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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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
(Address of principal 02139
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 October 31, 1997, there were 50,478,879 shares of common stock
outstanding.
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION:
Item 1: Financial Statements
Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996 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 6: Exhibits and Reports on Form 8-K 14
SIGNATURES 15
Exhibit Index 16
2
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,836 $ 19,817
Investments held to maturity 15,251 12,727
Accounts receivable, less allowance of $1,363 and $1,085
at September 30, 1997 and December 31, 1996, respectively 81,253 55,540
Unbilled revenue on contracts 4,310 2,959
Deferred income taxes 161 161
Prepaid expenses and other current assets 23,417 14,195
---------- --------
Total current assets 166,228 105,399
Property and equipment, net 27,830 19,027
Other assets 5,090 3,462
Goodwill, net 1,913 2,512
---------- --------
Total assets $ 201,061 $130,400
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,361 $ 11,052
Accrued expenses 26,012 17,410
Deferred revenue 9,352 5,203
Income taxes payable 8,315 3,178
Obligations under capital leases, current 86 74
---------- --------
Total current liabilities 62,126 36,917
Obligations under capital leases 111 162
Deferred income taxes 471 471
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 120,000,000 shares;
issued and outstanding 50,253,544 and 48,431,489 shares
at September 30, 1997 and December 31, 1996, respectively 502 484
Additional paid-in capital 67,147 44,652
Retained earnings 72,593 47,970
Foreign currency translation adjustment (1,889) (256)
---------- --------
Total stockholders' equity 138,353 92,850
---------- --------
Total liabilities and stockholders' equity $ 201,061 $130,400
========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net revenues $ 96,091 $ 63,869 $ 250,501 $ 167,405
Costs and expenses:
Project personnel 43,656 29,406 113,410 77,954
General and administration 9,904 7,773 27,733 20,617
Sales and marketing 8,223 4,722 21,527 12,409
Other costs 19,061 12,755 48,168 31,809
----------- ----------- ----------- -----------
Total operating expenses 80,844 54,656 210,838 142,789
----------- ----------- ----------- -----------
Income from operations 15,247 9,213 39,663 24,616
Other income (expense):
Interest income 632 255 1,619 655
Interest expense (31) (10) (97) (44)
Foreign exchange loss (65) (66) (147) (82)
----------- ----------- ----------- -----------
Income before income taxes 15,783 9,392 41,038 25,145
Provision for income taxes 6,313 3,786 16,415 10,087
----------- ----------- ----------- -----------
Net income $ 9,470 $ 5,606 $ 24,623 $ 15,058
=========== =========== =========== ===========
Net income per share $ .17 $ .10 $ .45 $ .28
=========== =========== =========== ===========
Weighted average number of
common and common
equivalent shares outstanding 56,223 55,305 55,391 54,231
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 24,623 $ 15,058
Amounts that reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,499 4,006
Tax benefit from exercise of stock options 8,900 5,498
Provision for deferred income taxes - 451
Increase in accounts receivable (27,141) (25,552)
Increase in unbilled revenue on contracts (1,531) (2,060)
Increase in prepaid expenses and other current assets (9,637) (3,456)
Increase in accounts payable 7,681 5,884
Increase in accrued expenses 9,238 4,762
Increase in deferred revenue 4,281 6,358
Increase in income taxes payable 4,921 1,424
Other, net (1,612) (215)
-------- --------
Net cash provided by operating activities 25,222 12,158
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (14,298) (10,289)
Purchase of investments held to maturity (15,107) (15,450)
Maturity of investments held to maturity 12,583 11,746
-------- --------
Net cash used for investing activities (16,822) (13,993)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit arrangements - (325)
Obligations under capital leases (38) (135)
Dividend distribution - (15)
Proceeds from employee stock purchase plan 4,914 2,071
Proceeds from exercise of stock options 8,698 5,584
-------- --------
Net cash provided by financing activities 13,574 7,180
-------- --------
Effect of foreign exchange rate changes on cash 45 (629)
Net increase in cash and cash equivalents 22,019 4,716
Cash and cash equivalents at beginning of period 19,817 7,490
-------- --------
Cash and cash equivalents at end of period $ 41,836 $ 12,206
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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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 the
Company and all of its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. 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
financial 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 nine months ended September 30, 1997, are not necessarily indicative
of results for the full year.
