 97-2, "Software Revenue Recognition", which define what
is considered vendor-specific objective evidence of the fair value of the
various elements in a multiple-element arrangement.
CONTINGENCIES
On October 4, 1995, John J. Wallace filed a purported class action lawsuit in
the United States District Court for the Eastern District of Pennsylvania
against the Company; Michael J. Emmi, Chairman of the Board, President and
Chief Executive Officer of the Company; Michael D. Chamberlain, Senior Vice
President and a director of the Company; and Eric Haskell, Senior Vice
President, Finance and Administration, Treasurer and Chief Financial Officer
of the Company. The plaintiff filed an amended complaint on November 28,
1995 and a second amended complaint on February 3, 1997. The class period
alleged is from June 5, 1995 through October 2, 1995. The second amended
complaint sought damages in unspecified amounts as well as equitable relief.
In April 1996, the Company's Motion to Dismiss the amended complaint was
granted in part and denied in part. In September 1997, the Company's Motion
to Dismiss the second amended complaint was granted in part and denied in
part, and plaintiff was permitted to pursue a claim that defendants violated
section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder to the extent that it alleges a failure to make
certain disclosures in the Company's Form 10-Q for the third quarter of
fiscal 1995. On December 3, 1997, the Court approved a Stipulation of
Dismissal and Entry of Final Judgment filed by the parties pursuant to which
all remaining claims were dismissed with prejudice and the Court entered a
final judgment in favor of the Company as to all remaining claims in the
action. On December 30, 1997 the plaintiff filed a notice of appeal with
respect to those claims which were dismissed pursuant to the Company's Motions
to Dismiss. Management believes the appeal is without merit and intends to
contest vigorously the appeal. While management, based on its investigation
to date, believes that resolution of this action will not have a materially
adverse effect on the Company's consolidated financial position, the ultimate
outcome of this matter cannot be presently determined.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK
The matters discussed herein and elsewhere that are forward-looking
statements, including statements concerning the Company's or management's
intentions, beliefs, expectations, or predictions for the future, are based on
current management expectations that involve risks and uncertainties that
could cause actual results to differ materially from those anticipated.
The following discussion highlights some, but not all of these risks and
uncertainties which may have a material adverse effect on the Company's
business, financial condition and/or results of operations.
The Company's revenues and operating results can vary substantially from
quarter to quarter based on a number of factors. Software sales revenues in
any quarter are dependent on the execution of license agreements and shipment
of product. The execution of license agreements is difficult to predict for a
variety of reasons including the following: a significant portion of the
Company's license agreements are typically signed in the last month of each
quarter; the duration of the Company's sales cycle is relatively long; the
size of transactions can vary widely; client projects may be postponed or
canceled due to changes in the client's management, budgetary constraints or
strategic priorities; and clients often exhibit a seasonal pattern of capital
spending. The Company has historically generated a greater portion of license
fees in total revenue in the last two fiscal quarters, although there is no
assurance that this will continue.
Also, as the Year 2000 approaches, many potential clients are evaluating their
existing systems and must decide whether to repair or replace those systems
which have Year 2000 issues. While the Company believes that such evaluations
are favorably impacting demand for its software products and services, such
demand is subject to change as the Year 2000 approaches since services to
remediate Year 2000 issues must be completed in a timely manner and lead times
required to complete systems implementations preclude system replacement as a
timely solution to the Year 2000 issue as the millennium nears. Given the
lack of precedent for an issue of this magnitude, the Company's ability to
accurately forecast the impact of the Year 2000 issue on quarter to quarter
revenue achievement is limited.
Since a significant part of the Company's business results from software
licensing, the Company's business is characterized by a high degree of
operating leverage. The Company's expense levels are based, in significant
part, on the Company's expectations as to future revenues and are therefore
relatively fixed in the short term. If software licensing revenues do not
meet expectations, net income is likely to be disproportionately adversely
affected. There can be no assurance that the Company will be able to increase
or even maintain its current level of profitability on a quarterly or annual
basis in the future. It is therefore possible that in one or more future
quarters the Company's operating results will be below expectations. In such
event, the price of the Company's common stock could be adversely affected.
The success of the Company's business is dependent upon certain key
management, sales and technical personnel. In addition, the Company believes
that to succeed in the future it will be required to continue to attract,
retain and motivate additional talented and qualified management, sales and
technical personnel. Competition for hiring such personnel in the information
technology industry is intense and demand for such employees has, to date,
exceeded supply. The Company from time to time experiences difficulty in
locating candidates with appropriate qualifications. There can be no
assurance that the Company will be able to retain its key employees or that it
will be able to continue to attract, assimilate and retain other skilled
management, sales and technical personnel. The loss of certain of its
existing key personnel or the inability to attract and retain additional
qualified employees in the future could have a material adverse effect on the
Company's business, operating results and financial condition.
The application software industry is characterized by rapid technological
advances, changes in customer requirements, product introductions and evolving
industry standards. The Company believes that its future success will depend
on its ability to continue to develop and market new products and enhancements
cost-effectively, which will necessitate continued investment in research and
development and sales and marketing. There can be no assurance that the
Company's existing products will not be rendered obsolete or non-competitive
by new industry standards or changing technology, that the Company will be
able to develop and market new products successfully or that the Company's new
product offerings will be accepted by its markets. Furthermore, programs as
complex as those offered by the Company may contain undetected errors or bugs
when they are first introduced or as new versions are released. There can be
no assurance that, despite testing by the Company and by third-party test
sites, errors will not be found in new product offerings, with the possible
result of unanticipated costs and delays in market acceptance of these
products.
