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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 June 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 0-21040
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1320610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
304 VASSAR STREET,
Cambridge, Massachusetts 02139
(Address of principal executive offices) (Zip Code)
(617) 374-9800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of July 31, 1998, there were 56,768,796 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 June 30, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION:
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5: OTHER INFORMATION 16
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
2
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 51,683 $ 39,496
Investments held to maturity 21,712 15,824
Accounts receivable, less allowance of $3,486 and $2,607
at June 30, 1998 and December 31, 1997, respectively 134,203 101,887
Unbilled revenue on contracts 9,687 8,231
Deferred income taxes 950 950
Prepaid expenses and other current assets 36,699 27,733
-------- --------
Total current assets 254,934 194,121
Property and equipment, net 41,975 35,403
Other assets 6,518 5,624
Goodwill, net 1,675 2,094
-------- --------
Total assets $305,102 $237,242
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,574 $ 18,998
Accrued expenses 47,373 36,235
Deferred revenue 14,356 9,502
Income taxes payable 21,983 19,361
Obligations under capital leases, current 127 143
Other current liabilities - 1,952
-------- --------
Total current liabilities 102,413 86,191
Obligations under capital leases 225 341
Deferred income taxes 923 923
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 250,000,000
shares; issued and outstanding 56,571,122 and 54,969,004
at June 30, 1998 and December 31, 1997, respectively 566 550
Additional paid-in capital 102,788 75,253
Retained earnings 102,084 76,445
Accumulated other comprehensive loss (3,897) (2,461)
-------- --------
Total stockholders' equity 201,541 149,787
-------- --------
Total liabilities and stockholders' equity $305,102 $237,242
======== ========
</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 June 30, Six Months Ended June 30,
---------------------------- --------------------------
1998 1997 1998 1997
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $146,330 $96,526 $279,816 $178,748
Costs and expenses:
Project personnel 65,156 43,444 125,177 79,864
General and administration 16,307 11,462 31,288 20,888
Sales and marketing 14,670 8,514 27,143 16,420
Other costs 28,098 18,506 54,410 33,930
-------- ------- -------- --------
Total operating expenses 124,231 81,926 238,018 151,102
-------- ------- -------- --------
Income from operations 22,099 14,600 41,798 27,646
Other income (expense):
Interest income 571 659 1,173 1,001
Interest expense (38) (43) (83) (76)
Foreign exchange (loss) gain (24) 36 (157) 5
-------- ------- -------- --------
Income before income taxes 22,608 15,252 42,731 28,576
Provision for income taxes 9,043 6,131 17,092 11,501
-------- ------- -------- --------
Net income $ 13,565 $ 9,121 $ 25,639 $ 17,075
======== ======= ======== ========
Basic net income per share $ .24 $ .17 $ .46 $ .32
======== ======= ======== ========
Diluted net income per share $ .22 $ .16 $ .42 $ .30
======== ======= ======== ========
Weighted average number of
common shares outstanding 56,306 52,544 55,901 52,274
======== ======= ======== ========
Weighted average number of
common and common
equivalent shares outstanding 61,723 58,079 61,334 58,008
======== ======= ======== ========
</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>
Six Months Ended June 30,
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,639 $ 17,075
Amounts that reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 6,268 3,637
Tax benefit from exercise of stock options 10,189 4,984
Changes in assets and liabilities:
Increase in accounts receivable (32,640) (26,434)
(Increase) decrease in unbilled revenue on contracts (1,545) 848
Increase in prepaid expenses and other current assets (9,063) (2,303)
(Decrease) increase in accounts payable (408) 4,968
Increase in accrued expenses 9,968 9,717
Increase in deferred revenue 4,846 7,890
Increase in income taxes payable 2,591 2,867
Other, net (875) (1,671)
-------- --------
Net cash provided by operating activities 14,970 21,578
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (12,520) (10,439)
Purchase of investments held to maturity (13,557) (9,255)
Maturity of investments 7,669 7,511
-------- --------
Net cash used for investing activities (18,408) (12,183)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan (823) -
Obligations under capital leases (121) (33)
Dividend distribution (1,129) (1,817)
Proceeds from employee stock purchase plan 3,390 2,140
Proceeds from exercise of stock options 13,972 4,564
-------- --------
Net cash provided by financing activities 15,289 4,854
-------- --------
Effect of foreign exchange rate changes on cash 336 (235)
Net increase in cash and cash equivalents 12,187 14,014
Cash and cash equivalents at beginning of period 39,496 26,087
-------- --------
Cash and cash equivalents at end of period $ 51,683 $ 40,101
======== ========
</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 REPORTING
------------------
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. In November
1997, the Company acquired all of the outstanding capital stock of Peter
Chadwick Holdings Limited ("Peter Chadwick"). The acquisition of Peter Chadwick
was accounted for using the pooling of interests method of accounting. All prior
period historical consolidated financial statements presented herein have been
restated to include the financial position, results of operations, and cash
flows of Peter Chadwick. Certain prior period amounts have been reclassified to
conform to current period presentation. In the opinion of management, the
consolidated financial statements reflect all normal and recurring adjustments,
which are necessary for a fair presentation of the Company's financial position,
results of operations, and cash flows as of the dates and for the periods
presented. The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Consequently, these statements do not include all the disclosures
normally required by generally accepted accounting principles for annual
financial statements nor those normally made in the Company's Annual Report on
Form 10-K. Accordingly, reference should be made to the Company's Annual Report
on Form 10-K for additional disclosures, including a summary of the Company's
accounting policies. The consolidated results of operations for the three and
six months ended June 30, 1998, are not necessarily indicative of results for
the full year.
