<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from ___________ to___________
Commission file number 0-7416
SHARED MEDICAL SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-1704148
(State or other jurisdiction (I.R.S.Employer Identification No.)
of incorporation or organization)
51 Valley Stream Parkway
Malvern, Pennsylvania 19355
(Address of principal executive offices) (Zip Code)
(610) 219-6300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
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
----- ------
On July 31, 1997, there were 24,950,741 shares of Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996*
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments.................. $ 25,811 $ 40,286
Accounts receivable, net......................... 227,830 212,061
Prepaid expenses and other current assets........ 26,091 24,980
------------ ------------
Total Current Assets........................... 279,732 277,327
Property and Equipment, net....................... 102,104 102,532
Computer Software, net............................ 56,086 51,331
Other Assets...................................... 85,547 76,288
------------ ------------
$523,469 $507,478
============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Notes payable.................................... $ 44,446 $ 21,941
Current portion of long-term debt and
capital leases.................................. 3,432 4,144
Dividends payable................................ 5,233 4,944
Accounts payable................................. 15,851 27,042
Accrued expenses................................. 41,341 56,323
Current deferred revenues........................ 31,354 42,422
Accrued and current deferred income taxes........ 21,857 14,862
------------ ------------
Total Current Liabilities...................... 163,514 171,678
------------ ------------
Deferred Revenues................................. 11,002 9,048
------------ ------------
Long-Term Debt and Capital Leases................. 17,579 15,361
------------ ------------
Deferred Income Taxes............................. 28,025 26,054
------------ ------------
Commitments
Stockholders' Investment:
Preferred stock, par value $.10;
authorized 1,000,000 shares; none issued....... - -
Common stock, par value $.01; authorized
120,000,000 shares in 1997 and 60,000,000 in
1996; 28,982,288 shares issued in 1997 and
28,835,333 in 1996............................. 290 288
Paid-in capital................................. 52,898 48,721
Retained earnings............................... 314,075 295,915
Common stock in treasury, at cost, 4,060,637
shares in 1997 and 4,035,101 in 1996........... (55,792) (55,782)
Cumulative translation adjustment............... (8,122) (3,805)
------------ ------------
Total Stockholders' Investment................. 303,349 285,337
------------ ------------
$523,469 $507,478
============ ============
</TABLE>
* Restated to reflect the acquisition of American Healthware Systems, Inc. in
February 1997, which was accounted for as a pooling of interests.
The accompanying notes are an integral part of this statement.
2
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
-----------------------------------
(Amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1997 1996* 1997 1996*
-------------------- --------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Service and system fees..... $185,372 $167,300 $369,352 $329,524
Hardware sales.............. 28,022 26,422 53,921 37,292
-------------------- --------------------
213,394 193,722 423,273 366,816
-------------------- --------------------
Cost and Expenses:
Operating and development... 88,074 80,557 175,994 157,540
Marketing and installation.. 61,086 55,283 120,170 108,541
General and administrative.. 15,527 15,399 32,636 30,102
Cost of hardware sales...... 24,190 22,651 46,535 32,095
Interest.................... 1,097 907 1,782 1,711
-------------------- --------------------
189,974 174,797 377,117 329,989
-------------------- --------------------
Income Before Income Taxes... 23,420 18,925 46,156 36,827
Provision for Income Taxes... 8,899 7,096 17,539 13,830
-------------------- --------------------
Net Income................... $ 14,521 $ 11,829 $ 28,617 $ 22,997
==================== ====================
Net Income Per Common Share.. $.57 $.46 $1.13 $.91
==================== ====================
Number of shares used to
compute per share amounts... 25,342 25,464 25,355 25,402
==================== ====================
Dividends Declared
Per Common Share............ $.21 $.21 $.42 $.42
==================== ====================
</TABLE>
* Restated to reflect the acquisition of American Healthware Systems, Inc. in
February 1997, which was accounted for as a pooling of interests.
The accompanying notes are an integral part of this statement.
3
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
1997 1996*
----------- -----------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income...................................... $ 28,617 $ 22,997
Adjustments to reconcile net income to net
cash used for operating activities -
Depreciation and amortization................ 18,962 18,672
Asset (increase) decrease -
Accounts receivable........................ (15,769) (21,099)
Prepaid expenses and other current assets.. (1,111) 526
Other assets............................... (10,643) 2,280
Liability increase (decrease) -
Accounts payable and accrued expenses...... (26,173) (20,890)
Accrued and current deferred income taxes.. 6,995 (1,226)
Deferred revenues.......................... (9,115) (733)
Deferred income taxes...................... 1,971 1,281
Other........................................ (2,110) (1,934)
----------- ----------
Net cash used for operating activities..... (8,376) (126)
----------- ----------
Cash Flows from Investing Activities:
Property and equipment additions................ (10,075) (13,704)
Investment in computer software................. (10,119) (7,952)
Dispositions of equipment....................... 1,098 221
----------- ----------
Net cash used for investing activities..... (19,096) (21,435)
----------- ----------
Cash Flows from Financing Activities:
Dividends paid.................................. (10,168) (10,955)
Exercise of stock options....................... 4,178 7,032
Increase in notes payable....................... 22,505 20,269
Payments of long-term debt and capital
lease obligations.............................. (3,509) (2,157)
Change in treasury stock........................ (9) (374)
----------- ----------
Net cash provided by financing activities.. 12,997 13,815
----------- ----------
Net Decrease in Cash and Short-Term Investments.. (14,475) (7,746)
Cash and Short-Term Investments, Beginning
of Period....................................... 40,286 25,473
----------- ----------
Cash and Short-Term Investments, End of Period... $ 25,811 $ 17,727
=========== ==========
</TABLE>
* Restated to reflect the acquisition of American Healthware Systems, Inc. in
February 1997, which was accounted for as a pooling of interests.
The accompanying notes are an integral part of this statement.
4
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Notes to Consolidated Financial Statements - June 30, 1997 (unaudited):
1. Basis of Presentation:
The information furnished in this Form 10-Q reflects all normal and
recurring adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial statements contained herein.
Prior period financial statements have been restated to reflect the
Company's business combination with American Healthware Systems, Inc. (AHS),
which was completed on February 28, 1997 and accounted for as a pooling of
interests.
2. Business Combination:
On February 28, 1997, the Company completed a merger with AHS, a provider of
financial information systems and facilities management services to health
organizations in New York State. Under the terms of the merger agreement,
the Company issued 1,255,325 shares of the Company's common stock in
exchange for all outstanding shares of AHS. This transaction was accounted
for as a pooling of interests. AHS is currently operating as a wholly owned
subsidiary of the Company.
Separate operating results for Shared Medical Systems Corporation (SMS) and
AHS for the quarter and six months ended June 30, 1996 were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, 1996 June 30, 1996
--------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Revenues:
SMS......................... $190,966 $361,318
AHS......................... 2,756 5,498
--------------- ---------------
$193,722 $366,816
=============== ===============
Net Income:
SMS......................... $ 11,383 $ 22,186
AHS......................... 446 811
--------------- ---------------
$ 11,829 $ 22,997
=============== ===============
</TABLE>
3. Accounts Receivable:
At June 30, 1997 and December 31, 1996, the Company's trade accounts
receivable were reduced by allowances for doubtful accounts of $8,467,000
and $8,094,000, respectively.
4. Property and Equipment:
The major classes of property and equipment at June 30, 1997 and
December 31, 1996 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Land and land improvements...... $ 11,603 $ 11,630
Buildings....................... 62,478 61,993
Equipment....................... 181,786 181,786
----------- -----------
255,867 255,409
Less accumulated depreciation
and amortization............. 153,763 152,877
----------- -----------
$102,104 $102,532
=========== ===========
</TABLE>
5
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
5. Computer Software:
The accumulated amortization for capitalized internally produced
computer software and purchased software at June 30, 1997 and
December 31, 1996 was $60,879,000 and $55,016,000, respectively.
6. Net Income Per Common Share:
In February 1997, the Financial Accounting Standards Board issued Statement
128 (FAS 128), Earnings Per Share (EPS). This statement is effective for
both interim and annual financial statements for periods ending after
December 15, 1997. FAS 128 replaces primary and fully diluted EPS as
required by Accounting Principles Opinion No. 15 (APB 15) with basic and
diluted EPS, respectively. Under the terms of this statement for the
applicable period, basic EPS is calculated using the weighted average shares
of common stock outstanding, and diluted EPS is calculated using the
weighted average shares of common stock outstanding and the effects of any
potentially dilutive securities such as stock options. The Company expects
that basic EPS will be approximately 2-3% greater than EPS as previously
reported and that diluted EPS will be equal to EPS as previously reported by
the Company under APB 15.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Material Changes in Financial Condition
- ---------------------------------------
The Company's financial condition has remained strong throughout the six months
ended June 30, 1997. Management is not aware of any potential material
impairments to, or material changes in, the Company's current financial
position.
The most significant requirements for funds now anticipated are for purchases of
equipment and payment of cash dividends. The Company plans to fund anticipated
expenditures primarily through internally generated funds supplemented from time
to time by bank borrowings.
At June 30, 1997, the Company had lines of credit with banks of approximately
$76,154,000, generally at their prime interest rates. At June 30, 1997,
approximately $31,708,000 of these lines of credit were unused.
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended June 30, 1997 Compared to the Three Months Ended
June 30, 1996.
Revenues
--------
Service and system fees revenues were $185,372,000, an increase of 10.8%
compared to the second quarter of 1996. This increase was primarily due to
higher levels of system fees and system processing fees. The higher level
of system fees was due to the installation of systems to new and existing
customers during the current quarter. The increase in system processing
fees was primarily due to the higher level of customer applications
processed at the Company's Information Services Center.
