<PAGE>
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
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 0-21040
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1320610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
304 Vassar Street,
Cambridge, Massachusetts 02139
(Address of principal executive offices) (Zip Code)
(617) 374-9800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of July 31, 1996, there were 45,759,917 shares of common stock
outstanding.
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
Item 1: Financial Statements
<S> <C> <C>
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION:
Item 1: Legal Proceedings 14
Item 4: Submission of Matters to a Vote of Security Holders 14
Item 6: Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $10,414 $ 6,338
Investments held to maturity 10,126 8,544
Accounts receivable, less allowance of $670 and $600
at June 30, 1996 and December 31, 1995, respectively 47,641 35,958
Unbilled revenue on contracts 2,546 1,115
Prepaid expenses and other current assets 3,775 2,261
------- -------
Total current assets 74,502 54,216
Property and equipment, net 15,013 11,278
Other assets 1,947 1,529
Deferred income taxes 60 60
Goodwill, net 2,911 3,311
------- -------
Total assets $94,433 $70,394
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,983 $ 6,502
Accrued expenses 12,188 8,719
Deferred revenue 5,120 2,993
Deferred income taxes 251 251
Income taxes payable 1,907 2,163
Obligations under capital leases, current 126 163
------- -------
Total current liabilities 27,575 20,791
Other liabilities 113 204
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.01 par value, authorized 120,000,000
shares; issued and outstanding 45,652,897 and
14,716,206
at June 30, 1996 and December 31, 1995, respectively 457 147
Additional paid-in capital 32,331 23,938
Retained earnings 33,847 25,046
Foreign currency translation adjustment 110 268
------- -------
Total stockholders' equity 66,745 49,399
------- -------
Total liabilities and stockholders' equity $94,433 $70,394
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net revenues $47,897 $32,192 $87,528 $59,422
Costs and expenses:
Project personnel 21,087 14,597 38,935 27,576
General and administration 5,966 3,961 10,331 7,541
Sales and marketing 3,629 3,264 6,689 5,913
Other costs 9,613 5,518 17,266 9,820
------- ------- ------- -------
Total operating expenses 40,295 27,340 73,221 50,850
------- ------- ------- -------
Income from operations 7,602 4,852 14,307 8,572
Other income (expense):
Interest income 264 141 398 309
Interest expense (12) (62) (22) (107)
Gain on sale of AdValue - 909 - 909
Foreign exchange (loss)
gain (3) (45) (15) 142
------- ------- ------- -------
Income before income taxes 7,851 5,795 14,668 9,825
Provision for income taxes 3,140 2,219 5,867 3,893
------- ------- ------- -------
Net income $ 4,711 $ 3,576 $ 8,801 $ 5,932
======= ======= ======= =======
Net income per share $ .09 $ .07 $ .17 $ .12
======= ======= ======= =======
Pro forma data:
Historical income before
taxes $ 7,851 $ 5,795 $14,668 $ 9,825
Provision for income
taxes:
Historical income taxes 3,140 2,219 5,867 3,893
Pro forma increase to
historical income
taxes - 106 - 108
------- ------- ------- -------
Pro forma net income $ 4,711 $ 3,470 $ 8,801 $ 5,824
======= ======= ======= =======
Pro forma net income per
share $ .09 $ .07 $ .17 $ .12
======= ======= ======= =======
Weighted average number of
common and common
equivalent shares
outstanding 53,126 49,773 52,714 49,542
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,801 $ 5,932
Amounts that reconcile net income to net cash
provided
by operating activities:
Depreciation and amortization 2,407 1,445
Provision for deferred income taxes - (91)
Gain on sale of AdValue - (909)
Increase in accounts receivable (11,638) (9,358)
Increase in unbilled revenue on contracts (1,445) (183)
Increase in prepaid expenses and other current
assets (1,526) (655)
Increase in accounts payable 1,509 3,134
Increase in accrued expenses 3,459 3,026
Increase in deferred revenue 2,142 1,573
(Decrease) increase in income taxes payable (256) 343
Other, net (433) (623)
-------- --------
Net cash provided by operating activities 3,020 3,634
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,797) (5,640)
Purchase of investments held to maturity (9,388) (12,707)
Maturity of investments held to maturity 7,806 15,201
Proceeds from sale of AdValue - 909
-------- --------
Net cash used for investing activities (7,379) (2,237)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit arrangements - (125)
Obligations under capital leases (128) 356
Proceeds from employee stock purchase plan 758 -
Proceeds from exercise of stock options and
related income tax benefits 7,945 2,809
-------- --------
Net cash provided by financing activities 8,575 3,040
-------- --------
Effect of foreign exchange rate changes on cash (140) 17
Net increase in cash and cash equivalents 4,076 4,454
Cash and cash equivalents at beginning of period 6,338 3,365
-------- --------
Cash and cash equivalents at end of period $ 10,414 $ 7,819
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. Basis of Presentation
---------------------
The accompanying consolidated financial statements of Cambridge Technology
Partners (Massachusetts), Inc. (the "Company") include the accounts of all of
the Company's wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated. Certain prior period amounts
have been reclassified to conform with current period presentation. In the
opinion of management, the consolidated financial statements reflect all normal
and recurring adjustments, which are necessary for a fair presentation of the
Company's financial position, results of operations, and cash flows as of the
dates and for the periods presented. The consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Consequently, these statements do not include
all the disclosures normally required by generally accepted accounting
principles for annual financial statements nor those normally made in the
Company's Annual Report on Form 10-K. Accordingly, reference should be made to
the Company's Annual Report on Form 10-K for additional disclosures, including a
summary of the Company's accounting policies, which have not changed. The
consolidated results of operations for the three and six months ended June 30,
1996, are not necessarily indicative of results for the full year.
The accompanying consolidated financial statements of the Company have been
prepared to give retroactive effect to the Company's 1995 acquisitions of The
Systems Consulting Group, Inc. ("SCG") and Axiom Management Consulting, Inc.
("Axiom"). All prior period historical consolidated financial statements
presented herein have been restated to include the financial position, results
of operations, and cash flows of SCG and Axiom.
B. Revolving Credit Facility
-------------------------
On June 26, 1996, the Company amended its uncollateralized revolving credit
facility (the "Facility") with Fleet National Bank, the successor to Fleet Bank
of Massachusetts, N.A. ("Fleet Bank"). The Facility was amended, among other
things, to increase the amount available under the Facility from $10.0 million
to $20.0 million, to extend the expiration date to June 30, 1998, from June 30,
1996, and to decrease the facility cost to .15% from .25%. In addition, the
Facility was also amended to permit the Company to elect an interest rate of
either, Fleet Bank's prime rate in effect from time to time or a eurodollar
rate, as defined, payable monthly in arrears commencing with the advance of
funds. The Facility requires, among other things, the Company to maintain
certain financial ratios. At June 30, 1996, and December 31, 1995, the Company
was in compliance with these financial ratio requirements and no borrowings have
been made under the Facility.
C. Stock Split
-----------
In March 1996, the Board of Directors approved a three-for-one stock split of
the Company's common stock and an amendment to the Company's corporate charter
to increase authorized common stock from 30 million to 120 million shares. Upon
stockholder approval in May 1996, the stock split was completed on June 19,
1996, via a 200% stock dividend to stockholders of record on May 29, 1996.
Accordingly, $305,000 representing the par value of the additional shares issued
was transferred from additional paid-in
6
<PAGE>
capital to common stock. All references in the accompanying financial statements
to the applicable share and per share data, for all periods presented, have been
retroactively restated to reflect the increased number of common shares
outstanding from the stock split.
D. Net Income Per Share
--------------------
Net income per share data is computed using the weighted average number of
common shares outstanding, the assumed exercise of stock options and warrants
(using the treasury stock method), and the assumed issuance of a stock dividend
at the beginning of each period to effect a stock split. The 1995 net income
per share data also reflects the assumed issuance, at the beginning of the
period, of 2,168,292 shares of common stock and an option to purchase 105,702
shares of the Company's common stock in connection with the acquisition of SCG,
and the assumed issuance, at the beginning of the period, of 978,360 shares of
common stock and options to purchase 29,538 shares of the Company's common stock
in connection with the acquisition of Axiom. Primary and fully diluted income
per share are the same for each period presented.
E. Legal Proceedings
-----------------
In July 1996, the Company was sued in the United States District Court for the
District of Colorado in Denver by Rocky Mountain Healthcare Corporation
("RMHC"). RHMC is seeking, among other things, a refund of $1,772,212 of
contract payments and related damages arising from the Company's alleged breach
of an agreement pursuant to which the Company provided software system design
and consulting services to RMHC. The suit includes breach of contract and tort
claims. The Company plans to vigorously defend itself against the suit and
anticipates bringing counterclaims against RMHC seeking, among other things,
recovery of the value of services rendered to RMHC but for which the Company has
not been paid.
In July 1996, Axiom was served a demand for arbitration by a former shareholder
of Axiom. The American Arbitration Association arbitration is currently pending
in northern California. The claims arise from Axiom's alleged failure to inform
such shareholder of the Company's interest in acquiring Axiom at the time he
sold his stock back to Axiom. The demand seeks damages in excess of $3.3
million plus punitive damages, costs and attorney's fees. The Company plans to
vigorously defend itself against this arbitration.