B. REVOLVING CREDIT FACILITY
-------------------------
In June 1998, the Company obtained a commitment from The Chase Manhattan Bank
("Chase") to provide a $50.0 million unsecured senior revolving credit facility
(the "Facility") through a syndication arrangement. The Facility, which is
expected to be in place by August 31, 1998, expires three years from its closing
date and replaces the Company's previously maintained $20.0 million revolving
credit facility that expired on June 30, 1998. The Facility will be administered
by Chase and will carry a commitment fee, payable quarterly in arrears,
calculated based on the unused portion of the Facility and a price grid as set
forth in the credit agreement currently under negotiation with Chase. The
Facility will permit the Company to elect any of three possible interest rate
formulas as defined in the credit agreement. Interest will be payable in arrears
based on an interest period determined by the interest rate elected by the
Company. The Facility will require, among other things, the Company to maintain
certain financial ratios, including debt service coverage, debt to capital, and
net worth. At June 30, 1998 and December 31, 1997, the Company had no balance
outstanding under its revolving credit facility.
C. OTHER CURRENT LIABILITIES
-------------------------
In April 1997, Peter Chadwick acquired the assets of a training facility located
in the United Kingdom. Peter Chadwick entered into a loan agreement with
National Westminister Bank (the "Loan Agreement") to finance this acquisition.
In March 1998, the Company terminated this Loan Agreement and repaid the
outstanding principal balance of approximately $823,000.
D. NET INCOME PER SHARE
--------------------
The Company adopted Statement of Financial Accounting Standard No. 128,
"Earnings per Share," ("SFAS 128") beginning with the year ended December 31,
1997, which includes retroactively restating
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earnings per share for all prior periods for which earnings per share ("EPS")
data is presented. SFAS 128 requires the presentation of basic and diluted EPS.
Basic net income per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted net income per share is computed using the weighted average
number of common shares outstanding plus the dilutive effect of common stock
equivalents (using the treasury stock method). The following table presents the
calculation of earnings per share for the three and six months ended June 30,
1998 and 1997 (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ----------------------
1998 1997 1998 1997
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net income $13,565 $ 9,121 $25,639 $17,075
======= ======= ======= =======
Basic:
Weighted average common
shares outstanding 56,306 52,544 55,901 52,274
======= ======= ======= =======
Net income per share $ .24 $ .17 $ .46 $ .32
======= ======= ======= =======
Diluted:
Weighted average common
shares outstanding 56,306 52,544 55,901 52,274
Dilutive effects of stock options
and warrants 5,417 5,535 5,433 5,734
------- ------- ------- -------
Weighted average common and
common equivalent shares
outstanding 61,723 58,079 61,334 58,008
======= ======= ======= =======
Net income per share $ .22 $ .16 $ .42 $ .30
======= ======= ======= =======
</TABLE>
E. 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
generally have maturities of one month. The impact of exchange rate movements
on contracts is recorded in other income in the period in which the exchange
rates change, generally consistent with the term of the contract. As of June
30, 1998, the Company held foreign exchange forward contracts of approximately
$10.2 million and there were no related deferred gains and losses. The Company
does not hold foreign exchange contracts for trading purposes.
