<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 April 30, 1999, there were 59,599,260 shares of common stock
outstanding.
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION:
Item 1: Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3: Quantitative and Qualitative Disclosure About Market Risk 18
PART II - OTHER INFORMATION:
Item 1: Legal Proceedings 19
Item 6: Exhibits and Reports on Form 8-K 19
SIGNATURES 21
EXHIBIT INDEX 22
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
------- --------------------
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 73,696 $ 80,051
Investments held to maturity 27,360 24,918
Accounts receivable, less allowance of $4,678 and $4,550
at March 31, 1999 and December 31, 1998, respectively 128,602 133,583
Unbilled revenue on contracts 20,866 10,964
Deferred income taxes 2,179 2,179
Prepaid expenses and other current assets 36,686 33,284
-------- --------
Total current assets 289,389 284,979
Property and equipment, net 48,159 48,255
Other assets 19,283 17,972
-------- --------
Total assets $356,831 $351,206
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,344 $ 15,804
Accrued expenses 43,704 49,603
Deferred revenue 11,916 10,861
Income taxes payable 24,378 30,635
Obligations under capital leases, current 151 147
-------- --------
Total current liabilities 94,493 107,050
Other long term liabilities 143 197
Deferred income taxes 1,975 1,809
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 250,000,000
shares; issued and outstanding 59,567,068 and 58,856,401 shares
at March 31, 1999 and December 31, 1998, respectively 596 589
Additional paid-in capital 129,196 115,662
Accumulated other comprehensive loss (4,582) (1,652)
Retained earnings 135,010 127,551
-------- --------
Total stockholders' equity 260,220 242,150
-------- --------
Total liabilities and stockholders' equity $356,831 $351,206
======== ========
</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 March 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues $151,373 $142,223
Costs and expenses:
Project personnel 71,568 65,535
General and administration 16,442 15,888
Sales and marketing 14,265 13,308
Other costs 37,960 27,375
-------- --------
Total operating expenses 140,235 122,106
-------- --------
Income from operations 11,138 20,117
Other income, net 893 412
-------- --------
Income before income taxes 12,031 20,529
Provision for income taxes 4,572 8,049
-------- --------
Net income $ 7,459 $ 12,480
======== ========
Basic net income per share $.13 $.22
======== ========
Diluted net income per share $.12 $.20
======== ========
Weighted average number of common shares
outstanding 59,301 57,217
======== ========
Weighted average number of common and common
equivalent shares outstanding 64,059 62,659
======== ========
</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>
Three Months Ended March 31,
-----------------------------
1999 1998
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,459 $ 12,480
Amounts that reconcile net income to net cash used
in operating activities:
Depreciation and amortization 3,943 3,068
Tax benefit from exercise of stock options 1,467 2,256
Gain on equity investment in Cambridge
Technology Capital Fund (282) -
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable 3,317 (14,708)
Increase in unbilled revenue on contracts (10,263) (2,756)
Increase in prepaid expenses and other current assets (3,845) (3,276)
(Decrease)/increase in accounts payable (1,339) 29
Decrease in accrued expenses (5,097) (7,256)
Increase in deferred revenue 1,080 2,376
(Decrease)/increase in income taxes payable (7,344) 6,065
Other, net (216) (28)
-------- --------
Net cash used in operating activities (11,120) (1,750)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (4,210) (6,490)
Investment in Cambridge Technology Capital Fund (840) -
Purchase of investments held to maturity (4,579) (6,157)
Maturity of investments 2,137 1,950
-------- --------
Net cash used in investing activities (7,492) (10,697)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan - (823)
Obligations under capital leases (54) (130)
Dividend distribution - (1,129)
Proceeds from employee stock purchase plan 4,768 3,389
Proceeds from exercise of stock options 7,307 8,315
-------- --------
Net cash provided by financing activities 12,021 9,622
-------- --------
Effect of foreign exchange rate changes on cash 236 (103)
Net decrease in cash and cash equivalents (6,355) (2,928)
Cash and cash equivalents at beginning of period 80,051 39,649
-------- --------
Cash and cash equivalents at end of period $ 73,696 $ 36,721
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. Basis of Reporting
------------------
The accompanying consolidated financial statements of Cambridge Technology
Partners (Massachusetts), Inc., a Delaware corporation (the "Company"), include
the accounts of the Company and all of its wholly owned subsidiaries. All
intercompany transactions and balances have been eliminated in consolidation.
In August 1998, the Company acquired all of the outstanding capital stock of
Excell Data Corporation ("Excell"). The Excell acquisition 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
Excell. 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 months ended
March 31, 1999 are not necessarily indicative of results for the full year.
B. Net Income Per Share
--------------------
Statement of Financial Accounting Standard No. 128, "Earnings per Share"
requires the presentation of basic and diluted earnings per share ("EPS"). Basic
EPS is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
EPS is computed using the weighted average number of common shares outstanding
plus the dilutive effect of common stock equivalents (using the treasury stock
method).
6
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The following table presents the calculation of earnings per share for the three
months ended March 31, 1999 and March 31, 1998 (in thousands except per share
data):
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Net income $ 7,459 $12,480
============== ==============
Basic:
Weighted average number of common shares outstanding 59,301 57,217
============== ==============
Net income per share $ .13 $ .22
============== ==============
Diluted:
Weighted average number of common shares outstanding 59,301 57,217
Dilutive effects of stock options 4,758 5,442
-------------- --------------
Weighted average number of common and common equivalent
shares outstanding 64,059 62,659
============== ==============
Net income per share $ .12 $ .20
============== ==============
</TABLE>
C. Foreign Exchange Contracts
--------------------------
The Company maintains foreign exchange contracts in an attempt 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 March 31, 1999, the Company held foreign exchange forward contracts of
approximately $4.3 million and there were no related deferred gains and losses.
The Company does not hold foreign exchange contracts for trading purposes.