B. 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 applicable period to effect a stock split. Net income
per share for the 1996 periods also reflects the assumed issuance, at the
beginning of each period, of common stock of the Company and options to purchase
common stock of the Company relating to acquisitions accounted for using the
pooling of interests method of accounting. Primary and fully diluted income per
share are the same for each period presented.
C. Foreign Exchange Contracts
--------------------------
The Company maintains foreign exchange contracts to mitigate the risk of changes
in foreign exchange rates associated with intercompany balances. The contracts
relate primarily to European currencies and generally have maturities of one
month. The impact of exchange rate movements on contracts are recorded in other
income for the period in which the exchange rates change, generally consistent
with the term of the contract. As of September 30, 1997, the Company held
foreign exchange forward contracts of approximately $4.4 million and there were
no related deferred gains and losses. The Company does not hold foreign exchange
contracts for trading purposes.
D. Accounting Pronouncements
-------------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"), which is effective for fiscal years ending after December 15, 1997,
including interim periods. SFAS 128 establishes standards for computing and
presenting earnings per share (EPS) and requires a dual presentation of basic
and dilutive EPS. The Company estimates that basic EPS would have been $.19 and
$.50 for the three and nine months ended September 30, 1997, respectively.
Dilutive EPS would not have been materially different from primary EPS presented
in the accompanying consolidated financial statements.
6
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In July 1997, FASB issued Statement of Financial Accounting Standards No. 130 -
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards
for reporting and displaying comprehensive income and its components in a full
set of general purpose financial statements. SFAS 130 is effective for fiscal
years beginning after December 15, 1997, with earlier application permitted.
The Company is currently assessing the impact of SFAS 130.
E. Subsequent Event
----------------
In October 1997, Cambridge Technology Capital Fund I L.P. (the "Fund") was
formed with committed capital of approximately $23.4 million through the first
closing. The Fund is a limited partnership and a wholly owned subsidiary of the
Company acts as the sole general partner of the Fund's general partner. The
Company's capital commitment to the Fund is approximately $6.0 million. No more
than two-thirds of the Fund's committed capital may be called before October
1999 without approval of the Fund's partners. The balance of the Fund's capital
will be provided by institutional investors and directors and employees of the
Company. The Fund intends to invest in expansion stage, private companies
providing products and services within areas of the Company's strategic
expertise.
7
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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") is an
international consulting and systems integration firm which provides services
for strategic consulting, process innovation, custom and package software
deployment (including Enterprise Resource Planning applications), networking,
and training to rapidly deliver strategic business information systems. Working
primarily with a fixed time/fixed fee price model, the Company continued to post
strong operating results for the quarter ended September 30, 1997. Net revenues
for the third quarter of 1997 increased 50% to $96.1 million compared to $63.9
million for the same period in 1996, reflecting increased demand for the
Company's services, in North America and International regions. Net income for
the quarter ended September 30, 1997, increased 69% to $9.5 million, or $.17 per
share compared to $5.6 million, or $.10 per share for the same period in 1996.
The Company continued to experience increased demand for its services in North
America and international regions for the third quarter of 1997, while
maintaining a focus on developing and implementing integrated service offerings
for the Company and its 1996 acquisitions of Ramos & Associates, Inc. (now known
as Cambridge Enterprise Resource Solutions (ERS)) and NatSoft S.A. (now known as
Cambridge Switzerland). Total net revenues in North America grew 54% in the
third quarter of 1997 compared to the same period in 1996. Both 1996
acquisitions continued to post strong results for the third quarter. ERS and
Cambridge Switzerland increased revenue by 12% and 153%, respectively, over the
second quarter of 1997. The Company believes that both ERS and Cambridge
Switzerland are well positioned for the fourth quarter of 1997 as they continue
to strengthen their client base. In order to support the increased demand for
the Company's services, total Company headcount increased to 2,521 at September
30, 1997, from 1,824 at December 31, 1996. The company remains confident in its
ability to hire and assimilate qualified personnel in meeting the demand for its
services in the fourth quarter of 1997.
During the third quarter of 1997, the Company continued to expand its business
in Latin America and Canada demonstrating increased acceptance of the Company's
service offerings in these markets. In addition, the Company opened an office in
Melbourne, Australia, Bangalore, India, and added offices in Newport Beach,
California, and Washington, D.C., bringing worldwide locations to 41 offices.