Many currently installed software products are not able to distinguish 21st
century dates from 20th century dates. As a result, computer software used by
many organizations may need to be upgraded to comply with Year 2000
requirements. Significant uncertainty exists in the information technology
industry concerning the potential effects associated with the Year 2000
problem.
The Company offers software products that are designed to be Year 2000
compliant. However, some of the Company's clients are running product
versions that are not Year 2000 compliant. The Company has been encouraging
such customers to migrate to current product versions. It is possible that
the Company may experience increased expenses in addressing migration issues
for such customers. In addition, there can be no assurances that the
Company's software products do not contain errors or defects associated with
Year 2000 date functions that may result in material costs to the Company.
Some commentators have stated that a significant amount of litigation will
arise out of Year 2000 compliance issues. Because of the unprecedented nature
of such litigation, it is uncertain whether or to what extent the Company may
be affected by it.
The Company's internal business information systems are being evaluated for
Year 2000 compliance. Although the Company is not aware of any material
operational issues or costs associated with preparing its internal systems for
the Year 2000, there can be no assurances that the Company will not experience
serious unanticipated negative consequences and/or material costs caused by
undetected errors or defects in the technology used in its internal systems.
Certain of the Company's contracts are subject to fiscal funding clauses,
which provide that in the event of budgetary constraints, the client is
entitled to reduce the level of services to be provided by the Company with a
corresponding reduction in the fee to be paid by the client, or in certain
circumstances, to terminate the services altogether. While the Company has
not been impacted materially by early terminations or reductions in service
from the use of fiscal funding provisions in the past, there can be no
assurance that such provisions will not give rise to early terminations or
reductions of service in the future. If clients of the Company representing a
substantial portion of the Company's revenues were to invoke the fiscal
funding provisions of their OnSite services contracts, the Company's results
of operations could be adversely affected.
The Company provides software-related services, including systems
implementation and integration services. Services are generally provided
under time and materials contracts and revenue is recognized as the services
are provided. In some circumstances, services are provided under fixed price
arrangements in which revenue is recognized on the percentage of completion
method. Revisions in estimates of costs to complete are reflected in
operations in the period in which facts requiring those revisions become
known.
Other factors that could affect the Company's future operating results include
the effect of publicity on demand for the Company's products and services;
general economic and political conditions; continued market acceptance of the
Company's products and services; the timing of services contracts and
renewals; continued competitive and pricing pressures in the marketplace; new
product introductions by the Company's competitors; and the Company's ability
to complete fixed-price contracts profitably.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II
Item 1. Legal Proceedings
On October 4, 1995, John J. Wallace filed a purported class action lawsuit in
the United States District Court for the Eastern District of Pennsylvania
against the Company; Michael J. Emmi, Chairman of the Board, President and
Chief Executive Officer of the Company; Michael D. Chamberlain, Senior Vice
President and a director of the Company; and Eric Haskell, Senior Vice
President, Finance and Administration, Treasurer and Chief Financial Officer
of the Company. The plaintiff filed an amended complaint on November 28,
1995 and a second amended complaint on February 3, 1997. The class period
alleged is from June 5, 1995 through October 2, 1995. The second amended
complaint sought damages in unspecified amounts as well as equitable relief.
In April 1996, the Company's Motion to Dismiss the amended complaint was
granted in part and denied in part. In September 1997, the Company's Motion
to Dismiss the second amended complaint was granted in part and denied in
part, and plaintiff was permitted to pursue a claim that defendants violated
section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder to the extent that it alleges a failure to make
certain disclosures in the Company's Form 10-Q for the third quarter of
fiscal 1995. On December 3, 1997, the Court approved a Stipulation of
Dismissal and Entry of Final Judgment filed by the parties pursuant to which
all remaining claims were dismissed with prejudice and the Court entered a
final judgment in favor of the Company as to all remaining claims in the
action. On December 30, 1997 the plaintiff filed a notice of appeal with
respect to those claims which were dismissed pursuant to the Company's
Motions to Dismiss. Management believes the appeal is without merit and
intends to vigorously contest the appeal. While management, based on its
investigation to date, believes that resolution of this action will not have
a materially adverse effect on the Company's consolidated financial position,
the ultimate outcome of this matter cannot be presently determined.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on February 26, 1998,
Michael D. Chamberlain and Thomas I. Unterberg were reelected as directors of
the Company for a term expiring at the Company's 2001 Annual Meeting of
Shareholders. There were 13,985,951 votes cast in favor of the election of
Mr. Chamberlain and 114,297 votes withheld from his election, and there were
14,036,357 votes cast in favor of the election of Mr. Unterberg and 63,891
votes withheld from his election. There were no abstentions and no broker
non-votes.
The amendment to the Company's Certificate of Incorporation increasing the
number of authorized shares of the Company's common stock from 24,000,000 to
100,000,000 shares was approved. There were 9,608,827 votes cast in favor of
approval of the amendment, 4,467,366 votes against and 24,055 abstained.
The amendment to the Company's 1994 Long-Term Incentive Plan increasing the
number of shares of the Company's common stock reserved for issuance
thereunder from 1,750,000 to 2,750,000 shares was approved. There were
7,004,662 votes cast in favor of approval of the amendment, 4,929,410 votes
against, 43,534 abstained and 2,122,642 broker non-votes.