D. Comprehensive Income
--------------------
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" 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
7
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stockholders. The following table presents the calculation of comprehensive
income and its components:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1999 1998
-----------------------------
(in thousands)
<S> <C> <C>
Comprehensive income:
Net income $ 7,459 $12,480
Other comprehensive income:
Unrealized gain on investment, net of taxes of $165 267 -
Foreign currency translation adjustments (3,197) (1,673)
------- -------
Other comprehensive income (2,930) (1,673)
------- -------
Comprehensive income $ 4,529 $10,807
======= =======
</TABLE>
E. New Accounting Pronouncements
-----------------------------
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
will be 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.
F. Legal Proceedings
-----------------
On November 18, 1998, certain of the former stockholders of Excell filed a
lawsuit against the Company in the United States District Court for the District
of Massachusetts. The complaint alleges breach of contract, violation of federal
securities laws, common law fraud, and negligent misrepresentation in connection
with the Excell acquisition and seeks unspecified damages. The Company believes
that the plaintiffs' claims are without merit and intends to vigorously defend
the lawsuit. In February 1999, the Company filed a counterclaim against such
former stockholders of Excell which alleges breach of contract.
In March and April 1999, certain stockholders of the Company filed ten separate
class action lawsuits against the Company and certain of the Company's officers
in the United States District Court for the District of Massachusetts. The suits
allege misrepresentations and omissions regarding the Company's future growth
prospects and progress of the Company's reorganization in violation of federal
securities laws. The suits seek unspecified damages. The Company believes that
the plaintiffs' claims are without merit and intends to vigorously defend the
lawsuits.
8
<PAGE>
The Company is involved in litigation and various other legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of any existing matter will have a material adverse
effect on its financial condition, results of operations, or cash flows.
G. Operating Segment and Geographic Information
--------------------------------------------
The Company is managed in two operating segments: North America and
International. North America provides systems integration and consulting
services in the United States and Canada while International provides systems
integration and consulting services outside of North America.
The company evaluates each segment's performance based on net revenues and
income from operations. Corporate costs have been allocated to each segment
based on the proportionate operating income of each segment. Total corporate
assets have been included in North America.
Information about the Company's operating segments is presented as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
March 31, March 31,
1999 1998
-------------- --------------
<S> <C> <C>
Net revenues:
North America $ 97,418 $101,558
International 53,955 40,665
-------------- --------------
Consolidated $151,373 $142,223
============== ==============
Income from operations:
North America $ 5,857 $ 16,376
International 5,281 3,741
-------------- --------------
Consolidated $ 11,138 $ 20,117
============== ==============
Total Assets
North America $272,246 $206,161
International 84,585 61,154
-------------- --------------
Consolidated $356,831 $267,315
============== ==============
</TABLE>
9
<PAGE>
Information about the Company's operations by geographic region is as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
March 31, March 31,
1999 1998
-------------- --------------
Net revenues:
<S> <C> <C>
North America $ 97,287 $101,514
Europe 47,315 37,467
Latin America 4,316 2,375
Pacific Rim 2,455 867
-------------- ---------------
Consolidated $151,373 $142,223
============== ===============
Income (loss) from operations:
North America $ 3,730 $ 14,758
Europe 6,868 6,046
Latin America 641 (330)
Pacific Rim (101) (357)
-------------- ---------------
Consolidated $ 11,138 $ 20,117
============== ==============
Total long-lived assets:
North America $ 53,601 $ 36,619
Europe 12,131 9,560
Latin America 844 375
Pacific Rim 867 155
-------------- ---------------
Consolidated $ 67,443 $ 46,709
============== ==============
</TABLE>
Net revenues to external customers are accounted for based on the location of
the customer. North American operations consist of services provided in the
United States and Canada. European operations consist of services provided
primarily in the United Kingdom, the Netherlands, Switzerland, Sweden, Norway,
Ireland, Germany, France, and Austria, which have similar business environments.
Latin American operations consist of services provided primarily in Mexico,
Puerto Rico, Brazil, and Venezuela. Pacific Rim operations consist of services
provided primarily in Japan, Australia, and India. There are no intraenterprise
sales for the periods presented. Corporate costs and long-lived assets have been
included in North America. No customer of the Company accounted for 5% or more
of the Company's net revenues for any of the periods presented.
10
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Item 2. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations
-------------------------
Overview
Cambridge Technology Partners (Massachusetts), Inc., a Delaware corporation (the
"Company"), is an international management consulting and systems integration
firm. Founded in 1991, the Company combines management consulting, internet
solutions, custom and package software deployment, network services, and
training to rapidly deliver end-to-end business solutions for "Global 2000"
organizations worldwide. The Company provides the majority of its services on a
fixed-time, fixed-price model with client involvement at all stages of the
process. In performing its services, the Company brings together key client
users, executives, and IT professionals in interactive sessions to achieve
consensus on the business case, strategic objectives, and functionality of a
business solution. In many cases, the Company employs a rapid deployment
methodology that features an iterative approach. The Company believes that these
techniques permit the delivery of results in rapid time frames -- typically
within three to twelve months. Net revenues for the first quarter of 1999
increased 6% to $151.4 million compared to $142.2 million for the same period in
1998. Net income for the quarter ended March 31, 1999, decreased 40% to $7.5
million, or $.12 per share (diluted), compared to $12.5 million, or $.20 per
share (diluted), for the quarter ended March 31, 1998.
Effective for 1999, the Company has realigned its North American operations.
North American operations, which in 1998 were organized on a regional geographic
basis, are now organized around the Company's six principal service offerings:
Management Consulting, Interactive Solutions, Customer Management Solutions,
Enterprise Resource Solutions, Custom Software Solutions, and Network Services.
This realignment helps integrate the Company's front-office, back-office, and
Internet application deployment capabilities. Under the former structure,
consultants provided services to clients based on geographic location, and as a
result, the Company was unable to take full advantage of specialist skills not
located in a client's geographic region. No longer constrained by geographic
regions, the new service line structure is designed to permit the Company to
provide clients with its best consultants in specific service areas who can
deploy proven methodologies, training, and business processes. This approach is
also intended to allow the Company to realize economies of scale in forecasting
and staffing and permit better leveraging of industry expertise.