7
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Cambridge Technology Partners (Massachusetts), Inc. (the "Company") provides
information technology and management consulting and software development and
evaluation services to organizations with large-scale information processing and
distribution needs that are utilizing or migrating to open systems computing
environments. The Company maintained strong operating results in the second
quarter ended June 30, 1996, by increasing net revenues and net income by 49%
and 32%, respectively, compared to the same period in 1995. Excluding a net
income benefit of $541,000 which resulted from the sale of the Company's
interest in Advalue Media Technologies, Inc. ("AdValue") in the second quarter
of 1995, net income for the second quarter of 1996 increased 55% from the same
period in 1995. The second quarter 1996 results reflect increased demand for
the Company's services, in both North America and Europe, while the Company
continued to focus on developing and implementing integrated service offerings
for the Company and its two 1995 acquisitions, SCG and Axiom. These new
services include Rapid Business Renewal/TM/ ("RBR"), a customer process renewal
method for profitable growth rather than cost cutting in a fixed price/fixed
time arrangement, and Rapid Process Implementation ("RPI"), a management
consulting and systems integration approach which focuses on closing the gap
between strategy and implementation. Furthermore, the Company continued to
build a presence in Latin America in the second quarter of 1996. In order to
meet increased demand for the Company's services, total Company staff increased
to 1,283 employees at June 30, 1996, from 1,062 employees at December 31, 1995.
With over 50 new employees joining the Company in July 1996, the Company expects
to continue hiring personnel to support the anticipated increase in demand for
its services in 1996.
Results of Operations
Three Months Ended June 30, 1996, Compared to
Three Months Ended June 30, 1995
Net revenues increased 49% to $47.9 million in 1996 compared to $32.2 million in
1995 due principally from an increase in the volume of services delivered to new
clients, as well as leveraging the client base by undertaking additional
projects for existing clients. North America net revenues grew 48% to $37.2
million from $25.1 million in 1995. European and Latin American operations
continued to make significant contributions to net revenues by growing 51% from
1995, accounting for $10.7 million of consolidated net revenues for the 1996
period compared to $7.1 million for 1995, representing 22% of net revenues for
both periods.
Project personnel costs consist principally of payroll and payroll related
expenses for personnel dedicated to client assignments and are directly related
to the level of client services being delivered. Project personnel costs were
$21.1 million or 44% of net revenues in 1996 compared to $14.6 million or 45% of
net revenues in 1995. The dollar increase resulted from hiring of additional
project personnel over 1995 staff levels to support the increased volume of
services delivered to clients and the related increase in payroll and payroll
related expenses over 1995. Worldwide project personnel headcount increased 36%
8
<PAGE>
to 1,094 employees at June 30, 1996, from 805 employees at June 30, 1995. The
decrease as a percentage of net revenues is primarily due to improvements in
project personnel costs as a percentage of net revenues in the Company's North
American operations. The Company expects to maintain its project personnel
costs as a percentage of net revenues at the current quarterly level for the
remainder of 1996, with any cost improvements resulting from continuing focus on
utilization rates for project personnel.
General and administration expenses were $6.0 million in 1996 compared to $4.0
million in 1995, representing 12% of net revenues for both periods. The dollar
increase primarily reflects expenses associated with increased staff headcount
and increased Company-wide recruiting and relocation expenses to support the
Company's continued growth and geographic expansion in both North America and
Europe. The Company expects to continue the containment of general and
administration expenses as a percentage of net revenues at the 1996 level while
continuing to provide sufficient support to allow for the Company's global
growth strategy.
Sales and marketing expenses were $3.6 million or 8% of net revenues in 1996
compared to $3.3 million or 10% of net revenues in 1995. The dollar increase is
primarily attributable to an increase in payroll and payroll related expenses
associated with the increase in sales and marketing personnel from 61 in 1995 to
74 in 1996, partially offset by a decrease in travel related expenses. In
addition, the Company continued its investment in maintaining marketing
initiatives and educational and training programs that provide clients with an
opportunity to learn about new technologies and client/server trends, such as
seminars for chief information officers and interactive management lab programs.
The percentage decrease is due principally to the significant increase in net
revenues from 1995 and the addition of the Company's newly acquired companies
whose sales and marketing expenses as a percentage of net revenues are lower
than the Company's historical level. The Company expects that sales and
marketing expenses will increase in future periods, due to anticipated hiring of
additional sales and marketing staff and the anticipated increase in marketing
programs.
Other costs consist primarily of non-billable expenses directly incurred for
client projects and other associated business costs, including facilities costs
and related expenses, non-billable staff travel, and staff training. Other
costs were $9.6 million or 20% of net revenues in 1996 compared to $5.5 million
or 17% of net revenues in 1995. The dollar and percentage increase from 1995
resulted principally from increased facility, travel, and employee training
costs, including costs related to opening of new offices and expansion of
existing offices in both North America and Europe as the Company continues to
execute its global expansion strategy. As the Company continues its headcount
and facilities growth to support current and anticipated increase in demand for
its services, the Company expects to maintain its other costs as a percentage of
net revenues at the current quarterly level for the remainder of 1996.
Interest income increased to $264,000 in 1996 from $141,000 in 1995. The
increase is principally due to higher average cash equivalent and investment
balances and higher average interest rates in 1996 compared to 1995. The
Company's investments consist primarily of tax exempt investment grade municipal
bonds which mature within one year from the date of purchase.
Interest expense of $62,000 in 1995 consisted primarily of interest on amounts
outstanding under lines of credit maintained by SCG and Axiom. Following the
acquisitions, all
9
<PAGE>
outstanding amounts were repaid and the Company terminated these revolving
credit facilities.
Foreign exchange loss of $45,000 in 1995 related to foreign currency exchange
rate fluctuations associated with intercompany balances. In May 1995, the
Company began entering into foreign exchange forward contracts to hedge against
the risk of changes in foreign currency exchange rates to the Company associated
with intercompany balances. As of June 30, 1996, the Company held foreign
exchange contracts of approximately $3.5 million.
Net income was $4.7 million or $.09 per share for the 1996 period as compared to
$3.6 million or $.07 per share for the same period in 1995. Net income for 1995
included a gain of $541,000, net of taxes, or $.01 per share on the sale of the
Company's interest in AdValue. The Company increased its net income per share
by 29% despite a 7% increase in the number of common and common equivalent
shares outstanding due to stock options granted to employees and shares issued
under the employee stock purchase plan.
Six Months Ended June 30, 1996, Compared to
Six Months Ended June 30, 1995
Net revenues increased 47% to $87.5 million in 1996 compared to $59.4 million in
1995 due principally from an increase in the volume of services delivered to new
clients, as well as leveraging the client base by undertaking additional
projects for existing clients. North America net revenues grew 41% to $67.2
million from $47.6 million in 1995. European and Latin American operations
continued to make significant contributions to net revenues by growing 72% from
1995, accounting for $20.3 million or 23% of consolidated net revenues for the
1996 period compared to 11.8 million or 20% of consolidated net revenues for the
same period a year ago.
Project personnel costs were $38.9 million or 44% of net revenues in 1996
compared to $27.6 million or 46% of net revenues in 1995. The dollar increase
resulted from hiring of additional project personnel over 1995 staff levels to
support the increased volume of services delivered to clients and the related
increase in payroll and payroll related expenses over 1995. The decrease as a
percentage of revenues is primarily due to improvements in project personnel
costs as a percentage of net revenues in the Company's North American
operations.
General and administration expenses were $10.3 million or 12% of net revenues in
1996 compared to $7.5 million or 13% of net revenues in 1995. The dollar
increase primarily reflects expenses associated with increased staff headcount
and increased Company-wide recruiting and relocation expense to support the
Company's continued growth and geographic expansion in both North America and
Europe. The decrease as a percentage of net revenues is primarily due to the
significant increase in net revenues.
Sales and marketing expenses were $6.7 million or 8% of net revenues in 1996
compared to $5.9 million or 10% of net revenues in 1995. The dollar increase is
primarily attributable to an increase in payroll and payroll related expenses
associated with the increase in sales and marketing personnel from 50 in 1995 to
74 in 1996 partially offset by a decrease in travel related expenses. In
addition, the Company continued its investment in maintaining marketing
initiatives and educational and training programs that provide clients with an
opportunity to learn about new technologies and client/server trends, such
10
<PAGE>
as seminars for chief information officers and interactive management lab
programs. The percentage decrease is due principally to the significant increase
in net revenues from 1995 and the addition of the Company's newly acquired
companies whose sales and marketing expenses as a percentage of net revenues are
lower than the Company's historical level.
Other costs were $17.3 million or 20% of net revenues in 1996 compared to $9.8
million or 17% of net revenues in 1995. The dollar and percentage increase from
1995 resulted principally from increased facility, travel, and employee training
costs, including costs related to opening of new offices and expansion of
existing offices in both North America and Europe as the Company continues to
execute its global expansion strategy.