Results of Operations
Three Months Ended September 30, 1997, Compared to
Three Months Ended September 30, 1996
Net revenues increased 50% to $96.1 million in the 1997 period compared to $63.9
million in 1996 due principally to an increase in the volume of services
delivered to new clients, leveraging the existing client base by undertaking
additional projects, and increased demand for expanded service offerings,
including strong growth in the enterprise resource solutions service market.
North American net revenues remained strong, growing 54% to $75.2 million in
1997 from $48.7 million in 1996. International net revenues grew 38% to $20.9
million in 1997 from $15.2 million in 1996. International net revenue results
were negatively impacted by the continuing strength of the U.S. dollar against
international currencies, as revenue growth increased by 49% to $22.7 million
excluding the impact of foreign exchange fluctuations.
8
<PAGE>
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
$43.7 million or 45% of net revenues in 1997 and $29.4 million or 46% of net
revenues in 1996. The dollar increase resulted from hiring of additional project
personnel over 1996 staff levels to support the increased volume of services
delivered to clients and the related increase in payroll and payroll related
expenses. Worldwide project personnel headcount increased 39% to 2,121 employees
at September 30, 1997, from 1,531 employees at September 30, 1996. The decrease
as a percentage of net revenues is primarily due to improvements in project
personnel costs in the Company's North American and European operations. The
Company is experiencing an increase in salaries and wages for project personnel
due to a decrease in the pool of potential employees. While the Company
anticipates meeting its hiring goals for 1997, it does expect salaries and wages
to continue to increase. The Company periodically reviews and updates its
billing rates to cover the expected increase in costs. The Company currently
expects to maintain project personnel costs as a percentage of net revenues at
approximately the same level as fiscal year 1996 for the remainder of fiscal
year 1997, as new employees are hired and assimilated to support its business
growth.
General and administration expenses were $9.9 million or 10% of net revenues in
1997 compared to $7.8 million or 12% of net revenues in 1996. The percentage
decrease from 1996 is primarily due to the significant increase in net revenues
and the Company's continued focus on cost containment in this area. The dollar
increase reflects expenses associated with increased staff headcount to support
the Company's continued growth and geographic expansion in North America and
international regions. The Company currently expects to maintain general and
administration expenses as a percentage of net revenues at approximately the
current level for the remainder of 1997, while continuing to provide sufficient
support for the Company's global growth strategy.
Sales and marketing expenses were $8.2 million or 9% of net revenues in 1997
compared to $4.7 million or 7% of net revenues in 1996. The dollar and
percentage increase is primarily attributable to an increase in payroll and
payroll related expenses associated with the increase in sales and marketing
personnel from 94 at September 30, 1996, to 170 at September 30, 1997. This
increased headcount enables the Company to maximize potential client lead
generation through its regional field marketing staff with subsequent services
coordinated by its sales personnel. These increases also resulted from increased
participation in trade shows and marketing publications in order to provide
existing and potential clients with essential information about the Company and
its existing and new service offerings. The Company continued its investment in
marketing initiatives and educational and training programs that provide clients
with opportunities to learn about new technologies and client/server internet
trends, such as seminars for chief information officers, an internet-based CIO
information network, and interactive management lab programs. The Company
currently expects to maintain sales and marketing expenses as a percentage of
net revenues at approximately the current level for the remainder of 1997.
Other costs consist 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 $19.1 million in 1997 and $12.8 million in 1996 or 20% of net revenues for
both periods. The dollar increase resulted principally from increased facility,
travel, and employee training costs, including costs related to maintaining
newly opened and expanded offices in North America and international regions as
the Company continues to execute its global expansion strategy. As the Company
continues its headcount and facilities growth to support current and anticipated
increases in demand for its services, the Company currently expects to maintain
its other costs as a percentage of net revenues at approximately the current
level for the remainder of 1997.
Interest income increased to $632,000 in 1997 from $255,000 in 1996. This
increase reflects growth in cash and investment balances and higher average
interest rates obtained in 1997 compared to 1996. The Company's investments
consist primarily of tax exempt investment grade municipal bonds which mature
9
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within one year from the date of purchase, overnight repurchase agreements, and
short term commercial paper.