North American net revenues decreased 4% while international net revenues grew
33% in the first quarter of 1999 compared to the first quarter of 1998. North
American net revenues for the quarter ended March 31, 1999, represented 64% of
total net revenues while international net revenues represented 36% of total net
revenues for the same period. North American net revenues for the quarter ended
March 31, 1998 represented 71% of total net revenues while international net
revenues represented 29% of total net revenues for the same period in 1998. The
international net revenue growth resulted from continued demand for the
Company's services, primarily in Europe, including Customer Management
Solutions, Interactive Solutions, Management Consulting, and Custom Software
Solutions. Net revenues from the Company's European operations accounted for
31% of total net revenues in the quarter ended March 31, 1999, compared to 26%
for the same period in 1998. The increase in international net revenues as a
percentage of total net revenues also resulted, in part, from the decrease in
North American net revenues.
11
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While the Company's total net revenues continued to grow in the first quarter of
1999, total net revenues in North America decreased compared to the same period
in 1998. This decrease principally resulted because the benefits of the
realignment of the Company's North American operations did not materialize as
quickly as anticipated. The Company's transition to a service line model,
commenced during the fourth quarter of 1998, resulted in expanded
responsibilities for members of service line management, the need for additional
sales force training and a shift in internal reporting and processes, each of
which contributed to lower net revenues. The decrease was also due, in part, to
changing market dynamics which resulted in decreased demand for Enterprise
Resource Planning (ERP) services and increased demand for interactive and WEB-
based services. The Company also experienced a decrease in net revenues for
Custom Software Solutions for the first quarter of 1999 compared to the same
period in 1998, as the Company continued to encounter increased competition from
providers of application specific solutions.
Due primarily to changing market dynamics resulting in decreased demand for ERP
services and increased demand for interactive and WEB-based services, the
Company announced in April 1999 that it will record a charge in the second
quarter of 1999 of approximately $9.0 million for a human resource repositioning
and retention program. This program will enable the Company to retain, retrain,
relocate and strategically redeploy employees into its e-business service
segments such as XRP (value-added services to ERP such as supply chain
management); Enterprise Application Integration; WEB-enablement; Customer
Management solutions; and E-Commerce solutions. Total Company headcount remained
at approximately 4,400 at March 31, 1999 and December 31, 1998 as the Company
assessed the skill sets necessary to address the changing market dynamics and
focused on training, hiring, and assimilating appropriate personnel to service
its clients.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1998
Net revenues increased 6% to $151.4 million in 1999 compared to $142.2 million
in 1998 due principally to a 37% increase in the net revenues of the Interactive
Solutions and Network Services lines of business and net revenue increases for
the Enterprise Resource Solutions, Customer Management Solutions, and Management
Consulting service lines of 30%, 18% and 5%, respectively. These increases were
partially offset by a 19% decrease in the net revenues of the Custom Software
Solutions service line. North American net revenues decreased 4% to $97.3
million for the first quarter of 1999 from $101.5 million for the first quarter
of 1998. International net revenues grew 33% to $54.1 million for the first
quarter of 1999 from $40.7 million for the same period in 1998.
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
$71.6 million or 47% of net revenues in 1999 compared to $65.5 million or 46% of
net revenues in 1998. The dollar and percentage increase resulted primarily
from an increase in payroll and payroll-related expenses related to the hiring
of additional project personnel over 1998 staff levels to support the increased
volume of services delivered to clients and an increase in subcontractor costs
to supplement critical skills. The Company continues to maintain its
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staffing process to monitor its subcontractor costs. Worldwide project personnel
headcount increased 14% to 3,548 employees at March 31, 1999 from 3,124
employees at March 31, 1998. While the Company expects to meet its retention and
hiring goals for the remainder of fiscal 1999, competition for personnel with
information technology 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.
General and administration expenses were $16.4 million in 1999 compared to $15.9
million in 1998, representing 11% of net revenues for both periods. The dollar
increase primarily reflects increased payroll and payroll-related expenses
associated with increased staff headcount of 28% to 513 employees at March 31,
1999 from 401 employees at March 31, 1998, partially offset by a decrease in
travel expenses.
Sales and marketing expenses were $14.3 million in 1999 compared to $13.3
million in 1998, reflecting 9% of net revenues for both periods. The dollar
increase is primarily attributable to an increase in payroll and payroll-related
expenses associated with a 22% increase in sales and marketing personnel from
243 at March 31, 1998 to 296 at March 31, 1999. The increased headcount enables
the Company to maximize potential client lead generation through its field
marketing staff with subsequent services coordinated by its sales personnel. 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.
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 non-billable project personnel
costs. Other costs were $38.0 million or 25% of net revenues in 1999 compared
to $27.4 million or 19% of net revenues in 1998. The dollar and percentage
increase from 1998 resulted principally from a decrease in project personnel
utilization which resulted in increased non-billable project personnel costs and
also from increased facility, travel, and employee training costs. The decrease
in project personnel utilization was primarily caused by the realignment of the
Company's North American operations to a service line model and the changing
market dynamics in the first quarter of 1999. The Company has adjusted its
hiring plans based upon a review of the skill sets required to reflect the
change in market dynamics described above, and will institute a human resource
repositioning and retention program in order to retain, retrain, relocate and
strategically redeploy employees.
Other income of $893,000 in 1999 included interest income of $720,000 and a
$282,000 gain from equity investments, partially offset by foreign currency
exchange rate loss and other interest expense totaling $109,000. Other income
in 1998 of $412,000 consisted of interest income of $602,000, partially offset
by foreign currency exchange rate loss and other interest expense totaling
$190,000.
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 March 31, 1999,
13
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the Company held foreign exchange contracts of approximately $4.3 million. As
the Company grows its international business, it becomes increasingly subject to
the risks associated with international operations, including changes in foreign
currency exchange rates. The Company continues to monitor the impact of foreign
currency exchange rates on revenues.
The Company's effective income tax rate for the first quarter of 1999 was 38.0%
compared to 39.2% for the same period a year ago. The decrease in the Company's
effective tax rate in the first quarter of 1999 is primarily due to favorable
effects of continuing state tax rate minimization initiatives and global tax
planning strategies. 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 and its geographic mix of revenue
and income.