Hardware sales revenues increased to $28,022,000 for the second quarter of
1997 from $26,422,000 in the second quarter of 1996, primarily due to
changes in the timing and product mix of systems installed.
6
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Cost and Expenses
-----------------
Operating and development expenses decreased to 47.5% of service and system
fees revenues in the second quarter of 1997 from 48.2% for the second
quarter 1996. This change was primarily due to a lower rate of growth, as
compared to the growth in service and system fees revenues, for certain
customer-related expenses and computer hardware and associated costs at the
Company's Information Services Center, partially offset by a higher rate of
personnel and related costs to support professional services provided to
customers.
Marketing and installation expenses remained at 33.0% of service and system
fees revenues in the second quarter of 1997 compared to the second quarter
of 1996.
General and administrative expenses, as a percentage of service and systems
fees revenues, decreased to 8.4% in the second quarter of 1997 from 9.2% in
the second quarter of 1996, primarily due to the Company's continuing
efforts to leverage administrative costs over an increasing revenue base.
Cost of hardware sales increased to 86.3% of hardware sales revenues in the
second quarter of 1997 from 85.7% in the second quarter of 1996. This
change was primarily due to the different product mixes of systems
installed in each quarter.
Interest expense was $1,097,000 in the quarter ended June 30, 1997 compared
to $907,000 in the same period in 1996. This change was generally
attributable to a higher level of average outstanding short-term borrowings
during the current period.
Provision for Income Taxes
--------------------------
Income taxes increased $1,803,000 in the quarter ended June 30, 1997 when
compared to the same period in 1996. This change was primarily due to an
increase of $4,495,000 in income before income taxes. The Company's
effective tax rate for federal, state and foreign income taxes was 38.0% in
the second quarter of 1997 and 37.5% in the second quarter of 1996. The
increase in the effective tax rate was primarily due to the change in the
tax status of AHS from an "S" Corporation, which is not subject to federal
income taxes, to a "C" Corporation upon its merger with the Company.
Net Income
----------
Net income was $14,521,000 in the quarter ended June 30, 1997 compared to
$11,829,000 in the quarter ended June 30, 1996 for the reasons discussed
above.
Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996.
Revenues
--------
Service and system fees revenues were $369,352,000, an increase of 12.1%
compared to the same period in 1996. This increase was primarily due to
higher levels of system fees, professional services, and system processing
fees. The higher level of system fees was due to the installation of
systems to new and existing customers in the first two quarters of 1997.
The higher level of professional services was generally attributable to
facilities management, system support, and consulting fees. The increase
in system processing fees was primarily due to the higher level of customer
applications processed at the Company's Information Services Center.
7
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Hardware sales revenues increased to $53,921,000 for the six months ended
June 30, 1997 from $37,292,000 for the same period in 1996, primarily due
to the installation of IBM mainframe systems to new and existing customers
that process the Company's INVISION product at their site.
Cost and Expenses
-----------------
Operating and development expenses decreased to 47.6% of service and system
fees revenues in the first two quarters of 1997 from 47.8% in the first two
quarters of 1996. This change was primarily due to a lower rate of
growth, as compared to the growth in service and system fees revenues, for
certain customer-related expenses and computer hardware and associated
costs at the Company's Information Services Center, partially offset by a
higher rate of personnel and related costs to support professional services
provided to customers.
Marketing and installation expenses decreased to 32.5% of service and
system fees in the first two quarters of 1997 from 32.9% in the first two
quarters of 1996, primarily due to a lower rate of growth, as compared to
the growth in service and system fees revenues, for personnel and related
costs. These changes were partially offset by an increased rate of growth
for certain customer-related expenses.
General and administrative expenses, as a percentage of service and system
fees revenues, decreased to 8.8% in the first two quarters of 1997 from
9.1% in the first two quarters of 1996, primarily due to the Company's
continuing efforts to leverage administrative costs over an increasing
revenue base, partially offset by costs associated with the Company's
business combination with American Healthware Systems, Inc., in the first
quarter of 1997.
Cost of hardware sales increased to 86.3% of hardware sales revenues in the
first two quarters of 1997 from 86.1% in the first two quarters of 1996.
This change was primarily due to the different product mixes of systems
installed in each period.
Interest expense was $1,782,000 for the six months ended June 30, 1997
compared to $1,711,000 in the same period in 1996. This change was
primarily due to a higher level of average outstanding short-term
borrowings throughout the current period.
Provision for Income Taxes
--------------------------
Income taxes increased $3,709,000 in the first two quarters of 1997 when
compared to the same period in 1996. This change was primarily due to an
increase of $9,329,000 in income before income taxes. The Company's
effective tax rate for federal, state and foreign income taxes was 38.0% in
the first two quarters of 1997 and 37.6% in the first two quarters of 1996.
The increase in the effective tax rate was primarily due to the change in
the tax status of AHS from an "S" Corporation, which is not subject to
federal income taxes, to a "C" Corporation upon its merger with the
Company.
Net Income
----------
Net income was $28,617,000 in the first two quarters of 1997 compared to
$22,997,000 in the first two quarters of 1996 for the reasons discussed
above.
8
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of the Company was held on May 9, 1997. At
the meeting the Company's stockholders were requested to vote on the following
matters:
a) To elect seven directors for one-year terms. The following is a summary
of the votes for elected directors:
Votes Broker
Nominee Votes For Withheld Non-Votes
---------------------------------------------------------------
R. James Macaleer.......... 22,221,407 153,734 0
Raymond K. Denworth, Jr.... 22,217,631 157,510 0
Frederick W. DeTurk........ 22,300,970 74,171 0
Josh S. Weston............. 22,298,030 77,111 0
Jeffrey S. Rubin........... 22,304,629 70,512 0
Marvin S. Cadwell.......... 22,302,512 72,629 0
Gail R. Wilensky........... 22,286,381 88,760 0
----------------------------------------------------------------
There are no other persons whose terms as director continued after the
annual stockholders meeting.
b) To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock,
par value $.01 per share, from 60,000,000 to 120,000,000. The following is a
summary of the voting on the amendment to the Company's Restated Certificate
of Incorporation:
Votes Broker
Votes For Against Abstentions Non-Votes
-----------------------------------------------------
18,595,092 3,726,353 53,696 0
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included in this report:
No. Description
---- ----------------------------------------------------------------
(3) Articles of Incorporation -
Certificate of Amendment of Restated Certificate of Incorporation
dated May 21, 1997
Restated Certificate of Incorporation dated May 14, 1992
(10) Material Contracts -
Performance bonus plans - 1997:
Marvin S. Cadwell
Form of performance bonus plan:
V. Brewster Jones
Terrence W. Kyle
9
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
No. Description
---- ----------------------------------------------------------------
Francis W. Lavelle
David F. Perri
Guillermo N. Ramas, Sr.
Employment agreement -
V. Brewster Jones
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the three-month
period ended June 30, 1997.
10
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
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.
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Registrant
August 14, 1997 /s/ Terrence W. Kyle
- --------------- -------------------------------------------
Date Terrence W. Kyle
Senior Vice President, Treasurer,
and Assistant Secretary,
Principal Financial Officer and
Duly Authorized Officer
11
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
----------------------------------
Exhibit Index
No. Description
---- ----------------------------------------------------------------
(3) Articles of Incorporation -
Certificate of Amendment of Restated Certificate of Incorporation
dated May 21, 1997
Restated Certificate of Incorporation dated May 14, 1992
(10) Material Contracts -
Performance bonus plans - 1997:
Marvin S. Cadwell
Form of performance bonus plan:
V. Brewster Jones
Terrence W. Kyle
Francis W. Lavelle
David F. Perri
Guillermo N. Ramas, Sr.
Employment agreement -
V. Brewster Jones
(27) Financial Data Schedule
12
<PAGE>
Exhibit (3)
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
SHARED MEDICAL SYSTEMS CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Company"),
DOES HEREBY CERTIFY THAT:
FIRST: The Board of Directors of the Company has adopted the following
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the Company:
RESOLVED, that the amendment to the first paragraph of Article FOURTH
of the Company's Restated Certificate of Incorporation to read in its
entirety as follows (the "Amendment") is hereby proposed and declared
to be advisable and in the best interests of the Company:
"FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is 121,000,000 shares, divided into
1,000,000 shares of Preferred Stock, each of which shall have the par
value of $.10 per share, and 120,000,000 shares of Common Stock, each
of which shall have the par value of $.01 per share."
FURTHER RESOLVED, that the Amendment be submitted for action to the
stockholders of the Company at the 1997 Annual Meeting of Stockholders
referred to in these minutes;
FURTHER RESOLVED, that upon stockholder approval of the Amendment, the
President, each Vice President, and the Treasurer of this Company are
hereby each severally authorized and directed to execute and file on
behalf of the Company such certificate or certificates as are required
to effectuate the Amendment under Delaware law and to take such other
actions as they consider necessary or appropriate to carry out the
foregoing resolutions.
SECOND: Thereafter, pursuant to resolution of its Board of Directors, the
annual meeting of the stockholders of the Company was duly called and held and
at such meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
<PAGE>
THIRD: The Amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed by
R. James Macaleer, its Chairman, and attested by Bonnie L. Shuman, its Assistant
Secretary, this 21st day of May, 1997.
By: /s/ R. James Macaleer
-------------------------------
R. James Macaleer
Chairman
ATTEST:
By: /s/ Bonnie L. Shuman (SEAL)
------------------------------
Bonnie L. Shuman
Assistant Secretary
<PAGE>
Exhibit (3)
SHARED MEDICAL SYSTEMS CORPORATION
RESTATED CERTIFICATE
OF INCORPORATION
-------------------------
SHARED MEDICAL SYSTEMS CORPORATION, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, having filed its original Certificate of Incorporation with the
Secretary of State of the State of Delaware on January 2, 1969, DOES HEREBY
CERTIFY:
I. That the Certificate of Incorporation is hereby restated to read
as follows:
"FIRST: The name of the corporation is SHARED MEDICAL SYSTEMS
CORPORATION.