Item 6(a). Exhibits
Exhibit 3 - Certificate of Amendment of Certificate of Incorporation and
Restated Certificate of Incorporation
Exhibit 10 -- Systems & Computer Technology Corporation 1994 Long-Term
Incentive Plan, as amended through November 18, 1997
Exhibit 27 -- Financial Data Schedule
Item 6(b). Reports on Form 8-K
The registrant did not file any current reports on Form 8-K during the three
months ended March 31, 1998.
<PAGE>
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(Registrant)
Date: 05/14/98 /s/
________________________________
Eric Haskell
Senior Vice President, Finance and Administration,
Treasurer and Chief Financial Officer
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Systems & Computer Technology Corporation (the "Company"), a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, hereby certifies as follows:
FIRST: That at a meeting of the Board of Directors of the Company,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Company. The resolutions setting forth
the proposed amendment are as follows:
RESOLVED, that the first paragraph of Article Fourth of the
Company's Certificate of Incorporation be modified to read as
follows:
The total number of shares of stock which this corporation is
authorized to issue is ONE HUNDRED MILLION (100,000,000) shares
of Common Stock, par value $.01, and THREE MILLION (3,000,000)
shares of Preferred Stock, $.10 par value.
and it was
FURTHER RESOLVED, that the amendment to the Company's Certificate
of Incorporation be submitted to the stockholders of the Company
for approval; and it was
FURTHER RESOLVED, that the proper officers of the Company be and
each is hereby authorized and directed to do and perform any and
all further acts and things and to make, execute, acknowledge and
deliver all instruments and documents necessary to carry out the
intent of the foregoing resolutions.
SECOND: That at a meeting of the stockholders of the Company, duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, the necessary number of shares as
required by statute were voted in favor of the proposed amendment.
THIRD: That the proposed amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Systems & Computer Technology Corporation has caused
this certificate to be signed by Richard A. Blumenthal, its Senior Vice
President, on April 1, 1998.
By: /s/
________________________________
Richard A. Blumenthal
Senior Vice President
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
FIRST: The name of this corporation is Systems & Computer Technology
Corporation.
SECOND: Its registered office in the State of Delaware is located at
1300 Delaware Trust Building, P.O. Box 25130, Wilmington, New Castle County,
Delaware, and its registered agent at that location is Peter J. Walsh.
THIRD: The nature of the business and the objects and purposes to be
transacted, promoted and carried on are:
To provide consulting services related to the development and use of
computer based systems, the design and implementation of such systems and the
operation of computer centers to provide complete data processing services to
client organizations.
To engage in any lawful act or activities for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is ONE HUNDRED MILLION (100,000,000) shares of Common
Stock, par value $.01, and THREE MILLION (3,000,000) shares of Preferred
Stock, $.10 par value.
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article FOURTH, to provide for the issuance
of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, and, if so, the terms
of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series.
If upon any voluntary or involuntary liquidation, dissolution or winding
up of the corporation, the assets available for distribution to holders of
shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of
Preferred Stock in accordance with the respective preferential amounts
(including unpaid cumulative dividends, if any) payable with respect thereto.
FIFTH: The name and mailing address of the incorporator is as follows:
Name Mailing Address
Peter J. Walsh 1300 Delaware Trust Building
P.O. Box 25130
Wilmington, New Castle County
Delaware 19899
SIXTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the board of directors is expressly
authorized to make, alter, amend and repeal the by-laws.
This corporation may in its by-laws confer powers additional to the
foregoing upon the directors, in addition to the powers and authorities
expressly conferred upon them by law.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8
of the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as
the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three-fourths in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this corporation, as the
case may be, and also on this corporation.
EIGHTH: Meetings of stockholders may be held outside the State of
Delaware, if the by-laws so provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation. Elections of
directors need not be by ballot unless the by-laws of the corporation shall so
provide.
NINTH: In the event that the holders of the voting stock of the
corporation are entitled to vote on (i) a merger or consolidation or on a
proposal that the corporation sell, lease or exchange substantially all of its
assets and property or that any entity sell, lease or exchange substantially
all of its assets and property to or with the corporation, or (ii) any
reclassification of securities, recapitalization or other transaction (except
redemptions permitted by the terms of the security redeemed or repurchases of
the securities for cancellation or the corporation's treasury) designed to
decrease the number of holders of the corporation's voting stock, the
favorable vote of not less than sixty-six and two-thirds percent (66 2/3%) of
all of the votes which the holders of the issued and outstanding voting stock
of the corporation are entitled to cast thereon shall be required for the
approval of any such action; provided, however, that the foregoing shareholder
voting requirement shall not apply to any of the transactions provided for in
subparts (i) or (ii) where such transaction has been approved by a resolution
of the Board of Directors of the corporation by a favorable vote of not less
than sixty-six and two-thirds percent (66 2/3%) of the Directors entitled to
vote thereon.
This Article NINTH may not be amended, nor may it be repealed in whole
or in part, until authorized by the favorable vote of not less than
sixty-six and two-thirds percent (66 2/3%) of all of the votes entitled to be
cast thereon by the holders of the issued and outstanding voting stock of the
corporation entitled to vote.
TENTH: Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws of the corporation), the affirmative vote of the
holders of sixty-six and two-thirds percent (66 2/3%) or more of the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) shall be required to amend, alter, change or repeal Sections 1 or 2 of
Article III of the By-Laws of the Corporation as in effect on April 2, 1982 or
this Article TENTH of this Certificate of Incorporation.