Net income decreased 40% to $7.5 million or $.12 per share (diluted) in the
first quarter of 1999 from $12.5 million or $.20 per share (diluted) for the
same period in 1998.
Liquidity and Capital Resources
The Company continued to operate primarily debt-free and to enhance its working
capital position. Working capital increased to $194.9 million at March 31,
1999, from $177.9 million at December 31, 1998. This increase was primarily due
to increases in investments held to maturity, unbilled revenue on contracts, and
prepaid expenses and other current assets, and decreases in accounts payable,
accrued expenses, and income taxes payable, partially offset by decreases in
cash and cash equivalents and accounts receivable. The increase in unbilled
revenue on contracts was caused by timing differences in contractual billing
terms and percentage of completion revenue recognition requirements. As of April
30, 1999, a substantial portion of the unbilled revenue on contracts at March
31, 1999 had been billed. The Company's days sales in accounts receivable was 78
days during the first quarter of 1999 compared to 71 and 78 days for the
quarters ended March 31, and December 31, 1998, respectively. The Company
continues to work toward a short term goal of 70 days sales in accounts
receivable.
Net cash used in operating activities was $11.1 million in the first three
months of 1999, compared to $1.8 million for the same period in 1998. A
decrease in accounts receivable was more than offset by lower net income and
decreases in accounts payable, accrued expenses and income taxes payable and
increases in unbilled revenue on contracts and prepaid expenses and other
current assets.
Capital expenditures of $4.2 million in 1999 were used principally for computer
equipment to support the Company's expanding operations and employee
workstations, telecommunications equipment, and leasehold improvements. Capital
expenditures for the full year of 1999 are expected to approximate $26 million,
principally for leasehold improvements, personal computers, employee
workstations, telecommunications and video conferencing equipment, and other
equipment to support both current and anticipated levels of customer activities
worldwide. The actual amount of capital expenditures may vary from management's
estimates as capital needs arise and actual expenditures are made. 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 or enhance the Company's global growth initiatives. The Company
cannot be certain that it will be able to identify suitable acquisition
opportunities at an acceptable cost, if at all.
14
<PAGE>
The Company maintains a $50.0 million unsecured senior revolving credit facility
(the "Facility") through a syndication arrangement committed equally by The
Chase Manhattan Bank ("Chase") and Fleet National Bank. The Facility, which
expires on September 10, 2001, is administered by Chase and carries 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. The Facility
permits the Company to elect any one of three possible interest rate formulas as
defined in the credit agreement. Interest is payable in arrears based on an
interest period determined by the interest rate elected by the Company. The
Facility requires, among other things, the Company to maintain certain financial
ratios, including debt service coverage, debt to capital, and net worth. At
March 31, 1999, the Company was in compliance with these financial ratio
requirements. As of March 31, 1999 and December 31, 1998, the Company had no
balance outstanding under the Facility.
Cambridge Technology Capital Fund I L.P. (the "Fund") was formed in October 1997
as a limited partnership with committed capital of approximately $25.3 million.
The Fund is intended to invest in expansion-stage, private companies providing
products and services within areas of the Company's strategic expertise. A
wholly owned subsidiary of the Company acts as the sole general partner of the
Fund's general partner and the Company's investment is accounted for using the
equity method of accounting. The Company's capital commitment to the Fund is
approximately $6.0 million. No more than two-thirds of the Fund's committed
capital may be called before October 1999 without approval of the Fund's
partners. The balance of the Fund's capital has been provided by institutional
investors and directors and employees of the Company. During the first quarter
of 1999 the Company contributed $840,000 to the Fund to bring its cumulative
investment in the Fund to approximately $2.7 million. The Company's investment
in the Fund resulted in a net gain of approximately $282,000 for the quarter
ended March 31, 1999.
In January 1998, the Company entered into an agreement with Boston Properties
Limited Partnership ("Boston Properties") to lease a building being 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. The Company's current facility in Cambridge, Massachusetts, which
houses part of the Company's Northeast operations and corporate functions, is
expected to be subleased to a third party through its remaining lease term. The
Company's lease at its Allston, Massachusetts facility, which houses the
remainder of the Company's Northeast operations will be terminated effective
June 30, 1999.
The Company expects that cash flows from operations will provide the principal
source of future liquidity for the Company. However, continued growth 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 its $50.0 million
unsecured senior revolving credit facility will be sufficient, at least through
1999, to meet the Company's working capital requirements and to fund the
Company's operations. In order to meet client demand for the Company's
services, the Company expects to continue to maintain its professional staff and
to open additional sales and operations offices, as needed, in North America and
internationally. The Company plans to open offices and reposition personnel in
response to anticipated demand for the Company's services. Operating results and
liquidity may be adversely affected if market demand and revenues are different
than anticipated. As the Company
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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.
Year 2000 Readiness Disclosure
The Year 2000 issue results from computer programs written using two digits
rather than four to define the applicable year. Any of the Company's internal
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has conducted an assessment of its information technology ("IT")
systems and non-IT systems (such as building security, voice mail, telephone and
other systems containing embedded microprocessors) and is in the process of
upgrading and enhancing material internal systems to bring them into material
Year 2000 compliance. These activities are expected to be completed by the end
of the second quarter of 1999. The Company's material internal IT systems
consist principally of accounting, human resources and sales force automation
application software created by third parties, plus internally developed time
and expense reporting and project accounting software applications. For the
third-party software applications, the Company has obtained written confirmation
that the software applications are Year 2000 compliant. The Company also expects
that each of these third party applications will be upgraded, as well as tested
by the Company for Year 2000 compliance by the end of the second quarter of
1999. The Company believes that its internally developed applications are now
materially Year 2000 compliant. The Company's computer hardware platforms,
principally servers, have been confirmed as Year 2000 compliant by the server
manufacturers, and this has been supported by the Company's internal testing.
Based on currently available information, the Company believes the expense
associated with these efforts will be immaterial and has provided for the
enhancement of these systems in its operating and capital budgets for the
current fiscal year. However, if compliance efforts of which the Company is not
currently aware are required and are not completed on time, or if the cost of
any required updating, modification or replacement of the Company's IT systems
exceeds the Company's estimates, the Year 2000 issue could have a material
adverse effect on the Company.