F. COMPREHENSIVE INCOME
--------------------
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the
presentation of comprehensive income and its components. Comprehensive income
presents a measure of all changes in equity that result from recognized
transactions and other economic events during the period other than transactions
with stockholders. SFAS 130 requires restatement of all prior period financial
statements presented and is effective for the periods beginning after December
15, 1997. The Company has elected to disclose this information in its annual
Statement of Stockholders' Equity. The following table presents the calculation
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of comprehensive income and its components for the three and six months ended
June 30, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- --------------------
1998 1997 1998 1997
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Comprehensive income:
Net income $13,565 $9,121 $25,639 $17,075
Foreign currency translation
adjustments 237 (849) (1,436) (2,024)
------- ------ ------- -------
Comprehensive income $13,802 $8,272 $24,203 $15,051
======= ====== ======= =======
</TABLE>
G. NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), was issued. SOP
98-1 provides guidance on applying generally accepted accounting principles in
addressing whether and under what condition the costs of internal-use software
should be capitalized. SOP 98-1 is effective for transactions entered into in
fiscal years beginning after December 15, 1998, however earlier adoption is
encouraged. The Company adopted the guidelines of SOP 98-1 as of January 1,
1998.
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal
years beginning after December 15, 1997. Interim reporting disclosures are not
required in the first year of adoption. SFAS 131 specifies revised guidelines
for determining an entity's operating segments and the type and level of
financial information to be disclosed. SFAS 131 changes current practice under
SFAS 14 by establishing a new framework on which to base segment reporting and
expands the required disclosures for each segment. The Company will adopt SFAS
131 in the fourth quarter of 1998 and is currently determining the impact of
such adoption on its reporting as currently presented.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded for each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company is currently
determining the impact of the adoption of SFAS 133 on the Company's results of
operations and financial position.
8
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Cambridge Technology Partners (Massachusetts), Inc. (the "Company") is an
international management consulting and systems integration firm. The Company
combines management consulting, information technology ("IT") strategy, process
innovation and implementation, custom and package software deployment, network
services, and educational services to rapidly deliver end-to-end business
systems for clients. In performing its services, the Company employs a rapid
development methodology that features an iterative approach and conducts
facilitated workshops that bring together key client users, executives, and IT
professionals to achieve consensus on the business case, strategic objectives,
and functionality of a business solution. The Company believes that this
approach permits the delivery of results in unprecedented time frames, typically
within three to twelve months. Working primarily with a fixed-price, fixed-
timetable model with client involvement at all stages of the process, the
Company continued to post strong operating results for the quarter ended June
30, 1998. Net revenues for the second quarter of 1998 increased 52% to $146.3
million compared to $96.5 million for the same period in 1997, reflecting
increased demand for the Company's services worldwide. Net income for the
quarter ended June 30, 1998, increased 49% to $13.6 million, or $.22 per share
(diluted) compared to $9.1 million, or $.16 per share (diluted) for the
comparable period in 1997.
In the second quarter of 1998, the Company continued to experience increased
demand for its services worldwide. North American net revenues grew 54% for the
quarter ended June 30, 1998, compared to the same period in 1997. This growth in
North American net revenues was fueled by increased demand across all geographic
areas for the Company's services, including custom and package client/server
applications, enterprise resource planning ("ERP") solutions, management
consulting services, and interactive solutions. Internationally, net revenues
grew 47% in the second quarter of 1998 compared to the same period a year ago.
In the second quarter of 1998, the Company commenced approximately 230 new
engagements worldwide. In order to support the increased demand for the
Company's services, total company headcount increased to 3,487 at June 30, 1998,
from 3,071 at December 31, 1997. The Company will continue to focus on hiring
and assimilating appropriate personnel to service its clients in the upcoming
quarters of 1998. While the Company's employee turnover has increased to an
annualized rate of 25% in 1998 from 23% in 1997, the Company expects that this
increase should not have a detrimental impact on the Company's ability to meet
its growth goals. The Company is continuing to hire in accordance with its
current and anticipated demand requirements and had 178 offers of employment
accepted as of July 31, 1998 for 1998 start dates.
In the second quarter of 1998, the Company generated an increased number of
cross business unit engagements, particularly driven by the Company's most
recent acquisition, Peter Chadwick. Demand for the Company's ERP business
remained strong in the second quarter of 1998 as the Company continued to grow
its Cambridge Momentum (SM) service offerings. The Company also developed and
introduced a rapid, fixed-time/fixed-price ERP deployment strategy for middle-
market organizations in the first quarter of 1998. Customer response to these
new service offerings has been positive.
During the first half of 1998, the Company strengthened its operations in Europe
by adding offices in Copenhagen, Denmark, Utrecht, Netherlands, Brussels,
Belgium, and Paris, France, bringing worldwide total office count to 49
locations at June 30, 1998. Committed to investing in the global expansion of
the Company, management believes that the Company is well positioned for
business growth going into the third quarter of 1998.