SECOND: The address of its registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is:
To provide shared computing and related service to medical
organizations.
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State
of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have the authority to issue is 61,000,000 shares,
divided into 1,000,000 shares of Preferred Stock, each of which shall
have the par value of $.10 per share, and 60,000,000 shares of Common
Stock, each of which shall have the par value of $.01 per share.
A statement of the designations and the powers, preferences and
rights, and the qualifications, limitations and restrictions granted
to or imposed upon the shares of each class, except such thereof as
the
<PAGE>
Board of Directors of the corporation (the "Board of Directors") is
authorized to fix by resolution or resolutions, as hereinafter
provided, is as follows:
I. PREFERRED STOCK
I. General. The Board of Directors shall have authority, by
-------
resolution, to divide any or all of the shares of Preferred Stock
into, and to authorize the issuance of, one or more series and with
respect to each such series to establish and, prior to the issue
thereof, to fix and determine:
(a) a distinguishing designation for such series and the number
of shares comprising such series, which number may (except as
otherwise provided by the Board of Directors in creating such series)
be increased or decreased from time to time (but not below the number
of shares then outstanding) by action of the Board of Directors;
(b) the rate and times at which and the other conditions on
which dividends on the shares may be declared and paid or set aside
for payment; whether the shares shall be entitled to any participating
or other dividends in addition to dividends at the rate so determined
and, if so, on what terms; and whether dividends shall be cumulative,
and if so, from what date or dates and on what terms;
(c) whether or not the shares shall have voting rights in
addition to the voting rights provided by law and, if so, the terms
and conditions thereof;
(d) whether the shares shall be convertible, or exchangeable,
at the option of either the holder or the corporation or upon the
happening of a specified event, and, if so, the terms and conditions
of such conversion or exchange, including provisions for any
adjustment of the conversion or exchange rate;
(e) whether or not the shares shall be redeemable and, if so,
the terms and conditions, if any, upon which they may be redeemed,
including the date or dates or event or events upon or after which
they shall be redeemable, the cash, property or rights (including
securities of the corporation and of a corporation or corporations
other than the corporation) for which they may be redeemed, whether
they shall be redeemable at the option of the holder or the
corporation, or both,
<PAGE>
or upon the happening of a specified event or events and the amount or
rate of cash, property or rights (including securities of the
corporation and of a corporation or corporations other than the
corporation) per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates,
including provisions for any adjustment of the redemption prices or
rates;
(f) whether any shares shall be redeemed through sinking fund
payments and, if so, on what terms;
(g) the amounts payable upon shares in the event of voluntary
or involuntary liquidation, dissolution, winding up or distribution of
the assets of the corporation; and
(h) subject to the provisions of the next succeeding paragraph
of this Section 1, any other relative powers, preferences and rights
and qualifications, limitations and restrictions of such series.
In the resolution establishing a new series of Preferred Stock,
the Board of Directors may provide for such additional rights, and
with respect to rights as to dividends, redemption and liquidation,
such relative preferences between shares of different series, as are
consistent with the rights of all outstanding shares of previously-
established series, and with all other provisions of this Article
FOURTH, but in the resolution establishing a new series of Preferred
Stock the Board of Directors may only provide that such series shall
have a preference over outstanding shares of any previously-
established series of Preferred Stock with respect to rights as to
dividends, redemption and liquidation to the extent that the
resolutions of the Board of Directors authorizing such previously-
established series expressly so permitted.
All shares of Preferred Stock of all series shall be identical
except as to the above mentioned rights and preferences which the
Board of Directors is authorized as aforesaid to fix and determine.
Except to the extent that the resolution of the Board of Directors
establishing a particular series shall otherwise provide: (i) in case
the stated dividends are not paid in full, all shares of Preferred
Stock of all series shall participate ratably in the payment of
dividends, including accumulated but unpaid dividends, in accordance
with the sums which would be payable
<PAGE>
thereon if all dividends thereon were declared and paid in full and
(ii) in case amounts payable upon liquidation of all series are not
paid in full, all shares of Preferred Stock of all series having a
liquidation preference shall participate ratably in any distribution
of assets other than by way of dividends, in accordance with the sums
which would be payable on such distribution if all sums payable
thereon to holders of all shares of Preferred Stock were discharged in
full.
2. Dividends. The holders of the shares of Preferred Stock
---------
shall be entitled to receive, when and as declared by the Board of
Directors, in their discretion or upon the occurrence of specified
conditions, out of any funds of the corporation lawfully available for
dividends under the laws of the State of Delaware, cash dividends at
such fixed rate (or, if participating, such participating rate and
such fixed rate, if any) per share for each particular series, and no
more, payable with such frequency and on such dates, in each case as
the Board of Directors may determine in fixing and determining the
rights and preferences of such series as above provided. Except to
the extent that the resolution of the Board of Directors establishing
a particular series shall provide that dividends on shares of such
series shall not be cumulative or shall otherwise provide, such
dividends on the Preferred Stock shall be cumulative from the dates as
follows:
(a) in the case of shares issued prior to the record date for
the initial dividend on shares of the series of which such shares
shall constitute a part, then from the date of issuance of such
shares;
(b) if issued during the period commencing immediately after
the record date for a dividend on shares of such series and
terminating at the close of the payment date for such dividends, then
from such dividend payment date; and
(c) otherwise, from the dividend payment date next preceding
the date of issue of such shares.
Accrued but undeclared or unpaid dividends on any shares of
Preferred Stock shall not bear interest.
Further restrictions with respect to dividends and distributions
on, and acquisitions for value of, shares of Preferred Stock and
shares of Common Stock are set
<PAGE>
forth in Section 6 of this Part I.
3. Redemption of Preferred Stock. Except as otherwise
-----------------------------
provided in Section 6 of this Part I, and except to the extent that
the resolution of the Board of Directors establishing a particular
series shall provide that shares of such series shall not be
redeemable by the corporation or that the shares of such series shall
be redeemable in another manner, the corporation may redeem all or any
of the outstanding shares of Preferred Stock, or all or any shares of
any series thereof, at any time or from time to time, upon payment in
respect of the shares so redeemed of the amount payable upon
redemption thereof fixed as aforesaid by the Board of Directors in
respect of the series of which such shares shall constitute a part,
together in each case, to the extent that such shares have cumulative
dividend rights, with an amount equal to all accumulated and unpaid
dividends accrued thereon to the date of redemption, whether or not
such dividends shall have been earned or declared (such price,
including such amount equal to such accumulated and unpaid dividends,
and whether payable in cash or property or partly in cash and partly
in property, as hereinafter provided, being hereinafter called the
"redemption price"). In fixing the redemption price for shares of
Preferred Stock of a particular series as aforesaid, the Board of
Directors shall specify whether such redemption price shall be paid in
cash, in property or in rights (including securities of the
corporation and of a corporation or corporations other than the
corporation), or a combination thereof. If the redemption price of
shares of a particular series may be paid in whole or in part in
property or rights, the resolution fixing the redemption price shall
specify the method to be followed in valuing the property or rights
which may be used to make such payment.
Any redemption by the corporation shall be in such amount, at
such place and in such manner as the Board of Directors shall
determine. Except to the extent that the resolution of the Board of
Directors authorizing a particular series of Preferred Stock shall
otherwise provide, in the case of a redemption by the corporation of
less than all the outstanding shares of Preferred Stock of any series,
the particular shares to be redeemed shall be selected by lot in such
manner as the Board of Directors shall determine. Unless otherwise
waived in writing by the holder thereof, notice of every redemption
shall be (i) mailed at least
<PAGE>
30 days prior to the date fixed for such redemption to the holders of
record of the shares so to be redeemed at their respective addresses
as the same shall appear on the books of the corporation and (ii)
published at least once in a newspaper of general circulation
customarily published each business day in the Borough of Manhattan,
City of New York.
From and after the date fixed in any such notice as the date of
redemption by the corporation, unless default shall be made by the
Corporation in providing the redemption price at the time and place
specified for the payment thereof pursuant to said notice, all
dividends on the shares of Preferred Stock thereby called for
redemption shall cease to accrue and all rights of the holders thereof
as stockholders in the corporation, except the right to receive the
redemption price upon surrender of their share certificates, shall
cease and terminate, and such shares shall not be deemed outstanding
for any purpose.
The corporation may, however, give or irrevocably authorize the
Depository hereinafter mentioned forthwith to give written notice (in
the same manner as the notice of redemption is required to be given as
aforesaid) to the holders of all the shares of Preferred Stock
selected for redemption by the corporation that the redemption price
has been or will on a date specified be deposited with a designated
bank, bank and trust company, or private bank, which shall have an
office in Philadelphia, Pennsylvania, or New York, New York, and shall
have a capital and surplus of not less than $25,000,000 (hereinafter
called the "Depositary"), in trust for the account of the holders of
such shares of Preferred Stock, and that such holders may receive the
redemption price of such shares of Preferred Stock from such
Depositary on or after the date of such deposit upon the surrender of
their share certificates without awaiting the date fixed for
redemption. In such event, if the redemption price shall have been so
deposited by the corporation with such Depositary, all rights as
stockholders in the corporation of the holders of the shares so
called, except the right to receive the redemption price from such
Depositary upon such surrender, shall cease and terminate upon the
date of such deposit or the date of the giving of such notice or
authority, whichever be later, and such shares of Preferred Stock
shall thereafter not be deemed to be outstanding for any purpose;
provided, that if any shares so called for redemption shall at that
time be convertible, the
<PAGE>
conversion privilege may be exercised in accordance with its terms,
but not later than the close of business on the day prior to the date
fixed for redemption. Any portion of the redemption price so deposited
which represents the redemption price of convertible shares which are
actually converted shall promptly be repaid by the Depositary to the
corporation. Any remaining portion of the redemption price so
deposited which shall remain unclaimed by the holders of such shares
of Preferred Stock at the end of two years after the date so fixed for
redemption shall be paid by such Depositary to the corporation, after
which the holders of such shares of Preferred Stock shall look only to
the corporation for payment of the redemption price thereof.