ELEVENTH: No director shall have any personal liability to the
Corporation or its stockholders for any monetary damages for breach of
fiduciary duty as a director, except that this Article shall not eliminate or
limit the liability of each director (i) for any breach of such director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which such director derived
an improper personal benefit. This Article shall not eliminate or limit the
liability of such director for any act or omission occurring prior to the date
when this Article becomes effective.
Systems & Computer Technology Corporation 1994 Long-Term
Incentive Plan, as amended through November 18, 1997
SECTION 1. Purpose; Definitions;. The name of this plan is the
Systems & Computer Technology Corporation 1994 Long-Term Incentive Plan (the
"Plan"). The purpose of the Plan is (i) to provide employees of Systems &
Computer Technology Corporation, a Delaware corporation (the "Corporation"),
selected by the Board of Directors of the Corporation, including employees of
the Corporation who are also directors of the Corporation, with financial
incentives to enhance shareholder value and (ii) to enable the Corporation to
attract, retain and motivate employees.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means, with respect to a person or entity, a person
that directly or indirectly controls, or is controlled by, or is under
common control with such person or entity.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Cause" means a felony conviction of a Participant or the failure
of a Participant to contest prosecution for a felony, or a Participant's
willful misconduct or dishonesty.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Committee" means the Board of Directors.
(f) "Disability" means permanent and total disability, as determined
under the Corporation's long-term disability program, except that Disability
of an optionee with respect to an Incentive Stock Option shall occur if the
optionee is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
(g) "Fair Market Value" means, as of any given date, the closing price
for a share of Stock, as reported on the National Association of Securities
Dealers Automated Quotation System (or, if the Stock is subsequently listed on
a national securities exchange, the closing price for a share of Stock on the
exchange on the relevant date).
(h) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(i) "Long-Term Performance Award" or "Long-Term Award" means an award
made pursuant to Section 8 hereof that is payable in cash and/or Stock
(including Restricted Stock) in accordance with the terms of the grant, based
on Corporation, business unit and/or individual performance over a period of
at least two years, in each case as determined by the Committee and as set
forth in the grant letter.
(j) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(k) "Participant" means an employee of the Corporation or a Subsidiary
to whom an award is granted pursuant to the Plan.
(l) "Restricted Stock" means an award of shares of Stock that is
subject to restrictions pursuant to Section 7 hereof.
(m) "Retirement" means termination of the employment of a Participant
with the Corporation or a Subsidiary other than a termination effected at the
direction of the Corporation (whether or not the Corporation effects such
termination for Cause).
(n) "Securities Broker" means a registered securities broker acceptable
to the Corporation who agrees to effect the cashless exercise of an Option
pursuant to Section 5(k) hereof.
(o) "Stock" means the Common Stock, $.01 par value per share, of the
Corporation.
(p) "Stock Appreciation Right" means the right, pursuant to an award
granted under Section 6 hereof, to surrender to the Corporation all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Option (or such
portion thereof) is surrendered, of the shares of Stock covered by such Stock
Option (or such portion thereof) and (ii) the aggregate exercise price of such
Stock Option (or such portion thereof).
(q) "Stock Option" or "Option" means any option to purchase shares of
Stock (including Restricted Stock, if the Committee so determines) granted
pursuant to Section 5 hereof.
(r) "Subsidiary" means, in respect of the Corporation, a subsidiary
corporation, whether now or hereafter existing, as defined in Sections 424(f)
and (g) of the Code.
SECTION 2. Administration. The Plan shall be administered by the Board
of Directors, and all references herein to the Committee shall be construed to
mean the Board of Directors.
The Committee shall have the authority to grant to eligible employees
(including director-employees), pursuant to the terms of the Plan: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock and/or (iv)
Long-Term Performance Awards. In particular, the Committee shall have the
authority:
(a) to select the officers and other employees of the Corporation or a
Subsidiary to whom Stock Options, Stock Appreciation Rights, Restricted Stock
and Long-Term Performance Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Long-Term Performance Awards, or any combination thereof, are to be granted
hereunder;
(c) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder, including, but not limited
to, the share price and any restriction or limitation, or any vesting
acceleration or forfeiture waiver regarding any Stock Option or other award
and/or the shares of Stock relating thereto, based on such factors as the
Committee shall determine, in its sole discretion;
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash or stock, including Restricted Stock under Section
5(j);
(f) to determine whether and under what circumstances a Stock Option
may be exercised without a payment of cash under Section 5(k); and
(g) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under the Plan may be
deferred either automatically or at the election of the Participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of
the Plan and any award issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Corporation and
Participants. No member of the Committee shall be liable for any good faith
determination, act or failure to act in connection with the Plan or any award
made under the Plan.
SECTION 3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. The stock to be subject or related to
awards under the Plan shall be shares of Stock and may be either authorized
and unissued shares of Stock or shares of Stock held in the treasury of the
Corporation. The maximum number of shares of Stock that may be the subject of
an award under the Plan is 2,750,000 and the Corporation shall reserve for the
purposes of the Plan, out of its authorized and unissued shares of Stock or
out of shares of Stock held in its treasury, or partly out of each, such
number of shares.
Notwithstanding the foregoing, no individual shall receive, over the
term of the Plan, awards for more than an aggregate of 30% of the shares of
Stock authorized for grant under the Plan.
(b) Computation of Stock Available for the Plan. For the purpose of
computing the total number of shares of Stock available under the Plan at any
time during which the Plan is in effect, there shall be debited against the
total number of shares of Stock determined to be available pursuant to
paragraphs (a) and (c) of this Section 3 the maximum number of shares of Stock
subject to issuance upon exercise of Options or other stock based awards made
under the Plan.