9
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998, COMPARED TO
THREE MONTHS ENDED JUNE 30, 1997
Net revenues increased 52% to $146.3 million in 1998 compared to $96.5 million
in 1997 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. North American
net revenues remained strong, growing 54% to $99.5 million in 1998 from $64.7
million in 1997. International net revenues grew 47% to $46.8 million in 1998
from $31.8 million in 1997. International net revenue results were negatively
impacted by the strengthening of the U.S. dollar against international
currencies. Excluding an $887,000 negative impact related to changes in foreign
exchange rates, consolidated net revenues for the quarter ended June 30, 1998,
would have been $147.2 million, or a 53% increase in net revenues compared to
the same period in 1997.
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
$65.2 million in 1998 and $43.4 million in 1997, or 45% of net revenues for both
periods. The dollar increase resulted from the hiring of additional project
personnel over 1997 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 33% to 2,868 employees
at June 30, 1998, from 2,162 employees at June 30, 1997. While the Company
anticipates meeting its hiring goals for the remainder of fiscal 1998,
competition for personnel with IT skills is intense and the Company expects
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 that project personnel costs as a percentage of net revenues
will increase to approximately 46% for the remainder of 1998 as the Company
invests in hiring and assimilating its employees to support its business growth.
Furthermore, in January 1998, the Company introduced staffing control
initiatives to better monitor its subcontractor costs. While subcontractor costs
continued to be a notable component of project personnel costs, subcontractor
costs were reduced in the first and second quarters of 1998 compared to the
third and fourth quarters of 1997 and were within management's expectations.
Other initiatives that are part of the Company's focus on containing project
personnel costs include the continuous review and measurement of utilization,
employee retention, and billability. In January 1998, the Company implemented
an improved worldwide time entry system to serve as the basis for its
productivity measurements.
General and administration expenses were $16.3 million or 11% of net revenues in
1998 compared to $11.5 million or 12% of net revenues in 1997. The percentage
decrease from 1997 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
internationally. The Company currently expects to decrease its general and
administration expenses as a percentage of net revenues to approximately 10% for
the remainder of 1998, while continuing to provide sufficient support for the
Company's global growth strategy.
Sales and marketing expenses were $14.7 million or 10% of net revenues in 1998
compared to $8.5 million or 9% in 1997. The dollar and percentage increase are
primarily attributable to an increase in payroll and payroll related expenses
associated with the increase in sales and marketing personnel from
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165 at June 30, 1997, to 262 at June 30, 1998, the increase in sales commissions
related to the significant increase in net revenues, and travel related expenses
for the field sales and marketing groups. 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. The
dollar increase 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 through those conducted by its Management Lab
and the Cambridge Information Network (CIN). The Management Lab and CIN enable
clients to participate in both physical and virtual interactive forums to
discuss issues associated with adopting advanced information technology, as well
as key business, technology, and career management issues. The Company expects
to leverage its investment in sales and marketing expenditures made in the first
half of 1998, and thus anticipates an improvement as a percentage of net
revenues in this area. The Company expects its sales and marketing expenses as a
percentage of net revenues to decrease to approximately 9% for the remainder of
1998.
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 $28.1 million in 1998 and $18.5 million in 1997, or 19% of net revenues for
both periods. The dollar increase from 1997 resulted principally from increased
facility, travel, and employee training costs. As the Company continues its
headcount and facilities growth to support current and anticipated increases in
demand for its services, the Company expects to maintain other costs as a
percentage of net revenues at approximately 19% for the remainder of 1998.
Interest income decreased to $571,000 in 1998 from $659,000 in 1997. The 1997
amount included a $188,000 one-time gain from the sale of an investment. The
Company's cash and 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 $24,000 in 1998 compared to a gain of $36,000 in 1997.
Foreign exchange gains and losses were related to foreign currency exchange rate
fluctuations associated with intercompany balances. 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. The exchange rate gains and losses are directly related to the
accuracy of such forecasted amounts. As of June 30, 1998, the Company held
foreign exchange contracts of approximately $10.2 million.
The Company's effective income tax rate in 1998 was 40.0% compared to 40.2% a
year ago. 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 $13.6 million or $.22 per share (diluted) for the 1998 period as
compared to $9.1 million or $.16 per share (diluted) for the same period in
1997. The Company increased its net income per share by 38% despite a 6%
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.