Interest income increased to $398,000 in 1996 from $309,000 in 1995. This
increase is principally due to higher average cash equivalent and investment
balances and higher average interest rates in 1996 compared to 1995.
Interest expense of $107,000 in 1995 consisted primarily of interest on amounts
outstanding under lines of credit maintained by SCG and Axiom. Following the
acquisitions, all outstanding amounts were repaid and the Company terminated
these revolving credit facilities.
Foreign exchange loss amounted to $15,000 in 1996 compared to a gain of $142,000
in 1995. The gain in 1995 is primarily due to weakening of the U.S. dollar
against European currencies related to intercompany balances.
Net income was $8.8 million or $.17 per share for the 1996 period as compared to
$5.9 million or $.12 per share for the same period in 1995. Net income for 1995
included a gain of $541,000, net of taxes, or $.01 per share on the sale of the
Company's interest in AdValue. The Company increased its net income per share
by 42% despite a 6% increase in the number of common and common equivalent
shares outstanding due to stock options granted to employees and shares issued
under the employee stock purchase plan.
Liquidity and Capital Resources
Working capital increased to $46.9 million at June 30, 1996, from $33.4 million
at December 31, 1995. This increase was primarily due to an increase in accounts
receivable and an increase in cash equivalents and investment balances,
partially offset by cash used for capital expenditures. The Company maintained
its days sales in accounts receivable at 77 days during both the first six
months of 1996 and the six month period ended December 31, 1995. The Company
continues to focus on strong client partnering relationships with its customers
to expedite payments and in February 1996, the Company established a treasury
function primarily responsible for worldwide collection efforts. The Company's
cash equivalent and investment balances increased 38% to $20.5 million at June
30, 1996, from $14.9 million at December 31, 1995.
Net cash provided by operating activities during the second quarter of 1996
decreased by $614,000 to $3.0 million from $3.6 million for the comparable
period in 1995. The increase in net income was more than offset by the increase
in accounts receivable, unbilled revenue on contracts, and prepaid expenses and
other current assets.
Capital expenditures of $5.8 million in the first six months of 1996 were
comprised principally of computer equipment and employee workstations to support
the Company's
11
<PAGE>
expanding operations and regional offices. Total capital expenditures for 1996
are expected to approximate $16.0 million, principally for leasehold
improvements, personal computers, employee workstations, telecommunication and
video conferencing equipment, and other equipment to support both current and
anticipated levels of customer activities in North America and Europe. Capital
expenditures could vary from quarter to quarter, as the Company evaluates
potential acquisitions of companies or technologies that may complement its
business.
On May 19, 1995, the Company sold its 6.3% interest in AdValue (formed in 1991
to develop, test, and market a centralized spot advertising computer software
packages) for $909,000 in cash.
On June 26, 1996, the Company amended its uncollateralized revolving credit
facility (the "Facility") with Fleet National Bank, the successor to Fleet Bank
of Massachusetts, N.A. ("Fleet Bank"). The Facility was amended, among other
things, to increase the amount available under the Facility from $10.0 million
to $20.0 million, to extend the expiration date to June 30, 1998, from June 30,
1996, and to decrease the facility cost to .15% from .25%. In addition, the
Facility was also amended to permit the Company to elect an interest rate of
either, Fleet Bank's prime rate in effect from time to time or a eurodollar
rate, as defined, payable monthly in arrears commencing with the advance of
funds. The Facility requires, among other things, the Company to maintain
certain financial ratios. At June 30, 1996, and December 31, 1995, the Company
was in compliance with these financial ratio requirements. As of June 30, 1996,
and December 31, 1995, no borrowings have been made under the Facility.
The Company expects that cash flows from operations will provide the principal
source of future liquidity for the Company. However, the Company is currently
experiencing a period of growth which could place a strain on the Company's
financial resources. In order to meet client demand, the Company expects to
continue to increase its professional staff and to open additional sales and
operating offices in 1996 in both North America and Europe. Although the
Company's plans to open offices and hire personnel are driven in response to
increased demand for the Company's information technology and management
consulting, and software development and evaluation services, a portion of these
expenses will be incurred in anticipation of increased demand. Operating
results and liquidity may be adversely affected if market demand and revenues do
not increase as anticipated. As the Company expands its international
operations, a number of factors, including market acceptance of the Company's
services, significant fluctuations in currency exchange rates, and changes in
general economic conditions could also adversely affect future results and
liquidity.
The Company currently anticipates that existing cash and investment balances
combined with cash generated from operations and amounts available under the
Facility will be sufficient, at least through 1997, to meet the Company's short-
term and long-term working capital requirements and to fund the expansion of the
Company's business.
This Form 10-Q includes forward-looking statements which involve risks and
uncertainties, particularly as to capital expenditures, future liquidity needs,
working capital needs, and project personnel costs, general and administrative
expenses, sales and marketing expenses, and other costs as a percentage of net
revenues. The Company's actual future results may differ significantly from
those stated in any forward looking statements. While it is impossible to
identify each factor and event that could affect
12
<PAGE>
the Company's results, variations in the Company's revenues and operating
results occur from time to time as a result of a number of factors, such as the
significance of client engagements commenced and completed during the quarter,
the number of working days in a quarter and employee hiring and utilization
rates. The timing of revenues is difficult to forecast because the Company's
sales cycle is relatively long in the case of new clients and may depend on
factors such as the size and scope of the assignments and general economic
conditions. Because a high percentage of the Company's expenses are relatively
fixed, a variation in the timing of the initiation or the completion of client
assignments, particularly at or near the end of any quarter, can cause
significant variations in operating results from quarter to quarter.
13
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
- - -------- -----------------
In July 1996, the Company was sued in the United States District Court for the
District of Colorado in Denver by Rocky Mountain Healthcare Corporation
("RMHC"). RHMC is seeking, among other things, a refund of $1,772,212 of
contract payments and related damages arising from the Company's alleged breach
of an agreement pursuant to which the Company provided software system design
and consulting services to RMHC. The suit includes breach of contract and tort
claims. The Company plans to vigorously defend itself against the suit and
anticipates bringing counterclaims against RMHC seeking, among other things,
recovery of the value of services rendered to RMHC but for which the Company has
not been paid.
In July 1996, Axiom was served a demand for arbitration by a former shareholder
of Axiom. The American Arbitration Association arbitration is currently pending
in northern California. The claims arise from Axiom's alleged failure to inform
such shareholder of the Company's interest in acquiring Axiom at the time he
sold his stock back to Axiom. The demand seeks damages in excess of $3.3
million plus punitive damages, costs and attorney's fees. The Company plans to
vigorously defend itself against this arbitration.
ITEM 4. Submission of Matters to a Vote of Security Holders
- - ------- ---------------------------------------------------
a. The annual meeting of stockholders was held on May 15, 1996.
b. No information provided due to inapplicability of item.
c. A vote was proposed to (1) fix the number of directors at nine and to
elect a Board of Directors to serve for the ensuing year or until their
respective successors are duly elected and qualified; (2) consider and act upon
a proposal to amend the Amended and Restated Certificate of Incorporation to
increase the authorized number of shares to 120 million; (3) consider and act
upon a proposal to approve an amendment to the 1991 Stock Option Plan to
increase the number of shares authorized under such Plan to 5 million shares of
common stock; (4) ratify the selection of Coopers & Lybrand L.L.P. as
independent accountants for the fiscal year ending December 31, 1996.
14
<PAGE>
The voting results are as follows:
<TABLE>
<CAPTION>
Votes Votes Votes Votes Broker
For Against Withheld Abstained Non-Votes
---------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(1) James K. Sims 11,859,958 N/A 3,360 N/A -
Robert L. Gett 11,859,958 N/A 3,360 N/A -
Warren V. Musser 11,860,167 N/A 3,151 N/A -
Robert E. Keith, Jr. 11,860,113 N/A 3,205 N/A -
Jean C. Tempel 11,858,567 N/A 4,751 N/A -
Jack L. Messman 11,860,067 N/A 3,251 N/A -
John W. Poduska, Sr. 11,860,067 N/A 3,251 N/A -
James I. Cash, Jr. 11,860,013 N/A 3,305 N/A -
James D. Robinson III 11,858,967 N/A 4,351 N/A -
(2) Amended and
Restated Certificate
of Incorporation 11,382,362 296,311 N/A 28,241 156,404
(3) 1991 Stock Option
Plan 9,250,774 1,513,747 N/A 36,817 1,061,980
(4) Coopers & Lybrand
L.L.P. 11,834,580 3,178 N/A 25,560 -
</TABLE>
d. No information provided due to inapplicability of item.
ITEM 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
a. Exhibits (filed as part of this report):
(3.1) Amended and Restated Certificate of Incorporation of the Company
as amended May 15, 1996.
(10.1) Amended 1991 Stock Option Plan.
(10.2) Third Amendement to Loan and Security Agreement by and between
the Company and Fleet Bank N.A. dated June 26, 1996.
(11.1) Statements Regarding Computation of Earnings Per Share.
b. There were no reports on Form 8-K filed for the quarter ended June 30,
1996.