Shares of Preferred Stock of any series redeemed, purchased or
otherwise acquired may be cancelled by the Board of Directors and
thereupon restored to the status of authorized but unissued shares of
Preferred Stock undesignated as to series.
4. Liquidation or Dissolution. Except to the extent that the
--------------------------
resolution of the Board of Directors establishing a particular series
shall otherwise provide with respect to shares of such series, on any
voluntary or involuntary liquidation or dissolution of the
corporation, before any payment or distribution shall be made to the
holders of any Common Stock, the holders of the shares of Preferred
Stock shall be entitled to be paid the amounts, if any, respectively
fixed therefor as aforesaid by the Board of Directors in respect of
each outstanding series of Preferred Stock, together in each case, to
the extent such shares have cumulative dividend rights, with an amount
equal to all accumulated and unpaid dividends thereon to the date of
such payment, whether or not such dividends shall have been earned or
declared.
After such payment shall have been made in full to the holders of
shares of Preferred Stock, they shall be entitled to no further
payment or distribution, and the holders of Common Stock shall be
entitled to share ratably in all remaining assets of the corporation.
A consolidation with or merger with or into any other corporation
or corporations shall not be deemed a liquidation or dissolution of
the corporation within the meaning of this Section 4.
5. Voting Rights. Except to the extent that the
-------------
<PAGE>
resolution of the Board of Directors establishing a particular series
shall otherwise provide and except as otherwise provided herein or by
law, at each meeting of stockholders of the corporation, each holder
of shares of Preferred Stock shall be entitled to one vote for each
such share on each matter to come before the meeting.
The resolution of the Board of Directors establishing a
particular series may confer on holders of the shares of such series,
voting separately or with holders of shares of Preferred Stock of
other series, the right to elect a member or members of the Board of
Directors at any time or from time to time.
6. Restrictions on Dividends and Purchase of Shares of
---------------------------------------------------
Preferred and Common Stock. So long as any shares of Preferred Stock
--------------------------
shall be outstanding, no dividend (other than dividends payable in
shares of Common Stock) shall be paid or distribution shall be made on
the Common Stock, nor shall any shares of Common Stock be purchased,
retired, or otherwise acquired by the corporation (except out of the
proceeds of the sale of shares of Common Stock received by the
corporation after January 1, 1977), nor shall any shares of Preferred
Stock be redeemed, purchased or otherwise acquired (for sinking fund
purposes or otherwise) by the corporation except in accordance with a
stock purchase offer (which may vary as to terms offered with respect
to shares of different series but not with respect to shares of the
same series) made to all holders of record of shares of Preferred
Stock, or except in accordance with a redemption made at the option of
the holder pursuant to the terms of the resolution of the Board of
Directors authorizing such series of Preferred Stock, unless in each
such case,
(a) all accumulated and unpaid dividends on all outstanding
shares of Preferred Stock for all past dividend periods shall have
been paid and full dividends on all shares of Preferred Stock for the
then-current dividend period declared and a sum sufficient for the
payment thereof set apart; and
(b) the corporation shall not be in arrears in respect of any
sinking fund obligation or obligations of a similar nature in respect
of any series of Preferred Stock.
7. Certain Matters Requiring Consent of Holders of Two-Thirds
----------------------------------------------------------
of Preferred Stock. So long as any
---------------
<PAGE>
shares of Preferred Stock shall be outstanding, and subject to the
provisions of the last sentence of this Section 7, the corporation
shall not, without the consent of the holders of at least two-thirds
of the shares of Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or at a meeting called for the
purpose:
(a) adopt or effect any amendment to the corporation's
Certificate of Incorporation, including the terms of any previously
created series of Preferred Stock, other than an amendment of the
nature described under Section 8 below, which would adversely affect
the powers, preferences or special rights of the Preferred Stock;
provided, however, that if any such amendment shall adversely affect
the powers, preferences or special rights of one or more, but not all,
of the several series of Preferred Stock at the time outstanding, the
consent of the holders of at least two-thirds of the shares then
outstanding of those series adversely affected, voting together and
not by series, shall be required in lieu of the consent of the holders
of two-thirds of the Preferred Stock; or
(b) authorize any new class of stock which is senior to the
Preferred Stock with respect to the payment of dividends or
distribution on liquidation or dissolution.
Notwithstanding the foregoing provisions, the resolution of the Board
of Directors creating a particular series may provide that the consent
of the holders of the outstanding shares of such series shall not be
required with respect to some or all of the foregoing matters and, to
the extent so provided, such shares shall not be deemed outstanding
for the purpose of applying the provisions of this Section 7.
8. Certain Matters Requiring Consent of Holders of a Majority
----------------------------------------------------------
of All Outstanding Shares. The corporation may increase the
-------------------------
authorized number of shares of Preferred Stock, or authorize any new
class of stock which is on a parity with the Preferred Stock with
respect to the payment of dividends or distributions on liquidation or
dissolution, by obtaining the affirmative vote, given in person or by
proxy, of the holders of at least a majority of the then-outstanding
Common Stock and Preferred Stock, voting together and not by class.
* * * * * *
<PAGE>
DESIGNATION OF POWERS, PREFERENCES, RIGHTS AND
QUALIFICATIONS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
Section 1. Designation and Amount. The shares of stock of such
----------------------
series shall be designated as "Series A Junior Participating Preferred
Stock" and the number of shares of stock constituting such series
shall be 60,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior
to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior
Participating Preferred Stock which are issued and outstanding shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, dividends in
an amount per share (rounded to the nearest cent) subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times
the per share amount of all cash dividends (payable in cash), and
1,000 times the per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on shares of
the Common Stock, $.01 par value, of the Company (the "Common Stock").
In the event the Company shall at any time after May 1, 1991 (the
"Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount of cash
dividends or other distributions to which holders of shares of Series
A Junior Participating Preferred Stock were entitled pursuant to the
preceding sentence immediately prior to such event shall be adjusted
by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on the
issued and outstanding shares of
<PAGE>
Series A Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock
from the date of declaration of any dividend on the Common Stock.
Accrued but unpaid dividends shall not bear interest. Dividends paid
on the shares of Series A Junior Participating Preferred Stock in an
amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
-------------
Junior Participating Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the stockholders of the Company. In the event
the Company shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or required by law, the
holders of shares of Series A Junior Participating Preferred Stock and
the holders of
<PAGE>
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of the stockholders of the Company.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears for a period of two
(2) full fiscal quarters, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period")
which shall extend until such time as all accrued and unpaid dividends
then outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock
which does not rank senior to the Series A Junior Participating
Preferred Stock (including the Series A Junior Participating Preferred
Stock) with dividends in arrears thereon for a period of two (2) full
fiscal quarters, voting as a class, irrespective of series, shall have
the right to elect one (1) Director.
(ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders
of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised
unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy.
The absence of a quorum of the holders of Common Stock shall not
affect the exercise by the holders of Preferred Stock of such voting
right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default
period, they shall have the right, voting as a class, to elect
Directors to fill such vacancies, if any, in the Board of Directors as
may then exist up to one (1) Director or, if such right is exercised
at an annual meeting, to elect one (1) Director. If the number which
may be so elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After
the holders of the Preferred Stock shall have exercised their right to
elect Directors in any default period and during the continuance of
such period, the number of Directors
<PAGE>
shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
---- -----
Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder
or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock outstanding,
irrespective of series, may request, the calling of a special meeting
of the holders of Preferred Stock, which meeting shall thereupon be
called by the Chairman, the President, a Vice-President or the
Secretary of the Company. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C) (iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Company.
Such meeting shall be called for a time not earlier than 20 days and
not later than 60 days after such order or request or in default of
the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next
annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock and of
Series A Junior Participating Preferred Stock, and other classes of
stock of the Company if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect one (1) Director
voting as a class, after the exercise of which right (x) the Director
so elected by the holders of Preferred Stock shall continue in office
until his successor shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in the Board
of Directors may (except as provided in paragraph (C) (ii) of this
Section 3 or in the articles or certificate of incorporation of the
Company) be filled by vote of a
<PAGE>
majority of the remaining Directors theretofore elected by the holders
of the class of stock which elected the Director whose office shall
have become vacant. References in this paragraph (C) to Directors
elected by the holders of a particular class of stock shall include
Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect a
Director shall cease, (y) the term of any Director elected by the
holders of Preferred Stock as a class shall terminate, and (z) the
number of Directors shall be such number as may be provided for in the
articles or certificate of incorporation or by-laws irrespective of
any increase made pursuant to the provisions of paragraph (C)(ii) of
this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the articles or
certificate of incorporation or by-laws). Any vacancies in the Board
of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining
Directors.
(D) Except as set forth herein or as required by law, holders
of Series A Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever any dividends or distributions payable on the
Series A Junior Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been paid
in full, the Company shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock, provided, that the Company may at any
time redeem, purchase or otherwise
<PAGE>
acquire shares of any such junior stock in exchange for any stock of
the Company ranking no higher (either as to dividends or rights upon
liquidation, dissolution or winding up) than such junior stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series
A Junior Participating Preferred Stock, except dividends paid ratably
on the Series A Junior Participating Preferred Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock or as
provided in clause (iv) below;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
<PAGE>
Section 5. Reacquired Shares. Any shares of Series A Junior
-----------------
Participating Preferred Stock purchased or otherwise acquired by the
Company in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
--------------------------------------
any liquidation (voluntary or otherwise), dissolution or winding up of
the Company, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series
A Junior Participating Preferred Stock shall have received $1.00 per
share, plus an amount equal to any accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment (the "Series A Liquidation Preference"). Following the
payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of
Series A Junior Participating Preferred Stock unless, prior thereto,
the holders of shares of Common Stock shall have received an amount
per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as
appropriately adjusted as set forth in subparagraph C below to reflect
such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock) (such number in clause (ii), the
"Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect
of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share
basis, respectively.