11
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO
SIX MONTHS ENDED JUNE 30, 1997
Net revenues increased 57% to $279.8 million in 1998 compared to $178.8 million
in 1997 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. North American
net revenues remained strong, growing 60% to $192.3 million in 1998 from $120.5
million in 1997. International net revenues grew 50% to $87.5 million in 1998
from $58.3 million in 1997. International net revenue results were negatively
impacted by the strengthening of the U.S. dollar against international
currencies. Excluding a $1.9 million negative impact related to changes in
foreign exchange rates, consolidated net revenues for the quarter ended June 30,
1998, would have been $281.7 million, or a 58% increase in net revenues compared
to the same period in 1997.
Project personnel costs were $125.2 million in 1998 and $79.9 million in 1997,
or 45% of net revenues for both periods. The dollar increase resulted from the
hiring of additional project personnel over 1997 staff levels to support the
increased volume of services delivered to clients and the related increase in
payroll and payroll related expenses. Average worldwide project personnel for
the six-month period ended June 30, 1998, increased 43% from the comparable
period in 1997.
General and administration expenses were $31.3 million or 11% of net revenues in
1998 compared to $20.9 million or 12% of net revenues in 1997. The percentage
decrease from 1997 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
internationally.
Sales and marketing expenses were $27.1 million or 10% of net revenues in 1998
compared to $16.4 million or 9% in 1997. The dollar and percentage increase are
primarily attributable to an increase in payroll and payroll related expenses
associated with a 60% increase in average sales and marketing personnel in the
first half of 1998, compared to the same period in 1997, the increase in sales
commissions related to the significant increase in net revenues, and travel
related expenses for the field sales and marketing groups. 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. The dollar and percentage increase also resulted from
increased participation in trade shows and marketing publications.
Other costs were $54.4 million in 1998 and $33.9 million in 1997, or 19% of net
revenues for both periods. The dollar increase from 1997 resulted principally
from increased facility, travel, and employee training costs.
Interest income increased to $1.2 million in 1998 from $1.0 million in 1997.
The increase reflects growth in cash and investment balances in 1998 compared to
1997. The Company's cash and 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 $157,000 in 1998 compared to a gain of $5,000 in 1997.
Foreign exchange gains and losses were related to foreign currency exchange rate
fluctuations associated with intercompany balances. The foreign exchange loss in
1998 is due primarily to unfavorable fluctuations in European and Latin American
currencies in 1998.
12
<PAGE>
The Company's effective income tax rate in 1998 decreased to 40.0% from 40.2% a
year ago. 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 $25.6 million or $.42 per share (diluted) for the 1998 period
compared to $17.1 million or $.30 per share (diluted) for the same period in
1997. The Company increased its net income per share by 40% despite a 6%
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 continued to operate primarily debt-free and enhance its working
capital position. Working capital increased to $152.5 million at June 30, 1998,
from $107.9 million at December 31, 1997. This increase was primarily due to
increases in accounts receivable, prepaid expenses and other current assets,
proceeds from exercise of stock options, and proceeds from shares issued under
the employee stock purchase plan, partially offset by cash used for capital
expenditures related to office expansions and computer equipment for new
employees and increases in accrued expenses, deferred revenue, and income taxes
payable. The Company's days sales in accounts receivable was 78 days during the
second quarter of 1998 compared to 77 days for the same period in 1997. The
increase in days sales in accounts receivable in 1998 is primarily due to the
timing of certain major receivable balances which were collected in the first
two weeks of July. In 1998, the Company began to include the reduction in days
sales outstanding as an individual metric for its employee bonus program. In
addition, the Company's treasury function, which is primarily responsible for
worldwide collection and cash management efforts, continues to focus on its
outstanding receivables by involving the Company's project management staff in
the collection process.
Net cash provided by operating activities was $15.0 million in 1998 compared to
$21.6 million for the comparable period in 1997. The increases in net income
and tax benefit from exercise of stock options, were more than offset by the
increases in accounts receivable, unbilled revenue on contracts, and prepaid
expenses and other current assets and a decrease in accounts payable.
Capital expenditures of $12.5 million in 1998 were used principally for computer
equipment to support the Company's expanding operations and employee
workstations and leasehold improvements related to the Company's expanding and
opening of new offices worldwide. Capital expenditures for 1998 are expected to
approximate $25.0 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 worldwide. 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.
In order to support the Company's current and anticipated business growth, the
Company obtained, in June 1998, a commitment from The Chase Manhattan Bank
("Chase") to provide a $50.0 million unsecured senior revolving credit facility
(the "Facility") through a syndication arrangement. The Facility, which is
expected to be in place by August 31, 1998, expires three years from its closing
date and replaces the Company's previously maintained $20.0 million revolving
credit facility that expired on June 30, 1998. The Facility will be administered
by Chase and will carry a commitment fee, payable quarterly in arrears,
calculated based on the unused portion of the Facility and a price grid as set
forth in the credit agreement currently under negotiation with Chase. The
Facility will permit the Company to elect any of three possible interest rate
formulas as defined in the credit agreement. Interest will be payable in arrears
based on an interest period determined by the interest rate elected by the
Company. The Facility
13
<PAGE>
will require, among other things, the Company to maintain certain financial
ratios, including debt service coverage, debt to capital, and net worth. At June
30, 1998 and December 31, 1997, the Company had no balance outstanding under its
revolving credit facility.