Foreign exchange loss was $65,000 in 1997 compared to $66,000 in 1996 related to
foreign currency exchange rate fluctuations associated with intercompany
balances. The exchange loss is primarily due to unfavorable fluctuations in
European currencies in the third quarter of 1997. The Company maintains monthly
foreign exchange forward contracts to hedge against the risk of changes in
foreign exchange rates associated with intercompany balances. This risk coverage
is dependent upon forecasted intercompany activities at the beginning of each
month and the exchange rate gains and losses are directly related to the
accuracy of such forecasted amounts. As of September 30, 1997, the Company held
foreign exchange contracts of approximately $4.4 million.
The Company's effective income tax rate in 1997 decreased to 40.0% from 40.3% in
1996. The Company's effective tax rate may vary from period to period based on
the Company's future expansion into areas of varying country, state, and local
statutory income tax rates.
Net income was $9.5 million or $.17 per share for the 1997 period as compared to
$5.6 million or $.10 per share for the same period in 1996. The Company
increased its net income per share despite a 2% increase in the number of common
and common equivalent shares outstanding, primarily due to stock options granted
to employees and shares issued under the employee stock purchase plan.
Nine Months Ended September 30, 1997, Compared to
Nine Months Ended September 30, 1996
Net revenues increased 50% to $250.5 million in 1997 compared to $167.4 million
in 1996 due principally to an increase in the volume of services delivered to
new clients, leveraging the existing client base by undertaking additional
projects, and increased demand for expanded service offerings, including strong
growth in the enterprise resource solutions service market. North American net
revenues remained strong, growing 53% to $194.3 million in 1997 from $126.8
million in 1996. International net revenues grew 38% to $56.2 million in 1997
from $40.6 million in 1996. International net revenue results were negatively
impacted by the continuing strength of the U.S. dollar against international
currencies, as revenue growth increased by 49% to $60.5 million excluding the
impact of foreign exchange fluctuations.
Project personnel costs were $113.4 million or 45% of net revenues in 1997
compared to $78.0 million or 47% of net revenues in 1996. The dollar increase
resulted from hiring of additional project personnel over 1996 staff levels to
support the increased volume of services delivered to clients and the related
increase in payroll and payroll related expenses. The decrease as a percentage
of net revenues is primarily due to improvements in project personnel costs in
the Company's North American and European operations. The Company currently
expects that its project personnel costs will increase to approximately 46% of
net revenues on a full year basis as salaries and wages increase while the
Company attempts to attract new employees.
General and administration expenses were $27.7 million or 11% of net revenues in
1997 compared to $20.6 million or 12% of net revenues in 1996. The dollar
increase reflects expenses associated with increased staff headcount to support
the Company's continued growth and geographic expansion in North America and
international regions. The percentage decrease from 1996 is primarily due to the
significant increase in net revenues and the Company's continued focus on cost
containment in this area. The Company currently expects to maintain general and
administration expenses at approximately 11% of net revenues on a full year
basis.
10
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Sales and marketing expenses were $21.5 million or 9% of net revenues in 1997
compared to $12.4 million or 7% of net revenues in 1996. The dollar and
percentage increase is primarily attributable to an increase in payroll and
payroll related expenses associated with the increase in sales and marketing
personnel from 94 at September 30, 1996, to 170 at September 30, 1997. This
increased headcount enables the Company to maximize potential client lead
generation through its regional field marketing staff with subsequent services
coordinated by its sales personnel. These increases also resulted from increased
participation in trade shows and marketing publications in order to provide
existing and potential clients with essential information about the Company and
its existing and new service offerings. The Company continued its investment in
marketing initiatives and educational and training programs that provide clients
with opportunities to learn about new technologies and client/server internet
trends, such as seminars for chief information officers, an internet-based CIO
information network, and interactive management lab programs. The Company
currently expects to maintain sales and marketing expenses as a percentage of
net revenues at approximately the current level for 1997 on a full year basis.
Other costs were $48.2 million or 19% of net revenues in 1997 compared to $31.8
million or 19% of net revenues in 1996. The dollar increase from 1996 resulted
principally from increased facility, travel, and employee training costs,
including costs related to maintaining newly opened and expanded offices in
North America and international regions as the Company continues to execute its
global expansion strategy. The Company currently expects to maintain other costs
as a percentage of net revenues at approximately the current level on a full
year basis.