(B) Notwithstanding paragraph (A) of this Section 6, (i) in the
event, however, that there are not
<PAGE>
sufficient assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other
series of preferred stock, if any, which rank on a parity with the
Series A Junior Participating Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of the Series A
Participating Preferred Stock and of any such parity shares in
proportion to their respective liquidation preferences; and (ii) in
the event that after the required distributions to holders of
Preferred Stock there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Stock.
(C) In the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company
--------------------------
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Junior
Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision
of adjustment hereinafter set forth) equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the
Company shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by
<PAGE>
multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
-------------
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred
-------
Stock shall rank junior to all other series of the Company's Preferred
Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
---------
Company shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights
of the Series A Junior Participating Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating
-----------------
Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares,
to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holder's
of Series A Junior Participating Preferred Stock.
* * * * * *
II. COMMON STOCK
1. Junior to Preferred Stock. The Common Stock shall rank junior
-------------------------
to the Preferred Stock with respect to payment of dividends and
distributions on liquidation or dissolution.
2. Voting Rights. Except as expressly provided by law, or as
-------------
otherwise provided in Part I, above, or by resolution of the Board of
Directors pursuant to the authority granted under Part I above, all
voting rights shall be vested in the holders of the Common Stock. At
<PAGE>
each meeting of stockholders of the corporation, each holder of Common
Stock shall be entitled to one vote for each such share on each matter
to come before the meeting, except as otherwise provided in this
Certificate of Incorporation or by law.
Further provisions affecting or concerning voting rights of the
holders of shares of Common Stock are contained in Sections 5 and 8 of
Part I above, and in Article EIGHTH hereof.
3. Dividends. After all accumulated and unpaid dividends upon
---------
all shares of Preferred Stock for all previous dividend periods shall
have been paid and full dividends on all shares of Preferred Stock for
the then current dividend period declared and a sum sufficient for the
payment thereof set apart therefor, and after or concurrently with the
setting aside of any and all amounts then or theretofore required to
be set aside for any sinking fund obligation or obligation of a
similar nature in respect of any series of Preferred Stock, then and
not otherwise, and subject to any other applicable provisions of Part
I hereof, dividends may be declared upon and paid to the holders of
the Common Stock, to the exclusion of the holders of the Preferred
Stock.
4. Rights Upon Liquidation. In the event of voluntary or
-----------------------
involuntary liquidation or dissolution of the corporation, after
payment in full of amounts, if any, required to be paid to the holders
of the Preferred Stock, the holders of the Common Stock shall be
entitled, to the exclusion of the holders of the Preferred Stock, to
share ratably in all remaining assets of the Corporation.
FIFTH: The corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
To make, alter or repeal the By-Laws of the corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To set apart out of any of the funds of the
<PAGE>
corporation available for dividends a reserve or reserves for any
proper purpose and to abolish any such reserve in the manner in
which it was created.
By a majority of the whole Board of Directors, to designate one
or more committees, each committee to consist of two or more of
the Directors of the corporation. The Board may designate one or
more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in a
resolution or in the By-Laws of the corporation, shall have and
may exercise the powers of the Board of Directors in the
management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all
papers which may require it; provided, however, the By-Laws may
provide that in the absence or disqualification of any member of
such committee or committees, the member or members thereof
present of any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member.
When and as authorized by the affirmative vote of the holders of
a majority of the stock issued and outstanding having voting
power given at a stockholders' meeting duly called upon such
notice as is required by statute, or when authorized by the
written consent of the holders of a majority of the voting stock
issued and outstanding to sell, lease or exchange all or
substantially all of the property and assets of the corporation,
including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may
consist in whole or in part of money or property including shares
of stock in, and/or other securities of, any other corporation or
corporations, as the Board of Directors shall deem expedient and
for the best interests of the corporation.
SEVENTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
corporation may be kept (subject to any provision contained in the
statutes)
<PAGE>
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 written
ballot unless the By-Laws of the corporation shall so provide.
EIGHTH: Stockholders shall not have cumulative voting rights in
the election of Directors.
NINTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject
to this reservation.
TENTH: The stockholder vote required to approve Business
Combinations (as hereinafter defined) shall be as set forth in this
Article TENTH.
1. Higher Vote for Business Combinations. In addition to any
-------------------------------------
affirmative vote required by law, this Certificate of Incorporation or
the By-Laws of the Corporation, and except as otherwise expressly
provided in Section 2 of this Article TENTH, a Business Combination
shall not be consummated without the affirmative vote of the holders
of at least 75% of the combined voting power of the then outstanding
shares of all capital stock of the Corporation (the "Capital Stock")
entitled to vote generally in the election of directors (such Capital
Stock hereinafter called the "Voting Stock") voting together as a
single class. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage or
separate class vote may be specified, by law or in any agreement with
any national securities exchange or otherwise.
2. When Higher Vote is Not Required. The provisions of Section 1
--------------------------------
of this Article TENTH shall not be applicable to a Business
Combination if the conditions specified in either of the following
paragraphs A or B are met.
A. Approval by Continuing Directors. The Business Combination
--------------------------------
shall have been approved by a majority of the Continuing Directors (as
hereinafter defined), whether such approval is made prior to or
subsequent to the date on which the Interested Stockholder (as
hereinafter defined) became an Interested Stockholder (the
"Determination Date").
<PAGE>
B. Price and Procedure Requirements. Each of the seven
--------------------------------
conditions specified in the following subparagraphs (i) through (vii)
shall have been met:
(i) The aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation
of the Business Combination (the "Consummation Date") of any
consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be an amount
at least equal to the higher of the amounts determined under
clauses (a) or (b) below (the requirements of this paragraph
(B)(i) shall be applicable with respect to all shares of Common
Stock outstanding whether or not the Interested Stockholder has
previously acquired any shares of the Common Stock):
(a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Stockholder for any shares of Common Stock acquired
beneficially by it, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with
respect to Common Stock, (1) within the two-year period
immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement
Date") or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher, plus interest
compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest, from time
to time in effect, of Provident National Bank, Philadelphia,
Pennsylvania, or any other major bank headquartered in
Philadelphia, Pennsylvania or New York, New York, selected
by a majority of the Continuing Directors, less the
aggregate amount of any cash dividends paid, and the Fair
Market Value of any dividends paid in other than cash, per
share of Common Stock from the Determination Date in an
amount up to but not exceeding the amount of such interest
payable per share of Common Stock, and
(b) the Fair Market Value per share of
<PAGE>
Common Stock on the Announcement Date or on the
Determination Date, whichever is higher, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock.
(ii) The aggregate amount of the cash and the Fair Market
Value as of the Consummation Date of any consideration other than
cash to be received per share by holders of shares of any class
or series of outstanding Capital Stock other than the Common
Stock in such Business Combination shall be an amount at least
equal to the highest of the amounts determined under clauses (a),
(b) or (c) below (the requirements of this paragraph B(ii) shall
be applicable with respect to all shares of every class or series
of outstanding Capital Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular
class or series of Capital Stock).
(a) The highest per share price (including any
brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested
Stockholder for any shares of such class or series of
Capital Stock acquired beneficially by it, as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the class or series of
Capital Stock, (1) within the two-year period immediately
prior to the Announcement Date or (2) in the transaction in
which it became an Interested Stockholder, whichever is
higher, plus interest compounded annually from the
Determination Date through the Consummation Date at the
prime rate of interest, from time to time, in effect, of
Provident National Bank, Philadelphia, Pennsylvania, or any
other major bank headquartered in Philadelphia, Pennsylvania
or New York, New York, selected by a majority of the
Continuing Directors, less the aggregate amount of any cash
dividends paid, and the Fair Market Value of any dividends
paid in other than cash, per share of such class or series
of Capital Stock from the Determination Date through the
Consummation Date in an amount up to but not exceeding the
amount of such interest payable per share of
<PAGE>
such class or series of Capital Stock;
(b) the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher, as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to the class or series of
Capital Stock, and
(c) the highest preferential amount per share to which
the holders of shares of such class or series of Capital
Stock would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, regardless of whether the
Business Combination to be consummated constitutes such an
event.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock (including Common Stock)
shall be in cash or in the same form as previously has been paid by or
on behalf of the Interested Stockholder in its direct or indirect
acquisition of beneficial ownership of shares of such class or series
of Capital Stock. If the consideration so paid for shares of any
class or series of Capital Stock varied as to form, the form of
consideration for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial ownership of the
largest portion of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
(iv) After the Determination Date and prior to the consummation
of such Business Combination, except as approved by a majority of the
Continuing Directors (a) there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) payable in accordance with the terms of
any outstanding Capital Stock, (b) there shall have been no reduction
in the annual rate of dividends paid on the Common Stock (except as
necessary to reflect any stock split, stock dividend or subdivision of
the Common Stock), (c) there shall have been an increase in the annual
rate of dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number
<PAGE>
of outstanding shares of Common Stock, and (d) such Interested
Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction
that results in such Interested Stockholder becoming an Interested
Stockholder and except in a transaction which, after giving effect
thereto, would not result in any increase in the Interested
Stockholder's percentage beneficial ownership of any class or series
of Capital Stock.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder of the Corporation), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of or
in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all stockholders of the Corporation at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a
prominent place, any statement as to the advisability of the Business
Combination that the Continuing Directors, or any of them, may choose
to make and, if deemed advisable by a majority of the Continuing
Directors, the opinion of an investment banking firm, selected for and
on behalf of the Corporation by a majority of the Continuing
Directors, as to the fairness of the terms of the Business Combination
from a financial point of view to the holders of the outstanding
shares of Capital Stock other than the Interested Stockholder and its
Affiliates or Associates (as hereinafter defined).