(c) Effect of the Expiration or Termination of Awards. If and to the
extent that an award made under the Plan expires, terminates or is canceled
or forfeited for any reason without having been exercised in full, the shares
of Stock associated with the expired, terminated, canceled or forfeited
portion of the award shall again become available for award under the Plan.
In addition, during the period that any award remains outstanding under the
Plan, the Committee may make good faith adjustments with respect to the number
of shares of Stock attributable to such awards for purposes of calculating the
maximum number of shares available for the granting of future awards under the
Plan.
(d) Other Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, Stock dividend, or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made
in the aggregate number of shares of Stock reserved for issuance under the
Plan, in the number and option price of shares of Stock subject to outstanding
Options granted under the Plan and in the number and price of shares of Stock
subject to other awards made under the Plan, as may be determined to be
appropriate by the Committee in its sole discretion, provided that the number
of shares of Stock subject to any award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by
the Corporation upon the exercise of any Stock Appreciation Right associated
with any Stock Option.
SECTION 4. Eligibility. Only officers and other employees of the
Corporation (including director-employees, but excluding any other person who
serves the Corporation only as a director) and/or its Subsidiaries are
eligible to be granted awards under the Plan.
SECTION 5. Stock Options. Stock Options granted under the Plan may be
of two types: (i) Incentive Stock Options or (ii) Non-Qualified Stock
Options. Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options
(in each case with or without Stock Appreciation Rights). To the extent that
any Stock Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(a) Option Price. The exercise price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant
but shall be not less than 100% of the Fair Market Value of the Stock on the
date of the grant. However, any Incentive Stock Option granted to any
optionee who, at the time the Option is granted, owns more than 10% of the
voting power of all classes of stock of the Corporation or of a Subsidiary,
shall have an exercise price per share of not less than 110% of Fair Market
Value per share on the date of the grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten years after
the date the Option is granted. However, any Option granted to any optionee
who, at the time the Option is granted, owns more than 10% of the voting power
of all classes of stock of the Corporation or of a Subsidiary may not have a
term of more than five years. No Option may be exercised by any person after
expiration of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at grant; provided, however, that, except as provided in Section
5(e), unless otherwise determined by the Committee at grant, no Stock Option
shall be exercisable during the six-month period following the date of the
grant of the Option. If the Committee provides, in its discretion, that any
Stock Option is exercisable only in installments, the Committee may waive such
installment exercise provisions at any time at or after grant, in whole or in
part, based on such factors as the Committee shall determine, in its sole
discretion.
(d) Method of Exercise. Subject to the exercise provisions under
Section 5(c), Stock Options may be exercised in whole or in part at any time
and from time to time during the term of the Option, by giving written notice
of exercise to the Corporation specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by certified or bank check, or such other instrument as
the Committee may accept. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part of the exercise
price of a Stock Option may be made in the form of unrestricted Stock based on
the Fair Market Value of the Stock on the date the Option is exercised;
provided, however, that, in the case of an Incentive Stock Option, the right
to make a payment in the form of already owned shares of Stock may be
authorized only at the time the Option is granted.
The Committee, in its sole discretion, may at the time of grant or such
later time as it determines, permit payment of a Stock Option exercise price
of a Non-Qualified Stock Option to be made in whole or in part in the form of
Restricted Stock based on the Fair Market Value of the Stock on the date the
Option is exercised (computed without regard to the restrictions applicable to
the Restricted Stock); provided, however, that in the case of an Incentive
Stock Option, the right to make a payment in the form of Restricted Stock may
be authorized only at the time the Option is granted. If such payment is
permitted, then Stock received upon the exercise of the Option may be subject
to the same forfeiture restrictions as the Restricted Stock used to make the
payment, unless otherwise determined by the Committee, in its sole discretion,
at or after grant.
If payment of the Option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of unrestricted Stock already owned by
the Participant, the Corporation may require that the Stock have been owned by
the Participant for a period of six months or longer from the date of
payment.
No shares of Stock shall be issued upon exercise of an Option until full
payment therefor has been made. An optionee shall generally have the rights
to dividends and other rights of a shareholder with respect to shares of Stock
subject to the Option when the optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in Section 11(a) hereof.
(e) Termination by Reason of Death. Subject to Section 5(i), if an
optionee's employment by the Corporation or any Subsidiary terminates by
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable or on such accelerated basis as the
Committee may determine at or after grant, by the legal representative of the
estate or by the legatee of the optionee under the will of the optionee, for a
period of one year (or such shorter period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated term
of such Stock Option, whichever period is the shorter.
(f) Termination by Reason of Disability. Subject to Section 5(i), if
an optionee's employment by the Corporation or any Subsidiary terminates by
reason of Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee or his personal representative, to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Committee may determine at or after grant, for a period of six months (or such
shorter period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is shorter; provided, however, that if the
optionee dies within such six-month period (or such shorter period as the
Committee shall specify at grant), any unexercised Stock Option held by such
optionee shall, at the sole discretion of the Committee, thereafter be
exercisable to the extent to which it was exercisable at the time of death for
a period of twelve months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Retirement. Subject to Section 5(i), if
an optionee's employment by the Corporation or any Subsidiary terminates by
reason of Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
such Retirement or on such accelerated basis as the Committee may determine at
or after grant, for a period of thirty (30) days from the date of such
termination of employment, or the stated term of such Stock Option, whichever
period is the shorter.