15
<PAGE>
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.
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
Date: August 12, 1996 By: /s/ Arthur M. Toscanini
--------------------------
Arthur M. Toscanini
Senior Vice President
- Finance and Treasurer
16
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CTP, INC.
(Incorporated March 13, 1991)
* * * * * *
I, James K. Sims, President of CTP, Inc. (the "Corporation"), a corpo-
ration organized and existing under and by virtue of the General Corporation
Law of the State of Delaware, do hereby certify that the Certificate of
Incorporation of CTP, Inc., as amended, has been further amended, and restated
as amended, in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware and, as amended and restated,
is set forth in its entirety as follows:
FIRST. The name of the Corporation is CTP, Inc.
SECOND. The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. 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 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 all classes of capital stock
which the Corporation shall have authority to issue shall be 32,000,000 shares,
consisting of 30,000,000 shares of common stock with a par value of $.01 per
share (the "Common Stock") and 2,000,000 shares of preferred stock with a par
value of $.01 per share (the "Preferred Stock").
A description of the respective classes of stock and a statement of
the designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
------------
1. General. All shares of Common Stock will be identical and will
-------
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of the Preferred Stock.
<PAGE>
-2-
2. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. Voting Rights. Except as otherwise required by law or this
-------------
Amended and Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held by him of record on
the books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock will vote together
with holders of the Preferred Stock as a single class, subject to any special or
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
B. PREFERRED STOCK
---------------
The Preferred Stock may be issued in one or more series at such time
or times and for such consideration or considerations as the Board of Directors
of the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any,
<PAGE>
-3-
on the issuance of additional shares of such series or shares of any other
series of Preferred Stock; or (vi) entitled to such other preferences, powers,
qualifications, rights and privileges, all as the Board of Directors may deem
advisable and as are not inconsistent with law and the provisions of this
Amended and Restated Certificate of Incorporation.
FIFTH. The Corporation is to have perpetual existence.
SIXTH.
1. Management. The business and affairs of the Corporation shall be
----------
managed by or under the direction of the Board of Directors of the Corporation.
2. By-laws. The Board of Directors of the Corporation is expressly
-------
authorized to adopt, amend or repeal the By-laws of the Corporation, subject to
any limitation thereof contained in the By-laws. The stockholders shall also
have the power to adopt, amend or repeal the By-laws of the Corporation.
3. Books. The books of the Corporation may be kept at such place
-----
within or without the State of Delaware as the By-laws of the Corporation may
provide or as may be designated from time to time by the Board of Directors of
the Corporation.
SEVENTH.
1. Number of Directors. The number of directors which shall
-------------------
constitute the whole Board of Directors shall be determined by resolution of a
majority of the Board of Directors, but in no event shall the number of
directors be less than three. The number of directors may be decreased at any
time and from time to time by a majority of the directors then in office, but
only to eliminate vacancies existing by reason of the death, resignation or
removal of one or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on such
election. Directors need not be stockholders of the Corporation.
2. Election of Directors. Elections of directors need not be by
---------------------
written ballot except as and to the extent provided in the By-laws of the
Corporation.
3. Terms of Office. Each director shall serve for a term ending on
---------------
the date of the annual meeting following the annual meeting at which such
director was elected.
4. Tenure. Notwithstanding any provisions to the contrary contained
------
herein, each director shall hold office until his successor is elected and
qualified, or until his earlier death, resignation or removal.
5. Vacancies. Any vacancy in the Board of Directors, however
---------
occurring, including a vacancy resulting from an enlargement of the Board of
Directors, may be filled only by vote of a majority of the directors then in
office, even if less than a quorum, or by a sole remaining
<PAGE>
-4-
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, if applicable; and a director
chosen to fill a position resulting from an increase in the number of directors
shall hold office until his successor is elected and qualified, or until his
earlier death, resignation or removal.
6. Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
7. Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law or
the Corporation's Amended and Restated Certificate of Incorporation or By-laws.
8. Rights of Preferred Stock. The provisions of this Article are
-------------------------
subject to the rights of the holders of any series of Preferred Stock from time
to time outstanding.
EIGHTH. No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate the
liability of a director: (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
NINTH.
1. Actions, Suits and Proceedings other than by or in the Right of
---------------------------------------------------------------
the Corporation. The Corporation shall indemnify each person who was or is a
- - ---------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees),
<PAGE>
-5-
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
- - ----------
the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful. Notwithstanding anything to the contrary
in this Article, except as set forth in Section 6 below, the Corporation shall
not indemnify an Indemnitee seeking indemnification in connection with a
proceeding (or part thereof) initiated by the Indemnitee unless the initiation
thereof was approved by the Board of Directors of the Corporation.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation, unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without: (i) the disposition being adverse to the Indemnitee, (ii)
an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea
of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best
<PAGE>
-6-
interests of the Corporation, and (v) with respect to any criminal proceeding,
an adjudication that the Indemnitee had reasonable cause to believe his conduct
was unlawful, the Indemnitee shall be considered for the purpose hereof to have
been wholly successful with respect thereto.
4. Notification and Defense of Claim. As a condition precedent to
---------------------------------
his right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein, at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless: (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6
-------------------
below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
- - -------- -------
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
-----------------------------
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including, in such
request, such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of
<PAGE>
-7-
expenses. Any such indemnification or advancement of expenses shall be made
promptly, and in any event, within 60 days after receipt by the Corporation of
the written request of the Indemnitee, unless with respect to requests under
Section 1, 2 or 5, the Corporation determines, by clear and convincing evidence,
within such 60-day period, that the Indemnitee did not meet the applicable
standard of conduct set forth in Section 1 or 2, as the case may be. Such
determination shall be made in each instance by: (a) a majority vote of a quorum
of the directors of the Corporation consisting of persons who are not, at that
time, parties to the action, suit or proceeding in question ("disinterested
directors"), (b) if no such quorum is obtainable, a majority vote of a committee
of two or more disinterested directors, (c) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors,
voting as a single class, which quorum shall consist of stockholders who are not
at that time parties to the action, suit or proceeding in question, (d)
independent legal counsel (who may be regular legal counsel to the Corporation),
or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
--------
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action, that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6, that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish, in any
way, the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement, or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights
<PAGE>
-8-
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation, and such rights may be
equivalent to, or greater or less than those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled, under any
-----------------------
provision of this Article, to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall,
nevertheless, indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance,
---------
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation, and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall, nevertheless, indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by an applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of the
----------------------
State of Delaware is amended after adoption of this Article to expand further
the indemnification permitted to Indemnitees, then the Corporation shall
indemnify such persons to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
<PAGE>
-9-
TENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner prescribed by the laws of the State of Delaware, and all rights
conferred upon stockholders are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Amended and Restated Certificate of
Incorporation are true under the penalties of perjury this 21st day of December,
1992.
/s/ James K. Sims
----------------------------------
James K. Sims, President
Attest:
/s/ Arthur M. Toscanini
- - -------------------------------------
Arthur M. Toscanini, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CTP, INC.
CTP, Inc. (the "Corporation"), a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows, pursuant to
Section 242 of the General Corporation Law of Delaware:
1. That the Board of Directors of CTP, Inc., at a meeting held on
December 17, 1992, duly adopted resolutions in accordance with Section 242 of
the General Corporation Law of the State of Delaware: (i) proposing amendment
of the Certificate of Incorporation of the Corporation subject to the approval
of the shareholders of the Corporation, (ii) declaring such amendment to be
advisable and in the best interests of the Corporation, (iii) directing that
such amendment be submitted to and be considered by written consent action of
the shareholders of the Corporation.
The resolution setting forth the amendment is as follows:
RESOLVED: That the Board of Directors of the Corporation deems it advisable and
in the best interests of the Corporation and its stockholders that
the Certificate of Incorporation of the Corporation, as amended and
restated, be further amended by deleting Article FIRST thereof in
its entirety and inserting the following in substitution therefor:
"FIRST. The name of the Corporation is Cambridge Technology Partners
(Massachusetts), Inc."
2. This Certificate of Amendment of Certificate of Incorporation was duly
adopted by written consent of the shareholders holding a majority of the
outstanding capital stock of the Corporation in accordance with the provisions
of Sections 228 and 242 of the General Corporation Law of the State of Delaware,
and written notice of the adoption of the Certificate of Amendment of
<PAGE>
-2-
Certificate of Incorporation has been given as provided by Section 228(d) of the
General Corporation Law of the State of Delaware to every shareholder entitled
to such notice.
IN WITNESS WHEREOF, CTP, Inc. has caused this Certificate of Amendment of
Certificate of Incorporation to be signed by James K. Sims, its President, and
attested by Arthur M. Toscanini, its Assistant Secretary, this 11th day of
February, 1993.
CTP, Inc.