In the first quarter of 1998, the Company repaid the outstanding principal
balance of approximately $823,000 under a loan agreement entered into by Peter
Chadwick to finance the purchase of a training facility located in the United
Kingdom. This loan agreement was then terminated. (see Note C of the Notes to
the Consolidated Financial Statements).
In January 1998, the Company entered into an agreement with Boston Properties
Limited Partnership ("Boston Properties") to lease a building to be constructed
and developed by Boston Properties. This approximately 177,000 square foot
building, which is located in Cambridge, Massachusetts, will house the Company's
Northeast operations, new employee training facility, and corporate departments.
The lease agreement is for a ten-year period, which is expected to commence in
June 1999. Pursuant to the terms of the lease agreement, the Company paid a
$1.3 million security deposit in January 1998. The Company's current building
is expected either to continue to be used for project development and other
activities or subleased through its remaining lease term.
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 1999, to meet
the Company's 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 1998, the Company expects to continue to increase its professional staff and
to open additional sales and operations offices in North America and
internationally. Although the Company's plans to open offices and hire
personnel are 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, political, and regulatory conditions, could also
adversely affect future results and liquidity.
14
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use," was issued (see Note G of
Notes to Consolidated Financial Statements).
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. Interim reporting disclosures are not
required in the first year of adoption (see Note G of Notes to Consolidated
Financial Statements).
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company)
(see Note G of Notes to Consolidated Financial Statements).
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes forward-looking statements (statements that are not
historical facts) such as statements about future net revenues and profits,
capital expenditures, liquidity sources and needs, working capital needs,
increases in personnel and related costs, opening additional offices, and
project personnel costs, general and administrative expenses, sales and
marketing expenses, and other costs as a percentage of net revenues. These
forward-looking statements are subject to several risks and uncertainties and
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, retention, 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 period to period.
15
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
(a) The annual meeting of stockholders was held on May 13, 1998.
(b) Not applicable.
(c) A vote was proposed to: (1) elect a Board of Directors to serve for the
ensuing year; (2) amend the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of common stock,
par value $.01 per share (the "Common Stock"), from 120,000,000 shares to
250,000,000 shares; (3) amend the Company's 1991 Stock Option Plan (the
"1991 Plan") to increase the number of shares of Common Stock available for
issuance under the 1991 Plan by 4,000,000 shares; and (4) ratify the
selection of the firm of Coopers & Lybrand L.L.P. as independent
accountants for the fiscal year ending December 31, 1998.
The voting results were as follows:
<TABLE>
<CAPTION>
Votes Withheld Votes Broker
Votes for Against Authority Abstained Non-votes
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(1) James K. Sims 47,901,844 N/A 1,686,582 N/A -
Warren V. Musser 47,518,362 N/A 2,070,064 N/A -
Robert E. Keith, Jr. 47,941,282 N/A 1,647,144 N/A -
Jack L. Messman 47,908,432 N/A 1,679,994 N/A -
John W. Poduska, Sr., Ph.D. 47,526,210 N/A 2,062,216 N/A -
James I. Cash, Jr., Ph.D. 47,904,232 N/A 1,684,194 N/A -
James D. Robinson, III 47,901,757 N/A 1,686,669 N/A -
(2) Increase in authorized shares
of Common Stock 47,079,081 2,308,946 - 146,631 53,768
(3) Increase in number of shares
under the 1991 Plan 26,885,802 19,022,787 - 166,259 3,513,578
(4) Coopers & Lybrand L.L.P. 49,534,453 17,193 - 36,780 -
(d) Not applicable.
</TABLE>
ITEM 5. OTHER INFORMATION
- ------- -----------------
Proposals of stockholders intended for inclusion in the proxy statement to be
furnished to all stockholders entitled to vote at the next annual meeting of the
Company's stockholders must be received at the Company's principal executive
offices no later than December 5, 1998. Proposals of stockholders to be made at
the next annual meeting of the Company's stockholders must be delivered to the
Company in accordance with the timing and procedural requirements set forth in
the Company's Amended and Restated By-laws, a copy of which have been filed with
the Securities and Exchange Commission and are incorporated by reference as an
exhibit to this Form 10-Q.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation of the Company,
as amended.