In addition to the Company's internal systems, the Company relies on third party
relationships in the conduct of its business. For example, third party vendors
handle the payroll function for the Company, and the Company also relies on the
services of landlords of its facilities, telecommunication companies, banks,
utilities, and commercial airlines, among others. The Company is currently
obtaining assurances from its landlords and material vendors and suppliers that
there will be no interruption of service as a result of the Year 2000 issue, and
to the extent such assurances are not given, the Company intends to devise
contingency plans to ameliorate the negative effects on the Company in the event
the Year 2000 issue results in the unavailability of services. However,
contingency plans developed by the Company may not prevent a service
interruption on the part of one or more of the Company's third party vendors or
suppliers from
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having a material adverse effect on the Company. In addition, the failure on the
part of the accounting systems of the Company's clients due to the Year 2000
issue could result in a delay in the payment of invoices issued by the Company
for services and expenses. A failure of the accounting systems of a significant
number of the Company's clients would have a material adverse effect on the
Company.
The Company is preparing written contingency plans to address failures in its
major IT and non-IT systems. These plans will include identification of major
systems, dependencies on third parties, and resources and strategies necessary
to restore operations or work around failures. The failure of the Company's
accounting systems resulting from a Year 2000 related power system outage at the
Company's central data center, particularly at the end of a fiscal period, could
represent a reasonably likely worst case scenario. The Company's contingency
plan provides for back-up power systems that could support the data center, as
well as the operation of a parallel third party disaster recovery site.
Although the Company's principal service offerings do not include Year 2000
remediation services, former, present and future clients could assert that
certain services performed by the Company involved or are related to the Year
2000 issue. The Company has recommended, implemented, and customized various
third-party software packages for its clients, certain of which may not be Year
2000 compliant. Because the Company has designed, developed and implemented
software and systems for a large number of clients since 1991, there can be no
way of assuring that all such software programs and systems will be Year 2000
compliant. In particular, the Company's solution delivery methodology, in many
cases, empowers clients to maintain, alter and upgrade systems after the
completion of an engagement. Due to the potential significance of the Year 2000
issue upon client operations, upon any failure of critical client systems or
processes that may be directly or indirectly connected or related to systems or
software analyzed, designed, developed, or implemented by the Company, the
Company may be subjected to claims regardless of whether the failure is related
to the services provided by the Company. If asserted, the resolution of such
claims (and the associated defense costs) could have a material adverse effect
on the Company.
The Company's policy has been to attempt to include provisions in client
contracts that, among other things, disclaim implied warranties, limit the
duration of express warranties, limit the Company's liability to the amount of
fees paid by the client to the Company in connection with the project, and
disclaim any liability arising from third-party software that is implemented,
customized or installed by the Company. The Company may not be able to obtain
these contractual protections in agreements concerning future projects, and
contractual provisions governing current and completed projects may not prevent
clients from asserting claims against the Company with respect to the Year 2000
issue. The contractual protections, if any, obtained by the Company may not
effectively operate to protect the Company from, or limit the amount of, any
liability arising from claims asserted against the Company.
New Accounting Pronouncements
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) (see Note E of Notes to Consolidated Financial Statements).
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Forward-looking Statements
This Form 10-Q includes forward-looking statements (statements that are not
historical facts), including, without limitation: statements about future net
revenues and profits; capital expenditures; liquidity sources and needs; working
capital needs; the Year 2000 issue; the impact of the realignment of the
Company's North American operations in 1999; statements about the Company's
charge for its human resources repositioning and retention program; the
Company's efforts to retain, retrain, relocate, and strategically redeploy
employees; the Company's hiring efforts; increases in personnel and related
costs; geographic expansion and opening additional offices; and litigation
involving the Company. These forward-looking statements are subject to several
risks and uncertainties. While it is impossible to identify each factor and
event that could affect the Company's results, there are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated by the forward-looking statements and that could have an impact
on the Company's operating results. These factors include, without limitation,
the number and significance of client engagements commenced and completed during
a period; the number of working days in a period; employee hiring, retention,
and utilization rates; the Company's ability to manage its growth; the Company's
ability to manage the cost of its engagements; changes in demand for the
Company's services; changes in demand for third party products or solutions for
which the Company performs integration services; risks associated with the
Company's realignment of its North American operations from a geographic-based
to a service line model, including the orientation of new management teams
within the service line structure and the need to develop reliable forecasting
tools for each service line within the organization; the success of the
Company's human resources repositioning and retention program; the Year 2000
issue, including the effect of the Year 2000 issue on client purchasing
patterns; competition; risks associated with international operations; the
acceptance and profitability of the Company's services in new locations; the
integration of acquired businesses; unanticipated negative outcomes of
litigation involving the Company; and misappropriation of, or lack or loss of
protection of, the Company's intellectual property. 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
client 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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
- ------- ---------------------------------------------------------
The Company is exposed to market risk from changes in interest rates and foreign
currency exchange rates due to investments in instruments made for non-trading
purposes. The interest rate risk relates primarily to the Company's portfolio of
short-term investment grade municipal securities. The Company is also subject to
risk relating to fluctuating interest rates to the extent that it incurs any
borrowings under its credit facility. The foreign exchange rate risk relates to
the Company's investment in foreign exchange contracts which are entered into in
order to mitigate the risk of changes in foreign exchange rates associated with
intercompany balances. The Company believes that interest rate risk and foreign
currency exchange rate risk are both immaterial to the Company.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
- ------- -----------------
On November 18, 1998, certain of the former stockholders of Excell filed a
lawsuit against the Company in the United States District Court for the District
of Massachusetts. The complaint alleges breach of contract, violation of federal
securities laws, common law fraud, and negligent misrepresentation in connection
with the Excell acquisition and seeks unspecified damages. The Company believes
that the plaintiffs' claims are without merit and intends to vigorously defend
the lawsuit. In February 1999, the Company filed a counterclaim against the
former stockholders of Excell which alleges breach of contract.