By:/s/ James K. Sims
-------------------------------------
James K. Sims,
President
ATTEST:
By:/s/ Arthur M. Toscanini
-----------------------------
Arthur M. Toscanini,
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
Cambridge Technology Partners (Massachusetts), Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify as follows, pursuant
to Section 242 of the General Corporation Law of Delaware:
FIRST: That the Board of Directors of said Corporation, at a meeting held
on December 14, 1995, duly adopted resolutions in accordance with Section 242 of
the General Corporation Law of the Sate of Delaware, (i) proposing amendment to
the Certificate of Incorporation of the Corporation, (ii) declaring such
amendment to be advisable and in the best interests of the Corporation, (iii)
directing that such amendment be submitted to the stockholders of the
Corporation for approval thereby. The resolutions setting forth the amendment
and directing that such amendment be submitted to the stockholders are as
follows:
RESOLVED: That, subject to stockholder approval, the Board of Directors of the
Corporation has determined that it is advisable and in the best
interests of all of the Corporation's stockholders to increase the
authorized capital stock of this Corporation from 30,000,000 shares of
Common Stock, $0.01 par value per share, to 120,000,000 shares; that
such increase be considered at the next annual meeting of the
stockholders, that in order to effect said increase the proper
officers of this Corporation are hereby authorized and directed to
prepare, execute and file with the Secretary of State of the State of
Delaware an appropriate Certificate of Amendment to the Certificate of
Incorporation of this Corporation; and that the Board of Directors is
hereby authorized to issue all or any part of the authorized but
unissued capital stock of this Corporation at such times, to such
persons, upon such terms, and for such consideration as the Board may
in its discretion determine.
RESOLVED: That the increase in the authorized capital stock of this Corporation
be submitted to the stockholders of the Corporation for their
consideration and approval.
<PAGE>
-2-
SECOND: This Certificate of Amendment of Certificate of Incorporation was
duly adopted at the Annual Meeting of Stockholders of the Corporation held May
15, 1996, in accordance with Section 242 of the General Corporation Law of the
State of Delaware.
THIRD: That in accordance with the aforementioned resolution, the Amended
and Restated Certificate of Incorporation of this Corporation is hereby amended
by deleting the first sentence of Article FOURTH thereof in its entirety and
replacing it with a new sentence so that, as amended, the first sentence of
Article FOURTH shall read as follows:
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue shall be One Hundred Twenty-
Two Million (122,000,000) shares, consisting of 120,000,000 shares of
Common Stock with a par value of $.01 per share (the "Common Stock")
and 2,000,000 shares of Preferred Stock with a par value of $.01 per
share (the "Preferred Stock").
FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Cambridge Technology Partners (Massachusetts), Inc.,
has caused this certificate to be signed by James K. Sims, its President, and
attested by Arthur M. Toscanini, its Assistant Secretary, as of this 15th day of
May, 1996.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By:/s/ James K. Sims
----------------------------------------
James K. Sims,
President
ATTEST:
By: /s/ Arthur M. Toscanini
--------------------------------------
Arthur M. Toscanini,
Assistant Secretary
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
1991 STOCK OPTION PLAN
1. PURPOSE
The name of this plan is the Cambridge Technology Partners
(Massachusetts), Inc. 1991 Stock Option Plan (the "Plan"). The purpose of the
Plan is to promote the long-term success of Cambridge Technology Partners
(Massachusetts), Inc., a Delaware corporation (the "Company"), by providing
financial incentives to the officers, employees, directors and consultants of
the Company who are in positions to make significant contributions toward such
success. The Plan is designed to attract individuals of outstanding ability to
become or to continue as officers, employees, directors or consultants of the
Company, to enable such individuals to acquire or increase proprietary interests
in the Company through the ownership of shares of Common Stock of the Company,
and to render superior performance during their associations with the Company.
The Company intends that this purpose will be effected by the granting pursuant
to the Plan of options for shares of the Company's Common Stock (hereinafter
referred to as "Options") that either do meet the definition of "incentive
stock options" ("Incentive Options") in Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), or do not meet such definition
("Nonqualified Options").
References herein to "the Company" shall include any successor
corporation to the Company and also any subsidiary of the Company (such that, if
the Company has one or more subsidiaries, individuals who are officers or key
employees thereof are eligible to be granted Options under the Plan).
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options. An Option shall not be considered to be an Incentive
Option unless designated as such at the time of grant or in the option agreement
relating to such option, and any option that is not so designated (or even if so
designated fails to meet the definition of "incentive stock option" under
Section 422(b) of the Code) shall be a Nonqualified Option. Unless otherwise
specified in a particular grant, Options granted under the Plan are intended to
qualify as performance-based compensation to the extent required under Section
162(m) of the Code and the regulations thereunder.
(b) The Plan shall be administered by a committee (the "Option
Committee") of not less than two members of the Board of Directors of the
Company selected by and from the members of the Company's Board of Directors in
accordance with the provisions of the Company's By-Laws relating to the
appointment of Committees; provided, however, that the Plan shall be
administered so that Options granted under the Plan will qualify for the
benefits provided by Rule 16b-3 (or any successor rule to the same effect) under
the Securities Exchange Act of 1934 and by Section 162(m) of the Code (or any
successor provision to the same effect) and the
<PAGE>
-2-
applicable regulations thereunder. Subject to the provisions of this Plan, the
Option Committee shall exercise all powers under the Plan, unless and until
other action is taken by the Company's Board of Directors. Action by the Option
Committee shall require the affirmative vote of a majority of all its members,
and a further vote of the Company's Board of Directors shall be required for the
approval of any and all grants of Options recommended by the Option Committee.
(c) Subject to the terms and conditions of the Plan, the Option
Committee shall have the power:
(i) To determine from time to time the Options to be granted
to eligible persons under the Plan, and to prescribe the terms and
provisions (which need not be identical) of each Option granted under the
Plan to such persons, and to recommend the grant of Options to the Board of
Directors of the Company for its approval;
(ii) To construe and interpret the Plan and Options granted
thereunder and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Option Committee may
correct any defect or supply any omission, or reconcile any inconsistency
in the Plan, or in any option agreement, in the manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective. All
decisions and determinations by the Option Committee and, with respect to
the grant of Options, by the Board of Directors of the Company in the
exercise of this power shall be final and binding upon the Company and all
optionees; and
(iii) Generally, to exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best interests of
the Company with respect to the Plan.
3. STOCK SUBJECT TO THE PLAN
(a) The stock subject to the Options granted under the Plan shall be shares
of the Company's authorized but unissued common stock, par value $.01 per share
(the "Common Stock"), or previously issued shares of Common Stock that have
been reacquired and reserved by the Company's Board of Directors for resale upon
exercise of Options granted under the Plan. The total number of shares of Common
Stock that may be issued pursuant to Options granted under the Plan shall not
exceed an aggregate of 15,000,000 shares of Common Stock. Such number shall be
subject to adjustment as provided in Section 9 hereof.
(b) Whenever any outstanding Option under the Plan expires, is canceled or
is otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such Option may again be the subject of
Options under the Plan.
(c) No employee of the Company may be granted Options to acquire, in the
aggregate, more than 3,000,000 shares of Common Stock under the Plan. If any
Option granted under the
<PAGE>
-3-
Plan shall expire or terminate for any reason without having been exercised in
full or shall cease for any reason to be exercisable in whole or in part, the
unpurchased shares subject to such Option shall be included in the determination
of the aggregate number of shares of Common Stock deemed to have been granted to
such employee under the Plan.
4. STOCK OPTION GRANTS
(a) Incentive Options may be granted only to persons who are employees of
the Company, including members of the Board of Directors who are also employees
of the Company. Nonqualified Options may be granted to officers and employees of
the Company, to directors of the Company, whether or not they are also employees
of the Company, to consultants to the Company who are not employees, and to such
other persons as the Option Committee shall select from time to time. The
determination of the persons eligible to receive grants, the number of shares of
Common Stock for which Options are granted and the determination of whether an
Option shall be an Incentive Option or a Nonqualified Option shall be made by
the Option Committee, subject to the approval of the Board of Directors of the
Company.
(b) No person shall be eligible to receive any Incentive Option under the
Plan if at the date of grant such person beneficially owns (or would own upon
the exercise of any Options held, or which upon such grant would be held, by
such person) in excess of ten percent (10%) of the outstanding shares of Common
Stock, unless (i) the exercise price is at least 110% of the fair market value
(determined as provided in Section 5(c) hereof at the time the Incentive Option
is granted) of the shares of Common Stock subject to the Option and (ii) such
Option by its terms is not exercisable after the expiration of five (5) years
from the date such Option is granted.
(c) The aggregate fair market value (determined as provided in Section 5(c)
hereof at the time the Incentive Option is granted) of shares of Common Stock
with respect to which any Incentive Option is exercisable for the first time by
the optionee during any calendar year (plus the value of any other such shares
of Common Stock first purchasable in such year under any other Option under the
Plan or any other plan of the Company or any parent or subsidiary thereof
intended to be an "incentive stock option" under Section 422 of the Code)
shall not exceed $100,000, and no person shall be eligible to receive an
Incentive Option for shares of Common Stock in excess of such limitation.
5. TERMS OF THE OPTION AGREEMENTS
Each option agreement for Options granted under the Plan shall contain such
provisions as the Option Committee shall from time to time deem appropriate.