Interest income increased to $1.6 million in 1997 from $655,000 in 1996. This
increase is principally due to increased cash and investment balances and higher
average interest rates obtained in 1997 compared to 1996. The Company's
investments consist primarily of tax exempt investment grade municipal bonds
which mature within one year from the date of purchase, overnight repurchase
agreements, and short term commercial paper.
Foreign exchange loss was $147,000 in 1997 compared to $82,000 in 1996 related
to foreign currency exchange rate fluctuations associated with intercompany
balances. The dollar increase is primarily due to unfavorable fluctuations in
European currencies in the nine months ended September 30, 1997, compared to the
same period in 1996.
The Company's effective income tax rate in 1997 and 1996 was 40%. The Company's
effective tax rate may vary from period to period based on the Company's future
expansion into areas of varying country, state, and local statutory income tax
rates.
Net income was $24.6 million or $.45 per share for the 1997 period as compared
to $15.1 million or $.28 per share for the same period in 1996. The Company
increased its net income per share despite a 2% increase in the number of common
and common equivalent shares outstanding, primarily due to stock options granted
to employees and shares issued under the employee stock purchase plan.
Liquidity and Capital Resources
The Company continues to generate cash flow from operations to fund its business
growth and geographic expansion. In addition, the Company continues to operate
primarily debt-free and enhance its working capital position. Working capital
increased to $104.1 million at September 30, 1997, from $68.5 million at
December 31, 1996. This increase was primarily due to increases in accounts
receivable, proceeds from the exercise of stock options, partially offset by
cash used for capital expenditures related to office expansions and computer
equipment for new employees and an increase in accounts payable. The Company's
days sales in accounts receivable was 75 days during the third quarter of 1997
compared to 79 days for the quarter ended September 30, 1996. The decrease in
days sales in accounts receivable
11
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is primarily due to the combined focus from the Company's treasury function and
the involvement of project management staff in the collection process.
Net cash provided by operating activities increased by $13.0 million to $25.2
million in 1997 from $12.2 million for the comparable period in 1996. The
significant increases in net income, tax benefit from the exercise of stock
options, deferred revenue, accounts payable, and accrued expenses was partially
offset by the increases in accounts receivable and prepaid expenses and other
current assets.
Capital expenditures of $14.3 million through September 30, 1997, were used
principally for computer equipment to support the Company's expansion
activities, upgrading employee workstations to the latest technologies, and
leasehold improvements related to the Company's growth of new offices in North
America and international regions. Capital expenditures for 1997 are expected to
approximate $20.0 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 and the Company's continual global expansion to new markets.
In accordance with the Company's strategic acquisition plans, the Company
evaluates, on an ongoing basis, potential acquisitions of companies or
technologies that may complement its business.
The Company maintains a $20.0 million uncollateralized revolving credit facility
(the "Facility") with Fleet National Bank ("Fleet Bank"). The Facility, which
expires on June 30, 1998, allows 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 including tangible net worth, debt to equity, and operating
profitability. At September 30, 1997 and December 31, 1996, the Company was in
compliance with these financial ratio requirements and no borrowings have been
made under the Facility.
In October 1997, Cambridge Technology Capital Fund I L.P. (the "Fund") was
formed with committed capital of approximately $23.4 million through the first
closing. The Fund is a limited partnership and a wholly owned subsidiary of the
Company acts as the sole general partner of the Fund's general partner. The
Company's capital commitment to the Fund is approximately $6.0 million. No more
than two-thirds of the Fund's committed capital may be called before October
1999 without approval of the Fund's partners. The balance of the Fund's capital
will be provided by institutional investors and directors and employees of the
Company. The Fund intends to invest in expansion stage, private companies
providing products and services within areas of the Company's strategic
expertise.
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. 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 1998, to meet
the Company's short-term and long-term working capital requirements and to fund
the expansion of the Company's business. In order to meet client demand for the
Company's services in 1997 and 1998, the Company expects to continue to increase
its professional staff and to open additional sales and operations offices in
North America, Latin America, Asia, and Europe. Although the Company's plans to
open offices and hire personnel are driven in response to increased demand for
the Company's 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.