(h) Other Termination. Unless otherwise determined by the Committee at
or after grant, if an optionee's employment by the Corporation or any
Subsidiary terminates for any reason other than death, Disability or
Retirement, the Stock Option shall thereupon terminate, except that such Stock
Option may thereafter be exercised by the optionee, to the extent it was
exercisable at the time of such termination, if the optionee is involuntarily
terminated by the Corporation or any Subsidiary without Cause, but only for a
period of thirty (30) days from the date of such termination or employment or
the stated term of such Stock Option, whichever period is shorter.
(i) Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Stock with
respect to which Incentive Stock Options are exercisable for the first time by
the optionee during any calendar year under the Plan and/or any other plan of
the Corporation or any Subsidiary shall not exceed $100,000. For purposes of
applying the foregoing limitation, Incentive Stock Options shall be taken into
account in the order granted.
To the extent (if any) permitted under Section 422 of the Code without
causing an Incentive Stock Option to lose its status as such or to be deemed
to be a new Incentive Stock Option under the modification rules of Section
424(h) of the Code, and subject to any restrictions imposed by the Committee,
if (i) a Participant's employment with the Corporation is terminated by reason
of death, Disability or Retirement and (ii) the portion of any Incentive Stock
Option that is otherwise exercisable during the post-termination period
specified under Section 5(e), (f) or (g), applied without regard to this
Section 5(i), is greater than the portion of such Option that is exercisable
as an "incentive stock option" during such post-termination period under
Section 422 after taking the $100,000 limitation into account, such
post-termination period of exercisability shall automatically be extended (but
not beyond the original Option term) to the extent necessary to permit the
optionee to exercise such Incentive Stock Option without violating the
$100,000 limitation. The Committee is also authorized to provide at grant for
a similar extension of the post-termination exercise period in the event of a
Change-in-Control.
(j) Cash-out of Option; Settlement of Restricted Stock. On receipt of
written notice to exercise, the Committee may, in its sole discretion, elect
to terminate all or part of the portion of the Option(s) proposed to be
exercised provided that the Corporation pays the optionee an amount in cash
equal to the excess of the Fair Market Value of the Stock otherwise issuable
over the Option price (the "Spread Value") on the effective date of such
cash-out.
In addition, if the option agreement so provides at grant or is amended
after grant and prior to exercise to so provide (with the optionee's consent),
the Committee may require that all or part of the shares to be issued upon
exercise of an Option take the form of Restricted Stock. For this purpose,
such Restricted Stock shall be valued on the date of exercise on the basis of
the Fair Market Value of such Restricted Stock determined without regard to
the forfeiture restrictions involved.
(k) Cashless Exercise. To the extent permitted under the Rules, and
with the consent of the Committee, the Corporation agrees to cooperate in a
"cashless exercise" of an Option. The cashless exercise shall be affected by
the Participant delivering to the Securities Broker instructions to sell a
sufficient number of shares of Stock to cover the costs and expenses
associated therewith.
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan and,
subject to Section 11(g) hereof, shall be transferable only upon transfer of
the related Stock Option. In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of the grant of such Stock
Option. In the case of an Incentive Stock Option, such rights may be granted
only at the time of the grant of such Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise determined by the Committee, in its sole discretion at the
time of grant, a Stock Appreciation Right granted with respect to less than
the full number of shares covered by a related Stock Option shall not be
reduced until the number of shares covered by an exercise or termination of
the related Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with Section 6(b) of the Plan, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b) of the Plan. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the
Plan, as shall be determined from time to time by the Committee, in its sole
discretion, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 5 and this
Section 6 of the Plan; provided, however, that any Stock Appreciation Right
granted subsequent to the grant of the related Stock Option shall not be
exercisable during the first six months of its term, except that this special
limitation shall not apply in the event of death or Disability of the optionee
prior to the expiration of the six-month period.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an amount in
cash and/or shares of Stock equal in value to the excess of the Fair Market
Value of one share of Stock over the Option price per share specified in the
related Stock Option, multiplied by the number of shares in respect of which
the Stock Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(iii) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related,
shall be deemed to have been exercised for the purpose of the limitation set
forth in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued under
the Stock Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
(iv) A Stock Appreciation Right granted in connection with a Stock
Option may be exercised only if and when the market price of the Stock subject
to the Stock Option exceeds the exercise price of such Stock Option.
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee
shall determine the officers and key employees of the Corporation and its
Subsidiaries to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if any) to
be paid by the recipient of Restricted Stock, the time or times within which
such awards may be subject to forfeiture, and all other conditions of the
awards.
The Committee may condition the vesting of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion, at the time of the award.
The provisions of Restricted Stock awards need not be the same with
respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Corporation, and has otherwise
complied with the applicable terms and conditions of such award. The purchase
price for shares of Restricted Stock may be zero.
Each Participant receiving a Restricted Stock award shall be issued a
stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such Participant, and shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Systems & Computer Technology Corporation 1994 Long-Term
Incentive Plan and an Agreement entered into between the registered owner and
Systems & Computer Technology Corporation. Copies of such Plan and Agreement
are on file in the offices of Systems & Computer Technology Corporation."
The Committee shall require that the stock certificates evidencing
shares of Restricted Stock be held in custody by the Corporation until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the Participant shall have delivered to the
Corporation a stock power, endorsed in blank, relating to the Stock covered by
such award.