Option agreements need not be identical, but each option agreement by
appropriate language, or by reference to this Section 5 of the Plan, shall
include the substance of all of the following provisions:
<PAGE>
-4-
(a) Expiration. Each Option shall expire on the date specified in the
option agreement, which date shall not be later than the tenth anniversary of
the date on which the Option was granted. Each Incentive Option shall in any
event expire not later than three months after the optionee is for any reason no
longer employed by the Company, except (i) if such termination of employment
results from optionee's disability (within the meaning of Section 22(e)(3) of
the Code), an Option may be exercised within twelve months thereafter, whether
or not exercisable at the time of such termination, and (ii) if such termination
of employment results from the optionee's death, an Option may be exercised by
his executors or administrators within twenty-four months thereafter, whether or
not exercisable at the time of such termination.
(b) Exercise. Unless the Option Committee shall otherwise determine at
the time an Option is granted, each Option shall become vested and exercisable
with respect to 25% of the shares of Common Stock subject to such Option as of
the first anniversary of the date of grant and, thereafter, with respect to an
additional 2.083% of the shares subject to such Option as of the same day (or
the immediately preceding day if a month does not have such day) of each
calendar month thereafter, so that such Option shall be exercisable in full as
of the fourth anniversary of the date of grant. Unless otherwise provided in the
vote of either the Option Committee or the Board of Directors of the Company,
for this purpose the date of the grant of an Option shall be the date on which
the Board of Directors approves the grant. To the extent not exercised, vested
installments shall accumulate and be exercisable in whole or in part at any time
after becoming exercisable, but not later than the date the Option expires or
terminates.
(c) Purchase Price. Unless the Option Committee shall otherwise determine
at the time the Option is granted, the purchase price per share of Common Stock
under each Option shall be not less than the fair market value of a share of
Common Stock on the date the Option is granted. For the purposes of the Plan,
the fair market value of the shares of Common Stock shall be determined by the
Option Committee with the approval of the Board of Directors of the Company.
6. LIMITATION ON RIGHTS OF OPTIONEES
(a) Options Nontransferable. No Option shall be transferable by any
optionee other than by will or by the laws of descent and distribution. Options
may be exercised during the optionee's lifetime only by the optionee (or, if the
optionee is disabled and so long as the Option remains exercisable, by the
optionee's duly appointed guardian or other legal representative).
(b) No Shareholder Rights. No optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any Option unless and
until (i) the Option shall have been exercised pursuant to the terms thereof,
(ii) the Company shall have issued and delivered the shares to the optionee, and
(iii) the optionee's name shall have been entered as a shareholder of record on
the books of the Company. Thereupon, the optionee shall have full voting,
dividend and other ownership rights with respect to such shares of Common Stock.
<PAGE>
-5-
(c) No Employment Rights. Neither the Plan nor the grant of any Option
thereunder shall be deemed to confer upon any optionee any rights of employment
with the Company, including without limitation any right to continue in the
employ of the Company, or affect the right of the Company to terminate the
employment of an optionee at any time, with or without cause.
(d) Authority of Company. The existence of the Options shall not affect:
the right or power of the Company or its shareholders to make adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business; any issue of bonds, debentures, preferred or prior
preference stock affecting the Common Stock or the rights thereof; the
dissolution or liquidation of the Company, or sale or transfer of any part of
its assets or business; or any other act, whether of a similar character or
otherwise.
7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Notice of Exercise. Any Option granted under the Plan may be
exercised by the optionee by delivering to the Chief Financial Officer of the
Company (or such other representative of the Company as the Option Committee may
designate) on any business day a written notice specifying the number (which
shall be consistent with the provisions of Section 5(b) hereof) of shares of
Common Stock the optionee then desires to purchase (the "Notice").
(b) Payment. Payment for the shares of Common Stock purchased pursuant to
the exercise of an Option shall be made either (i) in cash or by check
representing good funds in an amount equal to the option price for the number of
shares of Common Stock specified in the Notice (the "Total Option Price"), or
(ii) if authorized by the applicable option agreement, by the valid and properly
completed transfer to the Company of a number of shares of Common Stock having a
fair market value, determined as provided in Section 5(c) hereof, equal to or
less than the Total Option Price, plus cash or check in an amount equal to the
excess, if any, of the Total Option Price over the fair market value of such
shares of Common Stock.
8. NOTICE OF DISPOSITION; WITHHOLDING; ESCROW
An optionee shall immediately notify the Company in writing of any sale,
transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code) of any
shares of Common Stock acquired through exercise of an Incentive Option, within
two (2) years after the grant of such Incentive Option or within one (1) year
after the acquisition of such shares of Common Stock, setting forth the date and
manner of disposition, the number of shares of Common Stock disposed of and the
price at which such shares of Common Stock were disposed of. The Company shall
be entitled to withhold from any compensation or other payments then or
thereafter due to the optionee such amounts as may be necessary to satisfy any
withholding requirements of federal or state law or regulation and, further, to
collect from the optionee any additional amounts which may be required for such
purpose as a condition of delivering the shares of Common Stock acquired
pursuant to an Option. The Option Committee may, in its discretion, require
shares of Common
<PAGE>
-6-
Stock acquired by an optionee upon exercise of an Incentive Option to be held in
an escrow arrangement for the purpose of enabling compliance with this
Section 8.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Events for Adjusting Number and Price. If the shares of Common Stock
as a whole are changed into or exchanged for a different number or kind of
shares or securities of the Company, whether through reorganization,
recapitalization, reclassification, stock dividend or other distribution, split,
combination of interests, exchange of interests, change in corporate structure
or the like, an appropriate and proportionate adjustment shall be made in the
number and kind of shares of Common Stock subject to the Plan and in the number,
kind, and per share exercise price of shares of Common Stock subject to
unexercised Options or portions thereof granted prior to any such change. In the
event of any such adjustment in an outstanding Option, the optionee thereafter
shall have the right to purchase the number of shares of Common Stock under such
Option at the per share price, as so adjusted, which the optionee could purchase
at the total purchase price applicable to the Option immediately prior to such
adjustment.
(b) Option Committee and Board Action. Adjustments under this Section 9
shall be determined by the Option Committee and approved and ratified by the
Board of Directors of the Company, and such determinations shall be conclusive.
The Option Committee shall have the discretion and power in any such event to
determine and to make effective provision for acceleration of the time or times
at which any Option or portion thereof shall become exercisable. No fractional
interests shall be issued under the Plan on account of any adjustment specified
above.
10. AMENDMENT OR TERMINATION OF PLAN.
The Board of Directors of the Company may modify, revise or terminate this
Plan at any time and from time to time, except that, other than as provided in
Section 9 hereof, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations at
an annual or special meeting held within twelve (12) months before or after the
date of adoption of such amendment, where such amendment will:
(a) increase the number of shares of Common Stock as to which Options may
be granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change the minimum purchase price of Incentive Options to be granted
under the Plan;
(d) increase the maximum term of Options provided herein; or
<PAGE>
-7-
(e) otherwise materially increase the benefits accruing to participants
under the Plan.
Except as provided in Section 9 hereof, rights and obligations under any
Option granted before any amendment of the Plan shall not be altered or impaired
by such amendment, except with the consent of the optionee.
11. EFFECTIVE DATE; NONEXCLUSIVITY
(a) Effective Date. This Plan will be deemed to have been adopted and to
be effective when approved by the stockholders of the Company in compliance with
Temporary Regulation (S)14a-422A-2 under the Code.
(b) Nonexclusivity. The adoption of the Plan shall not be construed as
creating any limitations on the power of the Board of Directors of the Company
to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) Securities Laws. If in the opinion of legal counsel for the Company
the issuance or sale of any shares of Common Stock pursuant to the exercise of
an Option would not be lawful for any reason, including without limitation the
inability of the Company to obtain from any governmental authority or regulatory
body having jurisdiction the authority deemed by such counsel to be necessary to
such issuance or sale, the Company shall not be obligated to issue or sell any
shares of Common Stock pursuant to the exercise of an Option to an Optionee or
any other authorized person unless a registration statement that complies with
the provisions of the Securities Act of 1933, as amended, (the "Act") in
respect of such shares of Common Stock is in effect at the time thereof, or
other appropriate action has been taken under and pursuant to the terms and
provisions of the Act, or the Company receives evidence satisfactory to such
counsel that the issuance and sale of such shares of Common Stock, in the
absence of an effective registration statement or other appropriate action,
would not constitute a violation of the Act or any applicable state securities
law. The Company is in no event obligated to register any such shares of Common
Stock, to comply with any exemption from registration requirements or to take
any other action which may be required in order to permit, or to remedy or
remove any prohibition or limitation on, the issuance or sale of such shares of
Common Stock of any optionee or other authorized person.
(b) Withholding Taxes. As a condition of exercise of an Option, the
Company may, in its sole discretion, withhold or require the optionee to pay or
reimburse the Company for any taxes which the Company determines are required to
be withheld in connection with the grant or any exercise of an Option.