12
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This Form 10-Q includes forward-looking statements which involve risks and
uncertainties, particularly as to net revenues and profits, 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 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 period,
the number of working days in a period, employee hiring and utilization rates,
acceptance and profitability of the Company's services in new territories, and
integration of companies acquired. 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 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
a. Exhibits
(3.1) Amended and Restated Certificate of Incorporation of the
Company, as amended May 15, 1996, and further amended by a
filing of a Certificate of Designation, effective July 3,
1997 (filed as part of this report).
(4) Rights Agreement, dated as of June 23, 1997, by and between
Cambridge Technology Partners (Massachusetts), Inc. and
ChaseMellon Shareholder Services, LLC, as Rights Agent
(incorporated herein by reference to Exhibit 4.1 to the
Company's Report on Form 8-K, dated June 23, 1997, and filed
on July 1, 1997).
(11.1) Statement Regarding Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
----------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- ---------------- ---------------
(in thousands except per share data)
(unaudited)
<S> <C> <C> <C> <C>
Net income $ 9,470 $ 5,606 $ 24,623 $ 15,058
=============== =============== ================ ===============
Weighted average number of
common shares outstanding 49,958 47,326 49,334 46,984
Dilutive effect of common
equivalent shares of stock
options and warrants 6,265 7,979 6,057 7,247
--------------- --------------- ---------------- ---------------
Weighted average number of
common and common
equivalent shares outstanding 56,223 55,305 55,391 54,231
=============== =============== ================ ===============
Net income per share (1) $ .17 $ .10 $ .45 $ .28
=============== =============== ================ ===============
</TABLE>
(1) Primary and fully diluted income per share are the same for each
period presented.
b. Report on Form 8-K
A report on Form 8-K was filed by the Company on July 1, 1997, to
disclose that the Board of Directors of the Company on June 23, 1997,
approved and adopted a Rights Plan pursuant to a Rights Agreement, and
in connection therewith, declared a dividend of one preferred stock
purchase right for each share of the Company's common stock, $.01 par
value per share, to be paid on July 3, 1997, to holders of record of
the Company at the close of business on July 3, 1997.
14
<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: November 12, 1997 By: /s/ Arthur M. Toscanini
----------------------------
Arthur M. Toscanini
Executive Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Certificate of Incorporation of the
Company, as amended May 15, 1996, and further amended by a
filing of a Certificate of Designation, effective
July 3, 1997 (filed as part of this report).
4.0 Rights Agreement, dated as of June 23, 1997, by and between
Cambridge Technology Partners (Massachusetts), Inc. and
ChaseMellon Shareholder Services, LLC, as Rights Agent
(incorporated herein by reference to Exhibit 4.1 to the
Company's Report on Form 8-K, dated June 23, 1997, and
filed on July 1, 1997).
11.1 Statements Regarding Computation of Earnings per Share
(filed as part of this report).
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 corporation
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
<PAGE>
-2-
Amendment of 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 CHANGE OF LOCATION OF REGISTERED
OFFICE AND OF REGISTERED AGENT
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Cambridge Technology Partners (Massachusetts), Inc.
2. The registered office of the corporation within the State of Delaware is
hereby changed to 32 Loockerman Square, Suite L-100, City of Dover, County
of Kent.
3. The registered agent of the corporation within the State of Delaware is
hereby changed to The Prentice-Hall Corporation System, Inc., the business
office of which is identical with the registered office of the corporation
as hereby changed.
4. The corporation has authorized the changes hereinbefore set forth by
resolution of its Board of Directors.
Signed on May 26, 1993.
/s/ James K. Sims
--------------------------
President
/s/ Arthur M. Toscanini
- -----------------------
Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
--------------------
($0.01 Par Value)
of
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
--------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------
Cambridge Technology Partners (Massachusetts), Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY:
FIRST: That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, the Board of
Directors of the Corporation adopted the following resolutions creating a series
of 100,000 shares of Preferred Stock, $0.01 par value per share, designated as
Series A Junior Participating Preferred Stock:
RESOLVED: That pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of
Article FOURTH, Section B, of its Certificate of Incorporation, a
series of Preferred Stock of the Corporation (the "Series A Junior
Participating Preferred Stock") be, and it hereby is, created, and
that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special
rights of the shares of the Series A Junior Participating Preferred
Stock, and the qualifications, limitations or restrictions thereof,
shall be as set forth in Appendix A attached hereto.