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) During a period set by the Committee commencing with the date
of such award (the "Restriction Period"), the Participant shall not be
permitted to sell, transfer, pledge, assign or otherwise encumber shares of
Restricted Stock awarded under the Plan. The Committee, in its sole
discretion, may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the Committee
may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)
(i), the Participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Corporation, including the
right to vote the shares, and the right to receive any cash dividends. The
Committee, in its sole discretion, as determined at the time of award, may
permit or require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional Restricted Stock to the
extent shares are available under Section 3 of the Plan.
(iii) Subject to the applicable provisions of the award
agreement and this Section 7, upon termination of a Participant's employment
with the Corporation for any reason during the Restriction Period, all shares
of Restricted Stock still subject to restriction shall be forfeited by the
Participant.
(iv) In the event of hardship or other special circumstances
of a Participant whose employment with the Corporation is involuntarily
terminated (other than for Cause), the Committee may, in its sole discretion,
waive in whole or in part any or all remaining restrictions with respect to
such Participant's shares of Restricted Stock, based on such factors as the
Committee may deem appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period, the
certificates for such shares shall be delivered by the Corporation to the
Participant.
SECTION 8. Long Term Performance Awards.
(a) Awards and Administration. Long Term Performance Awards may be
awarded either alone or in addition to other awards granted under the Plan.
Prior to award of a Long Term Performance Award, the Committee shall determine
the nature, length and starting date of the performance period (the
"Performance Period") for each Long Term Performance Award, which shall be at
least two years (subject to Section 9 below), and shall determine the
performance objectives to be used in valuing Long Term Performance Awards and
determining the extent to which such Long Term Performance Awards have been
earned. Performance objectives may vary from Participant to Participant and
between groups of Participants and shall be based upon such Corporation,
business unit and/or individual performance factors and criteria as the
Committee may deem appropriate, including, but not limited to, earnings per
share or return on equity. Performance Periods may overlap and Participants
may participate simultaneously with respect to Long Term Performance Awards
that are subject to different Performance Periods and/or different performance
factors and criteria.
At the beginning of each Performance Period, the Committee shall
determine for each Long Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Stock to be awarded
to the Participant at the end of the Performance Period if and to the extent
that the relevant measure(s) of performance for such Long Term Performance
Award is (are) met. Such dollar values or number of shares of Stock may be
fixed or may vary in accordance with such performance and/or other criteria as
may be specified by the Committee, in its sole discretion.
(b) Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives
to a Long Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long Term
Performance Awards affected, to the extent deemed appropriate by the
Committee, in its sole discretion, to avoid unintended windfalls or hardship.
(c) Termination of Employment. Unless otherwise provided in the
applicable award agreement(s), if a Participant terminates employment with
the Corporation during a Performance Period because of death, Disability or
Retirement, such Participant (or his estate) shall be entitled to a payment
with respect to each outstanding Long Term Performance Award at the end of the
applicable Performance Period:
(i) based, to the extent relevant under the terms of the award,
upon the Participant's performance for the portion of such Performance Period
ending on the date of termination and the performance of the applicable
business unit(s) for the entire Performance Period, and
(ii) pro-rated, where deemed appropriate by the Committee, for
the portion of the Performance Period during which the Participant was
employed by the Corporation, all as determined by the Committee, in its sole
discretion.
However, the Committee may provide for an earlier payment in settlement
of such award in such amount and under such terms and conditions as the
Committee deems appropriate, in its sole discretion.
Subject to Section 9 below, if a Participant terminates employment with
the Corporation during a Performance Period for any other reason, then such
Participant shall not be entitled to any payment with respect to the Long Term
Performance Awards subject to such Performance Period, unless the Committee
shall otherwise determine, in its sole discretion.
(d) Form of Payment. The earned portion of a Long Term Performance
Award may be paid currently or on a deferred basis such interest or earnings
equivalent as may be determined by the Committee, in its sole discretion.
Payment shall be made in the form of cash or whole shares of Stock, including
Restricted Stock, either in a lump sum payment or in annual installments
commencing as soon as practicable after the end of the relevant Performance
Period, all as the Committee shall determine at or after grant. If and to the
extent a Long Term Performance Award is payable in Stock and the full amount
of such value is not paid in Stock, then the shares of Stock representing the
portion of the value of the Long Term Performance Award not paid in Stock
shall again become available for award under the Plan. Prior to any payment,
the Committee shall certify that all of the performance goals or other
material terms of the award have been met.
SECTION 9. Amendments and Termination. The Committee may amend, alter
or discontinue the Plan at any time and from time to time, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant with respect to a Stock Option, Stock Appreciation Right,
Restricted Stock or Long Term Performance Award which has been granted under
the Plan, without the Participant's consent, or which, without the approval of
the Corporation's stockholders, would:
(a) except as expressly provided in the Plan, increase the total number
of shares reserved for the purposes of the Plan;
(b) decrease the option price of any Stock Option to less than 100% of
the Fair Market Value on the date of grant;
(c) change the employees or class of employees eligible to participate
in the Plan; or
(d) extend the maximum Option term under Section 5(b) of the Plan.
The Committee may substitute new Stock Options for previously granted
Stock Options, including previously granted Stock Options having higher
exercise prices.
Subject to the above provisions, the Committee shall have broad
authority to amend the Plan to take into account changes in applicable tax
laws and accounting rules, as well as other developments. Notwithstanding the
foregoing, no amendment to the Plan may be made by the Committee without the
approval of the Corporation's stockholders if such approval would be required
under the Rules in order to ensure that transactions effected under the Plan
are eligible for the benefit of Rule 16b-3.