(vii) Such Interested Stockholder shall not have made any
material change in the Corporation's business or equity capital
structure without the approval of a majority of the Continuing
Directors.
Any Business Combination to which Section 1 of this Article TENTH
shall not apply by reason of this Section
<PAGE>
2 shall require only such affirmative vote as is required by law, any
other provision of this Certificate of Incorporation, the By-Laws of
the Corporation or any agreement with any national securities
exchange.
3. Certain Definitions. For the purpose of this Article TENTH:
-------------------
A. a "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder or (ii) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested
Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the benefit of
any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder involving any assets, securities or commitments
of the Corporation, any Subsidiary or any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder; or
(iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
(iv) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or
series of Capital Stock or any securities convertible into Capital
Stock or into equity securities of any Subsidiary, that is
beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
<PAGE>
(v) any agreement, contract, arrangement or other understanding
providing for any one or more of the actions specified in clauses (i)
through (iv) above.
B. A "person" shall mean any individual, firm, corporation or
other entity and shall include any group composed of any person and
any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding,
directly or indirectly, for the purpose of acquiring, holding, voting
or disposing of Capital Stock.
C. "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity) who or which:
(i) is, or has announced or publicly disclosed a plan or
intention to become, the beneficial owner of Voting Stock having 15%
or more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock; or
(ii) is an Affiliate or Associate of the Corporation and at
any time within the two-year period immediately prior to the date in
question was the beneficial owner of Voting Stock having 15% or more
of the votes entitled to be cast by the holders of all the then
outstanding shares of Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-year
period immediately prior to the date in question beneficially owned by
any Interested Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933.
D. A person shall be a "beneficial owner" of any Capital Stock:
(i) which such person or any Affiliate or Associate of such
person beneficially owns, directly or indirectly; or
<PAGE>
(ii) which such person or any Affiliate or Associate of such
person, has, directly or indirectly, (a) the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly,
by any other person with which such person or any Affiliate or
Associate of such person has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock.
For the purpose of determining whether a person is an Interested
Stockholder pursuant to paragraph C of this Section 3, the number of shares
of Capital Stock deemed to be outstanding shall include shares deemed owned
by the Interested Stockholder through application of this paragraph D but
shall not include any other shares of Capital Stock that may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise
of conversion rights, warrants or options, or otherwise.
E. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1986 (the term "registrant" in such Rule 12b-2 meaning in
this case the Corporation).
F. "Subsidiary" means any corporation of which a majority of any
class of equity security is beneficially owned by the Corporation,
provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph C of this Section 3, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is beneficially owned by the
Corporation.
G. "Continuing Director" means any member of the Board of
Directors of the Corporation (the "Board") who is not an Affiliate or
Associate or representative of the Interested Stockholder and was a
member of the Board prior to the time that the Interested Stockholder
became an Interested Stockholder, as well as any successor of a
Continuing Director who is not an Affiliate or Associate or
representative of the
<PAGE>
Interested Stockholder and is recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors then members
of the Board.
H. "Fair Market Value" means (i) in the case of cash, the amount
of such cash; (ii) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on such
Composite Tape, on the New York Stock Exchange or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the 30-day period immediately preceding the date in
question on the National Association of Securities Dealers, Inc.,
Automated Quotations System or any system then in use, or, if no such
quotations are available, the fair market value on the date in
question of a share of such stock as determined in good faith by a
majority of the Continuing Directors, and (iii) in the case of
property other than cash or stock, the fair-market value of such
property on the date in question as determined in good faith by a
majority of the Continuing Directors.
I. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in paragraphs B(i) and (ii) of Section 2 of this
Article TENTH shall include the shares of Common Stock and/or the
shares of any other class or series of Capital Stock retained by the
holder of such shares.
4. Powers of Continuing Directors. Any determination as to
------------------------------
compliance with this Article TENTH, including without limitation (a)
whether a person is an Interested Stockholder, (b) the number of
shares of Capital Stock or other securities beneficially owned by any
person, (c) whether a person is an Affiliate or Associate of another,
and (d) whether the requirements of paragraph B of Section 2 have been
met with respect to any Business Combination, shall be made only upon
action by a majority of the Continuing Directors of the Corporation,
and the good faith determination of a majority of the Continuing
Directors on such matters shall be conclusive and binding for all the
purposes of this Article TENTH.
<PAGE>
5. Fiduciary Obligations. Nothing contained in this Article
---------------------
TENTH shall be construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law. The fact that any Business
Combination complies with the provisions of Section B of this Article
TENTH shall not be construed to impose any fiduciary duty, obligation
or responsibility on the Board of Directors, or any member thereof, to
approve such Business Combination or recommend its adoption or
approval to the stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to evaluations
of or actions and responses taken with respect to such Business
Combination.
6. Amendments, Repeals, etc. Notwithstanding any other provision
------------------------
of this Certificate of Incorporation or the By-Laws of the Corporation
(and notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, this Certificate of Incorporation
or the By-Laws of the Corporation), the affirmative vote of the
holders of at least 75% of the voting power of the then outstanding
shares of Voting Stock, voting together as a single class, shall be
required to amend or repeal, or adopt any provisions inconsistent
with, this Article TENTH, provided, however, that the preceding
provisions of this Section 6 shall not apply to any amendment to,
repeal of, or adoption of any provisions inconsistent with, this
Article TENTH, and such action shall require only such affirmative
vote as is required by law and any other provisions of this
Certificate of Incorporation or the By-Laws of the Corporation, if
such action shall have been approved by a majority of the members of
the Board who are persons who would be eligible to serve as Continuing
Directors.
ELEVENTH: No action shall be taken by stockholders of the
Corporation except at an annual or special meeting of stockholders of
the Corporation.
TWELFTH: A director of the Corporation shall have no personal
liability to the Corporation or to its stockholders for monetary
damages for breach of fiduciary duty as a director except to the
extent that Section 102(b)(7) (or any successor provision) of the
General Corporation Law of the State of Delaware, as amended from time
to time, expressly provides that the liability of a director may not
be eliminated or
<PAGE>
limited."
II. That the above Restated Certificate of Incorporation only
restates and integrates and does not further amend the provisions of the
Corporation's Certificate of Incorporation as heretofore restated, amended or
supplemented, and that there is no discrepancy between those provisions and the
provisions of the above Restated Certificate of Incorporation.
III. That the provisions of the above Restated Certificate of
Incorporation were duly adopted by the directors without a vote of the
stockholders of the Corporation in accordance with the provisions of Section 245
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, SHARED MEDICAL SYSTEMS CORPORATION has caused its
corporate seal to be hereunto affixed and this certificate to be signed by R.
James Macaleer, its Chairman, and attested by James C. Kelly, its Secretary,
this 14th day of May, 1992.
SHARED MEDICAL SYSTEMS CORPORATION
By: /s/ R. James Macaleer
-------------------------------
Chairman
ATTEST:
By: /s/James C. Kelly
-------------------------
Secretary
[CORPORATE SEAL]
<PAGE>
Exhibit (10)
1997 INCENTIVE COMPENSATION PLAN FOR MARVIN S. CADWELL
------------------------------------------------------
The incentive compensation plan for Mr. Cadwell for 1997 is not set forth in a
formal document. In summary, Mr. Cadwell's calculated bonus amount will be
computed using a targeted bonus, which will be adjusted based on the Company's
performance against targeted earnings per share. The calculated bonus may range
from 0% to 120% of the targeted bonus. The calculated bonus is subject to
further adjustment based on sales attainment versus target. Such adjustment may
range from 50% to 120% of the calculated bonus. The result from the preceding
sentence is subject to a final adjustment, which may range from 80% and 120%,
based on improvement in accounts receivable days outstanding versus target.
<PAGE>
Exhibit (10)
1997 SMS Senior Management
Incentive Compensation Plan for:
----------------------------------------
(Name)
Plan Year: 1/1/97 - 12/31/97
-----------------
Approved by :
-------------------------
Marv Cadwell, CEO
Date:
--------------------------------
<PAGE>
I. Compensation Components
-----------------------
The compensation paid to plan Participants is comprised of a base salary and
this incentive compensation. The base bonus targeted for this Incentive
Compensation Plan is __________.
II. Summary of ICP Components
-------------------------
The objective of this Incentive Compensation Plan (ICP) is to compensate the
plan Participant in proportion to his/her contributions to SMS' achievement of
its sales, revenue, pretax income margin, and accounts receivable/cash flow
objectives, and to the achievement of certain general management challenges. The
definitions of these Performance Indicators are contained in Section V below.
The ICP is composed of the following:
<TABLE>
==================================================================================================================================
Focus Area SMS Targets Total Bonus
EXAMPLE ONLY (Potential @ 100% (Potential @ 100% (Potential @ 100%
Achievement) Achievement) Achievement)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Performance Indicators: Dollars % Dollars % Dollars %
- ----------------------------------------------------------------------------------------------------------------------------------
Sales
- ----------------------------------------------------------------------------------------------------------------------------------
Revenue & Pretax Income Margin %
- ----------------------------------------------------------------------------------------------------------------------------------
Accounts Receivable Days
- --------------------------------------------======================================================================================
Subtotal - Perf. Indicators Bonus
- ----------------------------------------------------------------------------------------------------------------------------------
2. General Mgmt. Challenge Bonus
- ---------------------------------------------------------------------------------------------------------=========================
Total Bonus (Before [A])
==================================================================================================================================
</TABLE>
[A] Balanced Performance Bonus -- an additional 10% of the actual
--------------------------
calculated Performance Indicators Bonus will be earned if the
targets for all three (3) of the SMS worldwide Performance
Indicators are achieved or exceeded.