In March and April 1999, certain stockholders of the Company filed ten separate
class action lawsuits against the Company and certain of the Company's officers
in the United States District Court for the District of Massachusetts. The suits
allege misrepresentations and omissions regarding the Company's future growth
prospects and progress of the Company's reorganization in violation of federal
securities laws. The suits seek unspecified damages. The Company believes that
the plaintiffs' claims are without merit and intends to vigorously defend the
lawsuits.
The Company is involved in litigation and various other legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of any existing matter will have a material adverse
effect on its financial condition, results of operations, or cash flows.
ITEM 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
3.1(1) Amended and Restated Certificate of Incorporation of the
Company, as amended.
3.2(2) Amended and Restated By-laws of the Company.
4.1(3) Rights Agreement dated June 23, 1997 by and between the Company and
ChaseMellon Shareholder Services, LLC ( the "Rights Agreement").
4.2(4) Amendment No. 1 to the Rights Agreement dated September 30, 1998 by
and between the Company and ChaseMellon Shareholder Services, LLC.
10.1 Amended and Restated 1991 Stock Option Plan, as amended.
10.2 1998 Stock Option Plan, as amended.
11 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
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- --------------------------------------------------------------------------------
(1) Incorporated herein by reference to Exhibit 3.1 to the Company's Report on
Form 10-Q for the period ended June 30, 1998.
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 33-56338).
(3) Incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8A/A filed on September 30, 1998.
(4) Incorporated herein by reference to Exhibit 4.2 to the Company's
Registration Statement on Form 8A/A filed on September 30, 1998.
(b) Reports on Form 8-K:
The Company did not file any current reports on Form 8-K during the three
months ended March 31, 1999.
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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: May 13, 1999 By: /s/ Arthur M. Toscanini
------------------------
Arthur M. Toscanini
Executive Vice President and
Chief Financial Officer
By: /s/ Louis P. Persico
---------------------
Louis P. Persico
Vice President, Controller and
Chief Accounting Officer
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EXHIBIT INDEX
3.1(1) Amended and Restated Certificate of Incorporation of the
Company, as amended.
3.2(2) Amended and Restated By-laws of the Company.
4.1(3) Rights Agreement dated June 23, 1997 by and between the Company and
ChaseMellon Shareholder Services, LLC ( the "Rights Agreement").
4.2(4) Amendment No. 1 to the Rights Agreement dated September 30, 1998 by
and between the Company and ChaseMellon Shareholder Services, LLC.
10.1 Amended and Restated 1991 Stock Option Plan, as amended.
10.2 1998 Stock Option Plan, as amended.
11 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
- -------------------------------------------------------------------------------
(1) Incorporated herein by reference to Exhibit 3.1 to the Company's Report on
Form 10-Q for the period ended June 30, 1998.
(2) Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 33-56338).
(3) Incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8A/A filed on September 30, 1998.
(4) Incorporated herein by reference to Exhibit 4.2 to the Company's
Registration Statement on Form 8A/A filed on September 30, 1998.
<PAGE>
EXHIBIT 10.1
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
1991 STOCK OPTION PLAN
(as amended through April 1, 1999)
1. PURPOSE
The name of this plan is the Cambridge Technology Partners (Massachusetts),
Inc. 1991 Stock Option Plan (the ``Plan''). The purpose of the Plan is to
promote the long-term success of Cambridge Technology Partners (Massachusetts),
Inc., a Delaware corporation (the ``Company''), by providing financial
incentives to the officers, employees, directors and consultants of the Company
who are in positions to make significant contributions toward such success. The
Plan is designed to attract individuals of outstanding ability to become or to
continue as officers, employees, directors or consultants of the Company, to
enable such individuals to acquire or increase proprietary interests in the
Company through the ownership of shares of Common Stock of the Company, and to
render superior performance during their associations with the Company. The
Company intends that this purpose will be effected by the granting pursuant to
the Plan of options for shares of the Company's Common Stock (hereinafter
referred to as ``Options'') that either do meet the definition of ``incentive
stock options'' (``Incentive Options'') in Section 422(b) of the Internal
Revenue Code of 1986, as amended (the ``Code''), or do not meet such definition
(``Nonqualified Options'').
References herein to ``the Company'' shall include any successor corporation
to the Company and also any subsidiary of the Company (such that, if the Company
has one or more subsidiaries, individuals who are officers or key employees
thereof are eligible to be granted Options under the Plan).
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options. An Option shall not be considered to be an Incentive
Option unless designated as such at the time of grant or in the option agreement
relating to such option, and any option that is not so designated (or even if so
designated fails to meet the definition of ``incentive stock option'' under
Section 422(b) of the Code) shall be a Nonqualified Option. Unless otherwise
specified in a particular grant, Options granted under the Plan are intended to
qualify as performance-based compensation to the extent required under Section
162(m) of the Code and the regulations thereunder.
(b) The Plan shall be administered by a committee (the ``Option Committee'')
of not less than two members of the Board of Directors of the Company selected
by and from the members of the Company's Board of Directors in accordance with
the provisions of the Company's By-Laws relating to the appointment of
Committees; provided, however,
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that the Plan shall be administered so that Options granted under the Plan will
qualify for the benefits provided by Rule 16b-3 (or any successor rule to the
same effect) under the Securities Exchange Act of 1934 and by Section 162(m) of
the Code (or any successor provision to the same effect) and the applicable
regulations thereunder. Subject to the provisions of this Plan, the Option
Committee shall exercise all powers under the Plan, unless and until other
action is taken by the Company's Board of Directors. Action by the Option
Committee shall require the affirmative vote of a majority of all its members,
and a further vote of the Company's Board of Directors shall be required for the
approval of any and all grants of Options recommended by the Option Committee.