<PAGE>
-8-
(c) Governing Law. The Plan shall be interpreted such that all options
hereunder intended to be Incentive Options shall meet the requirements therefor
set forth in Section 422 of the Code (and any applicable regulations, rulings or
judicial decisions interpreting said Section). Otherwise, the Plan shall be
governed by and interpreted under the laws of the State of Delaware.
13. TERMINATION OF GRANTING OF OPTIONS UNDER THE PLAN
No Option may be granted under the Plan after the tenth anniversary of the
effective date of the Plan.
<PAGE>
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This Third Amendment to Loan and Security Agreement (the "Third
Amendment") is entered into this 26th day of June, 1996 by and between Cambridge
Technology Partners (Massachusetts), Inc., a Delaware corporation with its
principal place of business at 304 Vassar Street, Cambridge, Massachusetts 02139
(the "Borrower"), and Fleet National Bank, successor by merger to Fleet Bank of
Massachusetts, N.A., with its office at Fleet Center, 75 State Street, Boston,
Massachusetts 02109 (the "Bank").
Reference is made to the following facts:
A. The Borrower and the bank entered into a Loan and Security
Agreement dated as of February 1, 1993 (the "Credit Agreement"), as amended by a
First Amendment to Loan and Security Agreement dated September 28, 1993 (the
"First Amendment") and as amended by a Second Amendment to Loan and Security
Agreement dated July 11, 1994 (the "Second Amendment"). The Credit Agreement,
as amended by the First Amendment and the Second Amendment, is referred to
herein as the "Agreement."
B. Pursuant to the Agreement, the Bank has made available to the
Borrower a revolving loan facility of up to $10,000,000 (the "Revolving Loan
Commitment").
C. The Borrower and the Bank wish to increase the principal amount of
the Revolving Loan Commitment, extend the maturity date of such revolving loans,
amend the interest rate and the facility fee and amend certain of the financial
covenants set forth in the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, including the premises hereof, the
Borrower and the Bank agree as follows:
Capitalized terms not otherwise defined in this Third Amendment shall
have the meaning set forth in the Agreement.
1. Amendments to Revolving Loan Facility.
-------------------------------------
a. Revolving Loan Commitment Increased. Section 2.24 of the Agreement is
------------------------------------
hereby amended by increasing the Revolving Loan Commitment from $10,000,000 to
$20,000,000. Section 3.1(a) of the Agreement is hereby amended by deleting the
amount of "$10,000,000" each time it appears in such Section 3.1(a) and
substituting therefor the amount of "$20,000,000".
<PAGE>
b. Extension of Revolving Loan Termination Date. Section 2.25 of the
--------------------------------------------
Agreement is hereby amended by deleting the words "June 30, 1996" and
substituting therefor the words "June 30, 1998".
c. Revolving Credit Advances. Section 3.1(a) of the Agreement is
-------------------------
hereby amended by deleting the amount of "$10,000,000" contained in the first
two sentences thereof and substituting therefor the amount of "$20,000,000."
d. Liabilities. Section 2.19 of the Agreement is hereby deleted and
-----------
the following substituted therefor:
"'Liability' and 'Liabilities' means all liabilities, debts, and
obligations of the Borrower to the Bank of every kind, nature and
description now existing or hereafter arising, whether under this
Agreement or otherwise, including without limitation the Borrower's
obligations under its promissory note dated June 26, 1996 in the
aggregate original principal amount of $20,000,000, Borrower's
obligation to reimburse the Bank for all amounts drawn on letters of
credit issued for the Borrower's account, Borrower's liabilities in
connection with any foreign exchange or currency transactions with
the Bank, any overdrafts which now or hereafter exist in the
Borrower's accounts maintained at the Bank, all of the Borrower's
obligations under this Agreement, all fees and charges in connection
with any account maintained by the Borrower with the Bank or any
service rendered by the Bank, and all costs and expenses incurred or
paid by the Bank in connection with the preparation or enforcement of
this Agreement and any other agreement between the Borrower and the
Bank or instrument or document furnished by the borrower to the Bank
(including, without limitation, Costs of Collection). The Bank's
books and records shall be prima facie evidence of the Borrower's
Liabilities to the Bank."
e. Prepayments of Revolving Credit Loans. Section 3.1(e) of the
-------------------------------------
Agreement is hereby deleted in its entirety and the following substituted
therefor:
"(e) Prepayments of Revolving Credit Loans. The Borrower may at any
-------------------------------------
time and from time to time prepay the Revolving Credit Loans,
in whole or in part, without premium or penalty with interest
accrued through the date of payment; provided, however, that
any partial prepayment of Advances bearing interest at the
Prime Rate shall be in an integral multiple of $5,000 and
provided, further that any prepayment of Eurodollar Rate Loans
(as defined in Exhibit 2 hereto) shall be made in accordance
---------
with Section A.3 of Exhibit 2 hereto. At the Borrower's option,
---------
and subject to the terms and conditions of this Agreement, any
amount so prepaid may be reborrowed."
f. Interest Rates for Revolving Credit Loans. Section 3.1(f) of
-----------------------------------------
the Agreement is hereby deleted in its entirety and the following substituted
therefor:
-2-
<PAGE>
"(f) Interest Rates for Revolving Credit Loans. The Borrower shall
-----------------------------------------
pay interest on the principal amount of the Advances
outstanding from time to time, from the date hereof until
payment of the Revolving Credit Loans and the Third Amended
Revolving Credit Note in full. Interest shall accrue on the
Revolving Credit Loans at the Prime Rate as declared from time
to time by the Bank or, subject to and in accordance with
Exhibit 2 hereto, the Effective Eurodollar Rate, per annum. The
---------
Borrower shall pay such interest on the Revolving Credit Loans
outstanding from time to time, monthly in arrears on the first
day of each calendar month of each year, commencing July 1,
1996 and on Eurodollar Rate Loans in accordance with Exhibit 2
---------
hereto. Notwithstanding any other terms and conditions of this
Agreement, the Borrower's right to elect the Effective
Eurodollar Rate and Eurodollar Rate Loans shall be subject to
the provisions of Exhibit 2 hereto. Any change in the Prime
---------
Rate shall take effect, for the purpose of determining the
Prime Rate hereunder, when made effective generally to loans by
the Bank, with or without notice to the Borrower. All
computations of interest hereunder and under the Third Amended
Revolving Credit Note shall be based on a year of 360 days and
the actual number of days elapsed."
g. Revolving Credit Note Replaced. On the date hereof, the
------------------------------
Borrower shall execute and deliver to the Bank its promissory note of even date
made payable to the Bank in the original principal amount of $20,000,000
substantially in the form of Exhibit 1 hereto (the "Third Amended Revolving
---------
Credit Note"), and the Agreement shall be amended by substituting such Third
Amended Revolving Credit Note for the Second Amended Revolving Credit Note
wherever the Agreement shall refer to the Second Amended Revolving Credit Note
and by replacing Exhibit 1 thereto with Exhibit 1 hereto. Upon execution and
delivery of such Third Amended Revolving Credit Note to the Bank, the Bank shall
return to the Borrower the executed original Second Amended Revolving Credit
Note dated July 11, 1994.
h. Facility Fee. Section 3.1(g) of the Credit Agreement is hereby
------------
amended by (i) deleting the percentage of "0.25%" contained therein and
substituting therefor the percentage "0.15%" and (ii) deleting the date "July 1,
1994" contained therein and substituting therefor the date "July 1, 1996."
i. Late Charges. Section 3.1 of the Agreement is hereby amended to
------------
add the following subsection at the end of such section:
"(i) Late Charges. If any amount of required principal and/or
------------
interest is not paid in full within ten (10) days after the same is due, the
Borrower shall pay to the Bank a late fee equal to five percent (5%) of the
required payment."
2. Financial Covenants Amended.
---------------------------
a. Minimum Tangible Capital Base. Section 5.21(a) of the Agreement is
-----------------------------
hereby deleted and the following substituted therefor:
-3-
<PAGE>
"The Borrower shall not permit the Tangible Capital Base to be less than
$30,000,000 plus the sum of (i) fifty percent (50%) of quarterly Net Income
(without regard to any Net Loss) for each Fiscal Quarter beginning after
March 31, 1996; and (ii) fifty percent (50%) of all net proceeds to the
Borrower of the issuance by the Borrower of equity securities or the
principal amount of Subordinated Indebtedness, in either case, issued or
incurred after March 31, 1996, provided, however, that where the Borrower
acquires any Subsidiary through the issuance or exchange of equity
securities, the net proceeds of such new equity securities for purposes of
calculating the Minimum Tangible Capital Base shall be limited to fifty
percent (50%) of the tangible assets acquired in such acquisition."
b. Profitability. Clauses (i) and (ii) of Section 5.21(c) of the
-------------
Agreement are hereby deleted and the following substituted therefor:
"(i) shall realize quarterly Net Income plus (A) amortized good will and
----
(B) non-cash expenses incurred in connection with any acquisition minus (C) any
-----
reduction in the Borrower's taxes due to the expenses described in the
aforementioned (A) and (B), of at least $2,000,000;
(ii) shall realize annual Net Income plus (A) amortized good will and (B)
-----
non-cash expenses incurred in connection with any acquisition minus (C) any
-----
reduction in the Borrower's taxes due to the expenses described in the
aforementioned (A) and (B), of at least $10,000,000; and"
c. Leverage. Section 5.21(d) of the Agreement is hereby deleted and the
--------
following substituted therefor:
"(d) Maximum Leverage. The Borrower shall not permit the ration of Funded
----------------
Debt to EBITDA to exceed 1:1 for the four (4) consecutive fiscal quarters ending
on the measurement date."
d. Cash Flow Ratio. Section 5.21(e) is hereby deleted.