SECTION 10. Unfunded Status of Plan. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or optionee by the
Corporation, nothing contained herein shall give any such Participant or
optionee any rights that are greater than those of a general creditor of the
Corporation. In its sole discretion, the Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Stock or payments in lieu or with respect to awards hereunder,
provided, however, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan.
SECTION 11. General Provisions.
(a) The Committee may require each person acquiring Stock or a Stock
based award under the Plan to represent to and agree with the Corporation in
writing that the Participant is acquiring the Stock or Stock based award for
investment purposes and without a view to distribution thereof and as to such
other matters as the Committee believes are appropriate to ensure compliance
with applicable Federal and state securities laws. The certificate evidencing
such award and any securities issued pursuant thereto may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer
and compliance with securities laws.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities Act of 1933, as amended, the Exchange
Act, any stock exchange upon which the Stock is then listed, and any other
applicable Federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Corporation or a Subsidiary any right to continued employment with the
Corporation or such Subsidiary, nor shall it interfere in any way with the
right of the Corporation or such Subsidiary to terminate the employment of any
of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the Participant for Federal income tax
purposes with respect to any award under the Plan, the Participant shall pay
to the Corporation, or make arrangements satisfactory to the Committee
regarding the payment, of any Federal, state or local taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise
determined by the Committee, the minimum required withholding obligations may
be settled with Stock, including Stock that is part of the award that gives
rise to the withholding requirement. The obligations of the Corporation under
the Plan shall be conditional on such payment or arrangements and the
Corporation shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant.
(e) At the time of grant of an award under the Plan, the Committee may
provide that the shares of Stock received as a result of such grant shall be
subject to a right of first refusal, pursuant to which the Participant shall
be required to offer to the Corporation any shares that the Participant wishes
to sell, with the price being the then Fair Market Value of the Stock, subject
to such other terms and conditions as the Committee may specify at the time of
grant.
(f) The reinvestment of dividends in additional Restricted Stock (or in
other types of Plan awards) at the time of any dividend payment shall only be
permissible if sufficient shares of Stock are available under Section 3 of the
Plan for such reinvestment (taking into account then outstanding Stock Options
and other Plan awards).
(g) Except as may be otherwise determined by the Board with respect to
any particular award under the Plan: (i) no award under the Plan shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order, as
defined in the Code or Title I of the Employee Retirement Income Security Act,
and (ii) all awards under the Plan shall be exercisable, during the
Participant's lifetime, only by the Participant or, in the event of his
Disability, by his personal representative.
(h) The Committee shall establish such procedures as it deems appropriate
for a Participant to designate a beneficiary to whom any amounts payable in
the event of the Participant's death are to be paid.
(i) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware.
SECTION 12. Effective Date of Plan Effective Date of Plan. The Plan
shall be effective on the date it is approved by the affirmative vote of the
holders of a majority of the shares of Stock present, or represented, and
entitled to vote on the Plan at a meeting of stockholders.
SECTION 13. Term of Plan. No Stock Option, Stock Appreciation Right,
Restricted Stock or Long Term Performance Award shall be granted pursuant to
the Plan on or after the tenth (10th) anniversary of the date of initial
stockholder approval of the Plan, but awards granted prior to such tenth
(10th) anniversary may extend beyond that date.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
March 31, 1998 and 1997 financial statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998 SEP-30-1997 SEP-30-1997
<PERIOD-END> MAR-31-1998 MAR-31-1998 MAR-31-1997 MAR-31-1997
<CASH> 26,832,000 26,832,000 5,759,000 5,759,000
<SECURITIES> 0 0 0 0
<RECEIVABLES> 120,926,000 120,926,000 93,019,000 93,019,000
<ALLOWANCES> 4,553,000 4,553,000 1,867,000 1,867,000
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 227,623,000 227,623,000 108,550,000 108,550,000
<PP&E> 71,829,000 71,829,000 61,584,000 61,584,000
<DEPRECIATION> 28,992,000 28,992,000 24,865,000 24,865,000
<TOTAL-ASSETS> 303,493,000 303,493,000 174,340,000 174,340,000
<CURRENT-LIABILITIES> 57,932,000 57,932,000 36,916,000 36,916,000
<BONDS> 77,510,000 77,510,000 28,045,000 28,045,000
0 0 0 0
0 0 0 0
<COMMON> 356,000 356,000 308,000 308,000
<OTHER-SE> 166,560,000 166,560,000 106,338,000 106,338,000
<TOTAL-LIABILITY-AND-EQUITY> 303,493,000 303,493,000 174,340,000 174,340,000
<SALES> 94,789,000 180,190,000 67,267,000 127,672,000
<TOTAL-REVENUES> 96,084,000 183,365,000 67,385,000 127,917,000
<CGS> 60,616,000 114,305,000 42,480,000 80,592,000
<TOTAL-COSTS> 82,707,000 158,242,000 59,102,000 113,048,000
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1,055,000 1,875,000 540,000 1,123,000
<INCOME-PRETAX> 12,322,000 23,248,000 7,743,000 13,746,000
<INCOME-TAX> 5,021,000 9,502,000 3,175,000 5,636,000
<INCOME-CONTINUING> 7,301,000 13,746,000 4,568,000 8,110,000
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 7,301,000 13,746,000 4,568,000 8,110,000
<EPS-PRIMARY> 0.22 0.41 0.16 0.29
<EPS-DILUTED> 0.20 0.38 0.14 0.26
</TABLE>