(c) Subject to the terms and conditions of the Plan, the Option Committee
shall have the power:
(i) To determine from time to time the Options to be granted to eligible
persons under the Plan, and to prescribe the terms and provisions (which need
not be identical) of each Option granted under the Plan to such persons, and
to recommend the grant of Options to the Board of Directors of the Company for
its approval;
(ii) To construe and interpret the Plan and Options granted thereunder and
to establish, amend, and revoke rules and regulations for administration of
the Plan. In this connection, the Option Committee may correct any defect or
supply any omission, or reconcile any inconsistency in the Plan, or in any
option agreement, in the manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective. All decisions and determinations
by the Option Committee and, with respect to the grant of Options, by the
Board of Directors of the Company in the exercise of this power shall be final
and binding upon the Company and all optionees; and
(iii) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
(d) No issued and outstanding Option shall be repriced to a lower purchase
price per share at any time during the term of such Option, without the prior
affirmative vote of a majority of the shares of stock of the Company present at
a stockholders' meeting in person or by proxy and entitled to vote thereon. Any
amendment or repeal of this section 2, clause (d), shall require the affirmative
vote of a majority of shares of stock of the Company present at a stockholders'
meeting in person or by proxy and entitled to vote thereon.
3. STOCK SUBJECT TO THE PLAN
(a) The stock subject to the Options granted under the Plan shall be shares of
the Company's authorized but unissued common stock, par value $.01 per share
(the ``Common Stock''), or previously issued shares of Common Stock that have
been
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reacquired and reserved by the Company's Board of Directors for resale upon
exercise of Options granted under the Plan. The total number of shares of Common
Stock that may be issued pursuant to Options granted under the Plan shall not
exceed an aggregate of 23,000,000 shares of Common Stock. Such number shall be
subject to adjustment as provided in Section 9 hereof.
(b) Whenever any outstanding Option under the Plan expires, is canceled or is
otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such Option may again be the subject of
Options under the Plan.
(c) No employee of the Company may be granted Options to acquire, in the
aggregate, more than 3,000,000 shares of Common Stock under the Plan. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unpurchased shares subject to such Option shall be
included in the determination of the aggregate number of shares of Common Stock
deemed to have been granted to such employee under the Plan.
4. STOCK OPTION GRANTS
(a) Incentive Options may be granted only to persons who are employees of the
Company, including members of the Board of Directors who are also employees of
the Company. Nonqualified Options may be granted to officers and employees of
the Company, to directors of the Company, whether or not they are also employees
of the Company, to consultants to the Company who are not employees, and to such
other persons as the Option Committee shall select from time to time. The
determination of the persons eligible to receive grants, the number of shares of
Common Stock for which Options are granted and the determination of whether an
Option shall be an Incentive Option or a Nonqualified Option shall be made by
the Option Committee, subject to the approval of the Board of Directors of the
Company.
(b) No person shall be eligible to receive any Incentive Option under the Plan
if at the date of grant such person beneficially owns (or would own upon the
exercise of any Options held, or which upon such grant would be held, by such
person) in excess of ten percent (10%) of the outstanding shares of Common
Stock, unless (i) the exercise price is at least 110% of the fair market value
(determined as provided in Section 5(c) hereof at the time the Incentive Option
is granted) of the shares of Common Stock subject to the Option and (ii) such
Option by its terms is not exercisable after the expiration of five (5) years
from the date such Option is granted.
(c) The aggregate fair market value (determined as provided in Section 5(c)
hereof at the time the Incentive Option is granted) of shares of Common Stock
with respect to which any Incentive Option is exercisable for the first time by
the optionee during any
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<PAGE>
calendar year (plus the value of any other such shares of Common Stock first
purchasable in such year under any other Option under the Plan or any other plan
of the Company or any parent or subsidiary thereof intended to be an ``incentive
stock option'' under Section 422 of the Code) shall not exceed $100,000, and no
person shall be eligible to receive an Incentive Option for shares of Common
Stock in excess of such limitation.
5. TERMS OF THE OPTION AGREEMENTS
Each option agreement for Options granted under the Plan shall contain such
provisions as the Option Committee shall from time to time deem appropriate.
Option agreements need not be identical, but each option agreement by
appropriate language, or by reference to this Section 5 of the Plan, shall
include the substance of all of the following provisions:
(a) Expiration. Each Option shall expire on the date specified in the option
agreement, which date shall not be later than the tenth anniversary of the date
on which the Option was granted. Each Incentive Option shall in any event expire
not later than three months after the optionee is for any reason no longer
employed by the Company, except (i) if such termination of employment results
from optionee's disability (within the meaning of Section 22(e)(3) of the Code),
an Option may be exercised within twelve months thereafter, whether or not
exercisable at the time of such termination, and (ii) if such termination of
employment results from the optionee's death, an Option may be exercised by his
executors or administrators within twenty-four months thereafter, whether or not
exercisable at the time of such termination.
(b) Exercise. Unless the Option Committee shall otherwise determine at the
time an Option is granted, each Option shall become vested and exercisable with
respect to 25% of the shares of Common Stock subject to such Option as of the
first anniversary of the date of grant and, thereafter, with respect to an
additional 2.083% of the shares subject to such Option as of the same day (or
the immediately preceding day if a month does not have such day) of each
calendar month thereafter, so that such Option shall be exercisable in full as
of the fourth anniversary of the date of grant. Unless otherwise provided in the
vote of either the Option Committee or the Board of Directors of the Company,
for this purpose the date of the grant of an Option shall be the date on which
the Board of Directors approves the grant. To the extent not exercised, vested
installments shall accumulate and be exercisable in whole or in part at any time
after becoming exercisable, but not later than the date the Option expires or
terminates.
(c) Purchase Price. Unless the Option Committee shall otherwise determine at
the time the Option is granted, the purchase price per share of Common Stock
under each Option shall be not less than the fair market value of a share of
Common Stock on the date the Option is granted. For the purposes of the Plan,
the fair market value of the shares of Common Stock shall be determined by the
Option Committee with the approval of the Board of Directors of the Company.