III. Specific Measurement of ICP Components
A) Performance Indicators - The incentive compensation will be
----------------------
based on the achievement of the targets for three (3)
Performance Indicators, namely Sales, Revenue & Pretax Income
Margin %, and Accounts Receivable Days. These indicators will
apply to SMS' worldwide operations, and to the Participant's
more customized Focus Area. Specific Performance Indicator
targets for both the consolidated SMS Targets and each
Participant's unique Focus Areas, if applicable, are documented
in a separate memo for each Participant.
The actual bonus payments related to these Performance
Indicators will be determined using the tables on Attachment A
(by first computing actual performance against each Performance
Indicator target in order to determine the payout factor; then
multiplying each payout factor by the relevant Bonus Potential
amount specified in the table in Section II above).
<PAGE>
B) General Management Challenges - A bonus of up to 10% of this
-----------------------------
plan's Bonus Potential will be paid for performance against the
following General Management challenges:
1.
2.
3.
4.
5.
6.
7.
Performance against these General Management Challenges, and
the determination of the corresponding bonus payments, will be
determined by the Participant's immediate manager.
IV. ICP Payment Policies
--------------------
A) None of the above listed bonus components will be considered
earned unless the participant is an employee on March 31, 1998,
or at the time of payment, if prior to that date.
B) Incentive compensation earned under this plan will be paid by
March 31, 1998 or as soon as practical thereafter.
C) Participants who enter the plan during the year or after the
plan year starts will receive prorated payments based on the
percentage of months the Participant was in the plan during the
year.
D) There are no draws under this plan.
E) The maximum bonus payout under this plan is three (3) times the
Bonus Potential for each Performance Indicator, plus 100% of the
General Management Challenges Bonus, plus the Balanced
Performance Bonus. If performance exceeds the thresholds at which
the Performance Indicator maximums are set, a senior management
review will occur to determine whether any additional bonuses
will be paid.
F) This plan may be adjusted for changes in business conditions,
abnormal or unusual business events, or non-fulfillment of job
duties.
G) At management's discretion, up to 20% of the earned bonus may be
paid in restricted stock.
<PAGE>
V. Definitions of ICP Terms
------------------------
A) Sales - The present value of the incremental/new SMS solutions
-----
(includes software, support, professional services, and
hardware), net of direct costs, sold by SMS organizations during
1997, as reported in the monthly Sales Report produced by
Marketing Administration (labeled SOLUTION GROWTH SALES). This
does not include the renewals, extensions, or conversions of
existing revenue streams. To be included in the Sales Report the
contract must be signed and dated by both the customer and SMS.
Exceptions to this definition, as it applies to specific Focus
Area Performance Indicators, will be clarified in separate memos
customized for individual Participants.
B) Revenues - Gross revenue (i.e. operating revenue plus gross
--------
hardware sales), as reported by Accounting. These targets are
subject to increases during the year, for any material changes to
SMS' financial plan (ex. significant acquisition).
C) Pretax Income - Revenues, as defined above, less direct expenses
-------------
(including all bonus costs of this plan) and overhead expenses,
as reported by Accounting. These targets are subject to increases
during the year, for any material changes to SMS' financial plan
(ex. significant acquisition).
D) Pretax Income Margin % - The result of dividing Pretax Income by
----------------------
Revenues, both as defined above. For Focus Area targets relevant
to certain Participants, their specific revenues and expenses
will be clarified in a separate memo.
E) Accounts Receivable Days - The 12 Month Average A/R Days, as
------------------------
determined by Accounting, using each month's A/R Days for all
receivables (including billed, unbilled, and accrued receivables,
less the relevant bad debt reserves). Each month's A/R Days are
calculated using the month-end accounts receivable balance
divided by the average monthly revenues for the three most recent
months.
<PAGE>
ATTACHMENT A
1997 SENIOR MANAGEMENT ICP - BONUS SCALES
-----------------------------------------
1. SALES -
<TABLE>
<CAPTION>
- ---------------------------
% ATTAINED % BONUS
vs. TARGET EARNED
- ---------------------------
= or (less
than) 90 0%
<S> <C>
91% 35%
92% 45%
93% 55%
94% 65%
95% 75%
96% 80%
97% 85%
98% 90%
99% 95%
100% 100%
(A) (A)
- ---------------------------
</TABLE>
(A) For each % of Sales Attainment over 100%, the
Sales-related bonus % will increase by an
additional 2%, up to a maximum payout of
300% of the Sales Bonus Potential
(@ 200% Attainment).
2. PRETAX INCOME MARGIN % -
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Revenue Attainment
vs. Target 1997 Pretax Income Margin Percentage
= or (greater (less If margin attainment equals or exceeds Margin Target % plus...
than) than) (0.4%) (0.3%) (0.2%) (0.1%) 0.0% 0.1% 0.2% 0.3% 0.4%
- -----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
110% 200% 225% 250% 275% 300% 300% 300% 300% 300%
109% 110% 175% 200% 225% 250% 300% 300% 300% 300% 300%
108% 109% 150% 175% 200% 225% 275% 300% 300% 300% 300%
107% 108% 125% 150% 175% 200% 250% 275% 300% 300% 300%
106% 107% 110% 125% 150% 175% 225% 250% 275% 300% 300%
105% 106% 100% 110% 125% 150% 200% 225% 250% 275% 300%
104% 105% 90% 100% 110% 125% 175% 200% 225% 250% 275%
103% 104% 80% 90% 100% 110% 150% 175% 200% 225% 250%
102% 103% 70% 80% 90% 100% 125% 150% 175% 200% 225%
101% 102% 60% 70% 80% 90% 110% 125% 150% 175% 200%
100% 101% 50% 60% 70% 80% 100% 110% 125% 150% 175%
99% 100% 40% 50% 60% 70% 90% 100% 110% 160% 150%
98% 99% 30% 40% 50% 60% 80% 90% 100% 100% 125%
97% 98% 20% 30% 40% 50% 70% 80% 90% 90% 100%
96% 97% 10% 20% 30% 40% 60% 70% 80% 80% 90%
95% 96% 0% 10% 20% 30% 50% 60% 70% 70% 80%
95% 0% 0% 10% 20% 40% 50% 60% 60% 70%
- -----------------------------------------------------------------------------------------------------
BONUS PAYOUT % IS DETERMINED BY INTERSECTING REVENUE ATTAINMENT ROW & PRETAX % COLUMN.
- -----------------------------------------------------------------------------------------------------
</TABLE>
3. A/R DAYS -
<TABLE>
<CAPTION>
- ---------------------------
% ATTAINED
vs. TARGET
- ---------------
(less than) % BONUS
or = EARNED
- ---------------------------
<S> <C>
(B) (B)
100% 100%
101% 80%
102% 60%
103% 40%
104% 20%
105% 0%
- ---------------------------
</TABLE>
(B) For each % of A/R Days Attainment under the
Target, the bonus % will increase by an
additional 10%, up to a maximum payout of
300% of the A/R Days Bonus Potential (@ 80%
of Target).
<PAGE>
Schedule to Exhibit (10)
An SMS Senior Management Incentive Compensation Plan for the plan year ended
December 31, 1997 in the form presented in the preceding pages was implemented
for each of the following executive officers of the Company during the reporting
period. Under each plan, 90% of the base bonus value is based upon performance
against corporate and focus area (consisting of certain segments of business
operations) sales, revenue, pre-tax income margin, and accounts receivable days.
The relative weighting and combination of these performance factors vary for
each individual, with an emphasis on the individual's particular area of
business operations. The remaining 10% of the base bonus value is tied to
subjective considerations of managerial performance against certain pre-defined
goals.
V. Brewster Jones
Terrence W. Kyle
Francis W. Lavelle
David F. Perri
Guillermo N. Ramas, Sr.
<PAGE>
Exhibit (10)
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of May 27, 1997 , between Shared Medical Systems
Corporation ("Employer" or "Company"), a Delaware corporation having its
principal office at Malvern, PA, and V. Brewster Jones, an individual residing
at 10301 Cutler's Lane, Potomac, Maryland 20854 ("Executive").
Executive and Employer agree as follows:
1.0 EMPLOYMENT, COMPENSATION AND BENEFITS.
1.1 Employer hereby provides to Executive, in consideration for
Executive's covenants contained herein, employment,
compensation and benefits as outlined in the letter
attached and incorporated by reference herein ("Letter"),
and Executive hereby accepts such employment, compensation
and benefits, upon the terms and conditions hereinafter set
forth.
1.2 Executive's salary shall remain as described in the Letter
until such time a change is determined by the Company's
chief executive officer ("CEO") in his sole discretion.
Executive's monthly salary (as may be increased from time
to time) is referred to herein as "Base Compensation."
1.3 Executive shall perform such duties as may be assigned from
time to time by Employer, shall devote full time,
attention, and energies to the business of Employer, and
shall faithfully perform his duties in accordance with the
direction of Employer. Executive also agrees to adhere to
all policies of the Employer.
1.4 Executive shall be entitled to participate in all group
life insurance, medical, and other benefit plans, except as
provided herein, established by Employer in accordance with
the applicable terms and conditions of such plans.
1.5 Executive shall be entitled to an annual vacation of four weeks,
and holidays and sick leave as set forth in Employer's policy
manual.
1.6 In addition to the annual salary described in the Letter
and Section 1.2 above, Executive shall be entitled to such
annual bonus or incentive compensation of the Employer as
set forth in the Letter, and as may be approved from time
to time by the CEO in his sole discretion. Such additional
compensation is referred to herein as "Incentive
Compensation."