3.2(1) Amended and Restated By-laws of the Company.
4(2) Rights Agreement dated June 23, 1997 between the Company and
ChaseMellon Shareholders Services, LLC.
11.1 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
(1) Incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1
(File No. 33-56338).
(2) 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.
(b) There were no reports on Form 8-K filed for the quarter ended June 30,
1998.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
Date: August 13, 1998 By: /s/ Arthur M. Toscanini
------------------------
Arthur M. Toscanini
Executive Vice President and
Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company, as
amended.
3.2 Amended and Restated By-laws of the Company (1).
4 Rights Agreement dated June 23, 1997 between the Company and ChaseMellon
Shareholders Services, LLC (2).
11.1 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
- ------------------------------
(1) Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 33-56338).
(2) 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.
19
<PAGE>
EXHIBIT 3.1
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 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
<PAGE>
-2-
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.
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 or said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with
<PAGE>
-3-
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, 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
<PAGE>
-4-
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 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
<PAGE>
-5-
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 to 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), 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, and no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgement, 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 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.
<PAGE>
-6-
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 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.
<PAGE>
-7-
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,
<PAGE>
-8-
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 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
<PAGE>
-9-
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
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
<PAGE>
-10-
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.
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 Dec.,
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."
<PAGE>
-2-
2. This Certificate of Amendment of Certificate of Incorporation was duly
adopted by written consent of the shareholders holding a majority of the
outstanding capital stock of the Corporation in accordance with the provisions
of Sections 228 and 242 of the General Corporation Law of the State of Delaware,
and written notice of the adoption of the Certificate of Amendment of
Certificate of Incorporation has been given as provided by Section 328 (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 AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
Cambridge Technology Partners (Massachusetts), Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify as follows, pursuant
to Section 242 of the General Corporation Law of Delaware:
FIRST: That the Board of Directors of said Corporation, at a meeting held
on December 14, 1995, duly adopted resolutions in accordance with Section 242 of
the General Corporation Law of the Sate of Delaware, (i) proposing amendment to
the Certificate of Incorporation of the Corporation, (ii) declaring such
amendment to be advisable and in the best interests of the Corporation, (iii)
directing that such amendment be submitted to the stockholders of the
Corporation for approval thereby. The resolutions setting forth the amendment
and directing that such amendment be submitted to the stockholders are as
follows:
RESOLVED: That, subject to stockholder approval, the Board of Directors of the
Corporation has determined that it is advisable and in the best
interests of all of the Corporation's stockholders to increase the
authorized capital stock of this Corporation from 30,000,000 shares of
Common Stock, $0.01 par value per share, to 120,000,000 shares; that
such increase be considered at the next annual meeting of the
stockholders, that in order to effect said increase the proper
officers of this Corporation are hereby authorized and directed to
prepare, execute and file with the Secretary of State of the State of
Delaware an appropriate Certificate of Amendment to the Certificate of
Incorporation of this Corporation; and that the Board of Directors is
hereby authorized to issue all or any part of the authorized but
unissued capital stock of this Corporation at such times, to such
persons, upon such terms, and for such consideration as the Board may
in its discretion determine.
RESOLVED: That the increase in the authorized capital stock of this Corporation
be submitted to the stockholders of the Corporation for their
consideration and approval.
<PAGE>
-2-
SECOND: This Certificate of Amendment of Certificate of Incorporation
was duly adopted at the Annual Meeting of Stockholders of the Corporation held
May 15, 1996, in accordance with Section 242 of the General Corporation Law of
the State of Delaware.
THIRD: That in accordance with the aforementioned resolution, the
Amended and Restated Certificate of Incorporation of this Corporation is hereby
amended by deleting the first sentence of Article FOURTH thereof in its entirety
and replacing it with a new sentence so that, as amended, the first sentence of
Article FOURTH shall read as follows:
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue shall be One Hundred Twenty-
Two Million (122,000,000) shares, consisting of 120,000,000 shares of
Common Stock with a par value of $.01 per share (the "Common Stock")
and 2,000,000 shares of Preferred Stock with a par value of $.01 per
share (the "Preferred Stock").
FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Cambridge Technology Partners (Massachusetts),
Inc., has caused this certificate to be signed by James K. Sims, its President,
and attested by Arthur M. Toscanini, its Assistant Secretary, as of this 15th
day of May, 1996.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUSETTS), INC.