RESOLVED: That the President, Chief Financial Officer or any Vice
President and the Secretary or any Assistant Secretary of the
Corporation be, and they hereby are, authorized and directed, in the
name and on behalf of the Corporation, to file the Certificate of
Designations in accordance with the provisions of Delaware General
Corporation Law and to take such actions as they may deem necessary
or appropriate to carry out the intent of the foregoing resolution.
SECOND: That the aforesaid resolutions were duly and validly adopted in
accordance with the applicable provisions of Section 151 of the General
Corporation Law of the State of Delaware and the Certificate of Incorporation
and By-Laws of the Corporation.
THIRD: That the aforesaid designation shall become effective on July 3,
1997.
<PAGE>
IN WITNESS WHEREOF, said Cambridge Technology Partners (Massachusetts),
Inc. has caused this Certificate to be executed, this 23rd day of June, 1997.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By: /s/ Arthur M. Toscanini
-----------------------
Name: Arthur M. Toscanini
-------------------
Title: Executive Vice President
------------------------
<PAGE>
-1-
Appendix A
----------
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series A Junior Participating Preferred Stock" and the number
of shares constituting such series shall be 100,000. Such number of shares may
be increased or decreased by resolution of the Board of Directors; provided,
--------
however, that no decrease shall reduce the number of shares of Series A Junior
- -------
Participating Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Junior Participating Preferred Stock.
Section 2. Dividends and Distributions.
----------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Junior Participating Preferred Stock, in preference to the holders
of Common Stock, $.01 par value per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds of the Corporation
legally available for the payment of dividends, quarterly dividends payable in
cash on January 31, April 30, July 31 and October 31 in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $10.00 or (b) subject to the provision for adjustment hereinafter
set forth, 1,000 times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision, combination or
consolidation of the outstanding Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series A Junior Participating
Preferred Stock before the dividend or distribution declared on the Common Stock
is paid or set apart; provided, however, that, in the event no dividend or
-------- -------
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
<PAGE>
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
-------------
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock or
effect a subdivision, combination of consolidation of the outstanding Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, by law, or in any other
Certificate of Designations creating a series of Preferred Stock or any similar
stock, the holders of shares of Series A Junior Participating Preferred Stock,
the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
<PAGE>
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
---- -----
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the Chairman of the
Board or the President, of the Corporation. Notice of such meeting and of any
annual meeting at which holders of Preferred Stock are entitled to vote pursuant
to this paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall be called for a
time not earlier than 10 days and not later than 60 days after such order or
request. Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of stock
shall include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in the certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or
<PAGE>
bylaws). Any vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled by a majority of the
remaining Directors.
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on or make any other distributions on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
-----------------
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of
<PAGE>
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
--------------------------------------
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $1,000.00 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment (the "Series A Liquidation Preference"). Following the payment
of the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit payment
in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(D) Neither the consolidation, merger or other business combination of
the Corporation with or into any other corporation nor the sale, lease, exchange
or conveyance of all or any part of the property, assets or business of the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly
<PAGE>
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
-- ----------
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred
-------
Stock shall rank junior to all other series of the Corporation's Preferred Stock
as to the payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
---------
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least seventy-five percent of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
together as a single class.
Section 11. Fractional Shares. Series A Junior Participating
-----------------
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 41,836
<SECURITIES> 15,251
<RECEIVABLES> 82,616
<ALLOWANCES> 1,363
<INVENTORY> 0
<CURRENT-ASSETS> 166,228
<PP&E> 43,899
<DEPRECIATION> 16,069
<TOTAL-ASSETS> 201,061
<CURRENT-LIABILITIES> 62,126
<BONDS> 0
0
0
<COMMON> 502
<OTHER-SE> 137,851
<TOTAL-LIABILITY-AND-EQUITY> 201,061
<SALES> 0
<TOTAL-REVENUES> 250,501
<CGS> 0
<TOTAL-COSTS> 210,838
<OTHER-EXPENSES> 1,472
<LOSS-PROVISION> 278
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 41,038
<INCOME-TAX> 16,415
<INCOME-CONTINUING> 24,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,623
<EPS-PRIMARY> 0.45
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</TABLE>