---------------
e. Defined Terms. Section 5.21(f) of the Agreement is hereby amended by
-------------
inserting the following definitions at the end of such section:
"(xii) "EBITDA" shall mean for any period the sum of Borrower's Net
Income, interest expense, tax expense, amortization of goodwill and non-
cash expenses incurred in connection with any acquisition, each calculated
in accordance with generally accepted accounting principles, consistently
applied."
"(xiii) "Funded Debt" shall mean (i) Indebtedness for borrowed money, (ii)
Indebtedness in respect of capitalized lease obligations, (iii) all other
interest bearing obligations which, in accordance with generally accepted
accounting principles, would be included as a liability on the consolidated
balance sheet of the Borrower and its Subsidiaries and (iv) all guarantees
of any of the foregoing."
-4-
<PAGE>
3. Acquisitions.
------------
Paragraph 5.13(c)(v) of the Agreement is hereby deleted and the following
substituted therefor:
"(v) acquisitions of any foreign or domestic corporations, partnerships or
similar entities, provided that at the time of each such acquisition the
Borrower is in compliance with each of the financial covenants set forth in
Section 5.21 of this Agreement for the four (4) consecutive fiscal quarters
ending on the next measurement date, on a pro-forma basis; and"
4. Reporting Covenants Amended.
---------------------------
Section 5.18 of the Agreement is hereby amended by inserting the following
subsection at the end of Section 5.18:
"(i) within forty-five (45) days of the end of each fiscal year of the
Borrower, management prepared projections for the Borrower's immediately
succeeding fiscal year, approved by the Board of Directors of the Borrower, and
in form and detail satisfactory to the Bank."
5. Provisions Governing Eurodollar Rate Loans.
------------------------------------------
The Agreement is hereby amended by attaching Exhibit 2 and Exhibit 3 to
this Third Amendment to the Agreement. Exhibit 2 and Exhibit 3 hereto shall,
for all purposes of the Agreement, be deemed to be Exhibit 2 and Exhibit 3
thereto which are hereby incorporated in the Agreement and made a part thereof.
6. Representations and Warranties Restated.
---------------------------------------
a. Except as otherwise set forth in this Section 6, the Borrower hereby
represents and warrants that the representations and warranties set forth in
Article 4 of the Agreement are true as of the date hereof.
b. The Borrower represents and warrants that each Related Entity is
listed on SCHEDULE A, annexed hereto. The Borrower represents and warrants that
all trade names and trade styles under which the Borrower presently conducts its
business are listed on SCHEDULE B, annexed hereto. Such Schedules A and B
annexed hereto are hereby substituted for Schedules A and B annexed to the
Credit Agreement. If any entity shall become or cease to be a Related Entity
after the date hereof, upon delivery of notice to the Bank to such effect,
Schedule A hereto shall be deemed amended to include or exclude, as the case may
be, such Related Entity. If the Borrower shall adopt a trade name or trade
style other than listed on Schedule B hereto, upon delivery of notice to the
Bank of such additional trade name or trade style, such Schedule B shall be
deemed amended to include such trade name or trade style.
-5-
<PAGE>
c. Section 4.8 of the Agreement is hereby deleted and the following
substituted therefor:
"The Borrower has previously furnished to the Bank true and complete copies
of the Borrower's audited financial statements consisting of a balance
sheet, statement of operations, statement of stockholders' equity and cash
flows for the period ending December 31, 1995, as well as unaudited
financial statements for the three months ended March 31, 1996. The
audited financial statements, including related notes, and the unaudited
financial statements have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited financial
statements, for the absence of notes), are in accordance with the books and
records of the Borrower and present fairly the financial condition of the
Borrower. Except as disclosed to the Bank in writing, since March 31,
1996, there has not been, whether or not in the ordinary course of
business:
(i) any material adverse change in the Borrower's financial condition
or any event, condition or state of facts which might materially and
adversely affect the Borrower's financial condition; or
(ii) any material damage, destruction, loss or other casualty, whether
covered by insurance or not."
d. The execution and delivery by the borrower of this Third Amendment and
of the Third Amended Revolving Credit Note, and of any and all other instruments
or documents executed in connection herewith to which the Borrower is a party
have been duly authorized by all necessary corporate action of the Borrower.
e. The Third Amendment, the Third Amended Revolving Credit Note and all
other instruments or documents executed in connection herewith or therewith to
which the Borrower is a party are the valid and binding obligations of the
Borrower, each enforceable against the Borrower in accordance with its
respective terms, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights or by the availability of equitable remedies.
f. The execution, delivery and performance by the Borrower of this Third
Amendment, the Third Amended Revolving Credit Note and all other instruments or
documents executed in connection herewith or therewith to which the Borrower is
a party do not violate in any material respect any material indenture, agreement
or undertaking to which the Borrower is a party or by which it or its properties
are bound or violate the Borrower's Articles of Organization or By-Laws or any
order of any judicial or administrative court or agency by which the Borrower or
its assets are bound of which, after due inquiry, the Borrower is aware.
g. Clause (a) of Section 3.5 of the Agreement is hereby deleted and the
following substituted therefor:
-6-
<PAGE>
"(a) except with respect to such representations, warranties and covenants
which are expressly limited to the date of the Agreement, as amended by the
First Amendment and the Second Amendment and/or the Third Amendment to Loan
and Security Agreement between the Borrower and the Bank, each of the
representations and warranties contained in Article 4 are correct in all
material respects and the Borrower is in compliance with all of the
covenants contained in Article 5; and"
7. No Event of Default.
-------------------
The Borrower hereby represents and warrants that no Event of Default under
the Agreement, and no event which with the giving of notice or the passage of
time or both, would become such an Event of Default, has occurred as of the date
hereof.
8. Agreement Confirmed.
-------------------
Except as expressly amended by this Third Amendment, the Agreement is in
all respects ratified and confirmed and the Agreement as so amended by this
Third Amendment shall remain in full force and effect and shall be read, taken
and construed as one and the same instrument.
9. Miscellaneous.
-------------
a. Severability. In the event any provision of this Third Amendment be
------------
held to be invalid in any circumstance, such invalidity shall not affect any
other provision or circumstance.
b. Counterparts. This Third Amendment may be executed and delivered in
------------
any number of counterparts, each of which shall be deemed to be an original, but
such counterparts together shall constitute one and the same instrument.
c. Captions. The captions of this Third Amendment are for convenience
--------
only and shall not affect the construction hereof.
d. Governing Law. This Third Amendment shall be construed in accordance
-------------
with and governed by the laws of The Commonwealth of Massachusetts.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
signed and sealed by their respective, duly authorized representatives, as of
the day and year first written above.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By: /s/ Arthur Toscanini
--------------------------------
Its: Chief Financial Officer
FLEET NATIONAL BANK
By: /s/ Thomas W. Davies
--------------------------------
Its: Vice President
By: /s/ William E. Rurode
--------------------------------
Its: Senior Vice President
-8-
<PAGE>
Exhibit 11.1
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 4,711 $ 3,576 $ 8,801 $ 5,932
======= ======= ======= =======
Pro forma net income $ 4,711 $ 3,470 $ 8,801 $ 5,824
======= ======= ======= =======
Weighted average number of
common shares outstanding 45,503 43,493 45,359 43,333
Dilutive effect of common
equivalent shares of stock
options and warrants 7,623 6,280 7,355 6,209
------- ------- ------- -------
Weighted average number of
common and common
equivalent shares outstanding 53,126 49,773 52,714 49,542
======= ======= ======= =======
Net income per share (1) $ .09 $ .07 $ .17 $ .12
======= ======= ======= =======
Pro forma net income per share (1) $ .09 $ .07 $ .17 $ .12
======= ======= ======= =======
</TABLE>
(1) Primary and fully diluted income per share are the same for all periods
presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,414
<SECURITIES> 10,126
<RECEIVABLES> 48,311
<ALLOWANCES> 670
<INVENTORY> 0
<CURRENT-ASSETS> 74,502
<PP&E> 22,009
<DEPRECIATION> 6,996
<TOTAL-ASSETS> 94,433
<CURRENT-LIABILITIES> 27,575
<BONDS> 0
0
0
<COMMON> 457
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 94,433
<SALES> 0
<TOTAL-REVENUES> 87,528
<CGS> 0
<TOTAL-COSTS> 73,221
<OTHER-EXPENSES> 383
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 14,668
<INCOME-TAX> 5,867
<INCOME-CONTINUING> 8,801
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,801
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