By: /s/ James K. Sims
------------------------------
James K. Sims,
President
ATTEST:
By: /s/ Arthur M. Toscanini
-------------------------------
Arthur M. Toscanini,
Assistant Secretary
<PAGE>
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>
-2-
(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>
-3-
(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>
-4-
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>
-5-
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>
-6-
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]
<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>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
Cambridge Technology Partners (Massachusetts), Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify as follows, pursuant
to Section 242 of the General Corporation Law of the State of Delaware:
FIRST: That the Board of Directors of said Corporation, at a meeting held
on March 23, 1998 duly adopted resolutions in accordance with Section 242 of the
General Corporation Law of the State of Delaware (i) proposing amendment to the
Certificate of Incorporation of the Corporation, (ii) declaring such amendment
to be advisable and in the best interests of the Corporation's stockholders and
(iii) directing that such amendment be submitted to the stockholders of the
Corporation for approval thereby. The resolutions setting forth the amendment
and directing that such amendment be submitted to the stockholders are as
follows:
RESOLVED: That, subject to stockholders approval, the Board of Directors of the
Corporation has determined it is advisable and in the best interests
of all of the Corporation's stockholders to increase the number of
authorized shares of Common Stock of the Corporation from 120,000,000
shares to 250,000,000 shares; that such increase be considered at the
Annual Meeting; that in order to effect said increase the proper
officers of the Corporation are hereby authorized and directed to
prepare, execute and file with the Secretary of State of the State of
Delaware an appropriate Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of the Corporation; and that the
Board of Directors is hereby authorized to issue all or any part of
the authorized but unissued capital stock of this Corporation at such
times, to such persons, upon such terms, and for such consideration as
the Board may in its discretion determine.
RESOLVED: That the increase in the number of authorized shares of Common Stock
of the Corporation be submitted to the stockholders of the Corporation
at the Annual Meeting for their consideration and approval.
<PAGE>
-2-
SECOND: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation was duly adopted at the Annual Meeting of
Stockholders of the Corporation held on May 13, 1998, in accordance with Section
242 of the General Corporation Law of the State of Delaware.
THIRD: That in accordance with the aforementioned resolution, the
Amended and Restated Certificate of Incorporation of the Corporation is hereby
amended by deleting the first sentence of Article FOURTH thereof in its entirety
and replacing it with a new sentence so that, as amended, the first sentence of
Article FOURTH shall read as follows:
The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue shall
be Two Hundred Fifty Two Million (252,000,000) shares,
consisting of Two Hundred Fifty Million (250,000,000)
shares of Common Stock with a par value of $.01 per share
(the "Common Stock") and Two Million (2,000,000) shares of
Preferred Stock with a par value of $.01 per share (the
"Preferred Stock").
FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
-3-
IN WITNESS WHEREOF, Cambridge Technology Partners (Massachuetts), Inc., has
caused this certificate to be signed by James P. O'Hare, its Secretary, as of
this 29th day of May, 1998.
CAMBRIDGE TECHNOLOGY PARTNERS
(MASSACHUETTS), INC.
By: /s/ James P. O'Hare
---------------------------
James P. O'Hare
Secretary
<PAGE>
EXHIBIT 11.1
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $13,565 $ 9,121 $25,639 $17,075
======= ======= ======= =======
Basic:
Weighted average common
shares outstanding 56,306 52,544 55,901 52,274
======= ======= ======= =======
Net income per share $ .24 $ .17 $ .46 $ .32
======= ======= ======= =======
Diluted:
Weighted average common
shares outstanding 56,306 52,544 55,901 52,274
Dilutive effects of stock options
and warrants 5,417 5,535 5,433 5,734
------- ------- ------- -------
Weighted average common and
common equivalent shares
outstanding 61,723 58,079 61,334 58,008
======= ======= ======= =======
Net income per share $ .22 $ .16 $ .42 $ .30
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 51,683
<SECURITIES> 21,712
<RECEIVABLES> 137,689
<ALLOWANCES> 3,486
<INVENTORY> 0
<CURRENT-ASSETS> 254,934
<PP&E> 67,958
<DEPRECIATION> 25,983
<TOTAL-ASSETS> 305,102
<CURRENT-LIABILITIES> 102,413
<BONDS> 0
0
0
<COMMON> 566
<OTHER-SE> 200,975
<TOTAL-LIABILITY-AND-EQUITY> 305,102
<SALES> 0
<TOTAL-REVENUES> 279,816
<CGS> 0
<TOTAL-COSTS> 238,018
<OTHER-EXPENSES> (1,016)
<LOSS-PROVISION> 559
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 42,731
<INCOME-TAX> 17,092
<INCOME-CONTINUING> 25,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,639
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.42
</TABLE>