1
<PAGE>
1.7 This Agreement shall remain in full force and effect until
Executive's change to a non-Executive level position or
upon Termination of Employment and those post-employment
obligations described in Sections 4.0 and 5.0 shall
continue in full force and effect thereafter.
2.0 DEFINITIONS. For purposes of this Agreement, the following definitions
shall apply.
2.1 "Severance Pay" is a monthly payment made up of three
components: (i) Base Compensation; (ii) the monthly cost of
continued medical insurance coverage under COBRA; and (iii)
a pro rata portion of the maximum amount of Incentive
Compensation, if any, which could have been paid to the
Executive for the year. The right to premium payments does
not expand an Executive's right to medical coverage.
2.2 "Cause" shall mean termination of Executive due to
Executive's (i) dishonest or illegal conduct; (ii) breach
of his obligations under this Agreement; (iii) conduct
contrary to the best interests of Employer; (iv)
insubordination, incompetence, misconduct, poor performance
or neglect of his duties; or (v) willful violation of any
express direction of the CEO.
2.3 "Change in Control" shall mean the acquisition by any
person (other than the Company or any affiliate or
associate of the Company) as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act)
of 40% or more of the combined voting power of the
Company's then outstanding securities, or the approval by
the stockholders of the Company of (i) any merger or
consolidation where stockholders of the Company immediately
prior to the merger or consolidation do not immediately
thereafter hold more than 50% of the combined voting power
of the surviving company's then outstanding securities;
(ii) a liquidation or dissolution of the Company; or (iii)
a sale of all or substantially all of the Company's assets.
2.4 "Termination of Employment" shall mean the termination of
employment of the Executive by the Employer, including
constructive discharge which is defined for this purpose to
mean an act by the Employer regarding Executive's terms or
conditions of employment which would cause a reasonable
person in Executive's position to resign from employment.
3.0 SEVERANCE PAY.
3.1. Notwithstanding any provision in this Agreement, the Company
retains its right to terminate Executive's employment without
Cause. Upon
2
<PAGE>
Termination of Employment without Cause, Company shall pay to
Executive Severance Pay for a period of eighteen (18) months.
Except as provided in Section 3.2, the payments required to
be made by Employer to Executive pursuant to this Section
3.1 shall be Executive's sole severance benefit in the
event of Executive's discharge without cause. Payment of
such severance benefit is conditioned upon Executive
executing a general release of all claims against the
Company, and Executive's continued adherence to his/her
obligations under Sections 4.0 and 5.0 of this Agreement.
3.2 In the event (a) there is a "Change of Control" of the
Company, and (b) within twenty four (24) months after the
Change in Control (i) the Chief Executive Officer of the
Company immediately prior to the Change in Control is
replaced and (ii) there is a Termination of Employment of
Executive, Employer shall pay to Executive in a lump sum an
amount equal to eighteen (18) months of Severance Pay. Such
payment required to be made by Employer to Executive
pursuant to this Section 3.2 shall be in lieu of those
referred to in Section 3.1 and shall be Executive's sole
severance benefit. Payment of such severance benefit is
conditioned upon Executive executing a general release of
all claims against the Company, and Executive's continued
adherence to his/her obligations under Sections 4.0 and 5.0
of this Agreement. Executive hereby agrees to repay to
Company any severance benefit paid to Executive should
he/she violate his/her obligations under Sections 4.0
and/or 5.0.
3.3 Employer may terminate Executive's employment immediately
at any time for Cause, provided that Employer has given
Executive prior written notice of such Cause and Executive
has failed to cure such Cause within 21 days after receipt
of such notice. In the event of Termination for Cause,
Employer shall not be obligated to make any payments other
than the payment of earned but unpaid salary and benefits.
3.4 If Executive is unable to perform his duties and
responsibilities by reason of a disability as defined under
Company's short term disability plan, Company shall provide
Executive with short term disability for a period of six
(6) months equal to Executive's Base Compensation and a pro
rata portion of the maximum amount of Incentive
Compensation, if any, which could have been paid to
Executive for the year during which Executive first became
disabled. This short term disability benefit shall be
reduced by the amount of payments due Executive for this
time period under any applicable disability benefit
programs, including Social Security disability, workers'
compensation and disability retirement benefits.
3.5 In the event that Executive dies during the term of his
Employment,
3
<PAGE>
Employer shall pay to his executors or administrators, as
appropriate, for a period of three (3) months, Executive's Base
Compensation and a pro rata portion of the maximum amount of
Incentive Compensation, if any, which could have been paid to
Executive for the year in which he/she died. To the extent
possible, such payments will be non-taxable death benefits under
the Internal Revenue Code.
4.0 CONFIDENTIAL INFORMATION.
4.1 Executive represents and warrants that Executive is free of
any contractual restrictions and restraints in entering
this Agreement, and has not, and will not, in connection
with this employment, divulge any confidential information,
trade secrets, or copyright-protected information of any
prior employer or of any other third party.
4.2 Employer will provide to Executive or Executive will learn,
trade secrets and other proprietary information of Employer
and third parties which are not generally available to the
public. Examples of this information include computer
programs, marketing and development plans, proprietary
product and service offerings data about Employer, customer
and prospect lists and requirements, employee lists,
salaries and benefits, financial information and customer
and vendor data. During Executive's employment and at all
times afterward, Executive shall keep confidential all such
information and material and will not disclose such
information to any person or entity or make any use of this
information, except as required in the performance of
Executive's current employment responsibilities. When
Executive leaves Employer's employment, Executive will
immediately return to Employer all materials containing
such information. Such materials shall, at all times, be
the property of the Employer.
4.3 Employer may seek and obtain injunctive relief against the
breach or threatened breach of Executive's obligations
under this paragraph, in addition to any other legal
remedies which may be available.
5.0 NON-COMPETITION.
5.1 During the term of this Agreement and for eighteen (18) months
following termination of Executive's employment for any reason:
(i) Executive will not, without Employer's prior written
consent, (i) compete with Employer's business
activities or accept similar employment with a
competitor of Employer, or (ii) solicit any customer
or prospect of Employer that Executive or his
subordinates solicited or serviced for Employer, or
(iii) solicit for
4
<PAGE>
hire other individuals who were Employer's employees
on the date Executive left Employer to also leave
Employer. If Executive's responsibilities for Employer
have a geographic territory, this provision will apply
only within the geographic territory for which
Executive had responsibility during the year before
Executive left Employer; otherwise it will apply where
Employer does or has plans to do business.
(ii) Executive hereby acknowledges that the limitation as
to time and the limitation on the character or nature
placed on his subsequent employment are reasonable and
fair and will not prevent or materially impair his/her
ability to earn a livelihood.
5.2 Employer may seek and obtain injunctive relief against the
breach or threatened breach of Executive's obligations under
this paragraph, in addition to any other legal remedies which
may be available.
6.0 OWNERSHIP OF WORK PRODUCT.
The parties agree that all "Work" (which shall include for purposes of
this Section all ideas, processes, methodologies, software, algorithms,
formulae, notes, outlines, photographs, inventions, improvements, and
other information and work product developed or generated by or on behalf
of Employer during the course of the Executive's employment), shall be
considered "works made for hire" within the meaning of the Copyright Act
of 1976, 17 U.S.C. ss.101 et seq., and that Employer is and shall be the
sole owner of all rights therein, including but not limited to all rights
of copyright. In the event any of the Work is deemed not to be a "work
made for hire," then Executive hereby transfers to Employer, without
further consideration, all right, title, and interest to such Work,
including any and all patents, copyrights, trade secrets and other
proprietary rights related thereto. Executive agrees to promptly execute
and deliver, or cause to be promptly executed and delivered, all documents
and instruments requested by Employer to evidence the foregoing
assignment.
7.0 MISCELLANEOUS.
This Agreement: (i) may not be amended except in a writing executed by
both parties; (ii) shall only be governed by and construed in accordance
with the laws of the State of Delaware; (iii) shall be binding upon and
inure to the benefit of Employer and Executive and their respective
successors and permitted assigns; and (iv) represents the entire Agreement
and understanding of the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings of the parties in
connection therewith. If any portion of this Agreement is deemed to be
unenforceable, the balance of this Agreement shall nevertheless continue
in effect and any court may enforce any provision to the
5
<PAGE>
extent permitted by law, even though the entire provision may not be
enforced. This Agreement shall not be assignable by Executive, and shall
be assignable by Employer only to any person, firm, or corporation which
may become a successor in interest by purchase, merger or otherwise.
IN WITNESS WHEREOF, the undersigned, intended to be legally bound, have duly
executed this Agreement as of the date first above written.
ACCEPTED:
V. Brewster Jones Shared Medical Systems Corporation
- ----------------- ----------------------------------
/S/V. Brewster Jones /S/Marvin S. Cadwell
- --------------------------- --------------------------------
(Signature) By (Signature)
Name: Marvin S. Cadwell
Title: President and CEO
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 25,811
<SECURITIES> 0
<RECEIVABLES> 236,297
<ALLOWANCES> 8,467
<INVENTORY> 0
<CURRENT-ASSETS> 279,732
<PP&E> 255,867
<DEPRECIATION> 153,763
<TOTAL-ASSETS> 523,469
<CURRENT-LIABILITIES> 163,514
<BONDS> 17,579
0
0
<COMMON> 290
<OTHER-SE> 303,059
<TOTAL-LIABILITY-AND-EQUITY> 523,469
<SALES> 53,921
<TOTAL-REVENUES> 423,273
<CGS> 46,535
<TOTAL-COSTS> 296,164
<OTHER-EXPENSES> 32,636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,782
<INCOME-PRETAX> 46,156
<INCOME-TAX> 17,539
<INCOME-CONTINUING> 28,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,617
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