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<PAGE>
6. LIMITATION ON RIGHTS OF OPTIONEES
(a) Transferability of Options. Except as set forth below, (i) no Option
shall be transferable by any optionee other than by will or by the laws of
descent and distribution and (ii) Options may be exercised during the optionee's
lifetime only by the optionee (or, if the optionee is disabled and so long as
the Option remains exercisable, by the optionee's duly appointed guardian or
other legal representative). However, the Committee may, in its discretion,
permit a Non-qualified Option holder to transfer the Non-qualified Option to
family members or other persons for estate planning purposes. In connection
with permitting transfers, the Committee may require that (i) no consideration
be given or payment made for any such transfer, (ii) the stock option agreement
pursuant to which such Option is granted must be approved by the Committee, and
must expressly provide for transferability at the date of grant in a manner
consistent with the Plan, and (iii) subsequent transfers of the transferred
Option shall be prohibited except those in accordance with this Section.
Following any such transfer, any such Options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Sections 2, 6(b) - (d), 7, 8, 9 and 12 hereof the
term "optionee" shall be deemed to refer to the transferee. The events of
termination of employment set forth in an optionee's option agreement shall
continue to be applied with respect to the original optionee, following which
the Options shall be exercisable by the transferee only to the extent and for
the periods specified in such option agreement.
(b) No Shareholder Rights. No optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any Option unless and until
(i) the Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the shares to the optionee, and (iii)
the optionee's name shall have been entered as a shareholder of record on the
books of the Company. Thereupon, the optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Common Stock.
(c) No Employment Rights. Neither the Plan nor the grant of any Option
thereunder shall be deemed to confer upon any optionee any rights of employment
with the Company, including without limitation any right to continue in the
employ of the Company, or affect the right of the Company to terminate the
employment of an optionee at any time, with or without cause.
(d) Authority of Company. The existence of the Options shall not affect: the
right or power of the Company or its shareholders to make adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business; any issue of bonds, debentures, preferred or prior
preference stock affecting the Common Stock or the rights thereof; the
dissolution or liquidation of the Company, or sale or
5
<PAGE>
transfer of any part of its assets or business; or any other act, whether of a
similar character or otherwise.
7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Notice of Exercise. Any Option granted under the Plan may be exercised
by the optionee by delivering to the Chief Financial Officer of the Company (or
such other representative of the Company as the Option Committee may designate)
on any business day a written notice specifying the number (which shall be
consistent with the provisions of Section 5(b) hereof) of shares of Common Stock
the optionee then desires to purchase (the ``Notice'').
(b) Payment. Payment for the shares of Common Stock purchased pursuant to
the exercise of an Option shall be made either (i) in cash or by check
representing good funds in an amount equal to the option price for the number of
shares of Common Stock specified in the Notice (the ``Total Option Price''), or
(ii) if authorized by the applicable option agreement, by the valid and properly
completed transfer to the Company of a number of shares of Common Stock having a
fair market value, determined as provided in Section 5(c) hereof, equal to or
less than the Total Option Price, plus cash or check in an amount equal to the
excess, if any, of the Total Option Price over the fair market value of such
shares of Common Stock.
8. NOTICE OF DISPOSITION; WITHHOLDING; ESCROW
An optionee shall immediately notify the Company in writing of any sale,
transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code) of any
shares of Common Stock acquired through exercise of an Incentive Option, within
two (2) years after the grant of such Incentive Option or within one (1) year
after the acquisition of such shares of Common Stock, setting forth the date and
manner of disposition, the number of shares of Common Stock disposed of and the
price at which such shares of Common Stock were disposed of. The Company shall
be entitled to withhold from any compensation or other payments then or
thereafter due to the optionee such amounts as may be necessary to satisfy any
withholding requirements of federal or state law or regulation and, further, to
collect from the optionee any additional amounts which may be required for such
purpose as a condition of delivering the shares of Common Stock acquired
pursuant to an Option. The Option Committee may, in its discretion, require
shares of Common Stock acquired by an optionee upon exercise of an Incentive
Option to be held in an escrow arrangement for the purpose of enabling
compliance with this Section 8.
6
<PAGE>
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Events for Adjusting Number and Price. If the shares of Common Stock as
a whole are changed into or exchanged for a different number or kind of shares
or securities of the Company, whether through reorganization, recapitalization,
reclassification, stock dividend or other distribution, split, combination of
interests, exchange of interests, change in corporate structure or the like, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares of Common Stock subject to the Plan and in the number, kind, and per
share exercise price of shares of Common Stock subject to unexercised Options or
portions thereof granted prior to any such change. In the event of any such
adjustment in an outstanding Option, the optionee thereafter shall have the
right to purchase the number of shares of Common Stock under such Option at the
per share price, as so adjusted, which the optionee could purchase at the total
purchase price applicable to the Option immediately prior to such adjustment.
(b) Option Committee and Board Action. Adjustments under this Section 9
shall be determined by the Option Committee and approved and ratified by the
Board of Directors of the Company, and such determinations shall be conclusive.
The Option Committee shall have the discretion, and power in any such event to
determine and to make effective provision for acceleration of the time or times
at which any Option or portion thereof shall become exercisable. No fractional
interests shall be issued under the Plan on account of any adjustment specified
above.
10. AMENDMENT OR TERMINATION OF PLAN.
The Board of Directors of the Company may modify, revise or terminate this
Plan at any time and from time to time, except that, other than as provided in
Section 9 hereof, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations at
an annual or special meeting held within twelve (12) months before or after the
date of adoption of such amendment, where such amendment will:
(a) increase the number of shares of Common Stock as to which Options may be
granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change the minimum purchase price of Incentive Options to be granted under
the Plan;
(d) increase the maximum term of Options provided herein; or
(e) otherwise materially increase the benefits accruing to participants under
the Plan.
7
<PAGE>
Except as provided in Section 9 hereof, rights and obligations under any
Option granted before any amendment of the Plan shall not be altered or impaired
by such amendment, except with the consent of the optionee.
11. EFFECTIVE DATE; NONEXCLUSIVITY
(a) Effective Date. This Plan will be deemed to have been adopted and to be
effective when approved by the stockholders of the Company in compliance with
Temporary Regulation (S)14a-422A-2 under the Code.
(b) Nonexclusivity. The adoption of the Plan shall not be construed as
creating any limitations on the power of the Board of Directors of the Company
to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) Securities Laws. If in the opinion of legal counsel for the Company the
issuance or sale of any shares of Common Stock pursuant to the exercise of an
Option would not be lawful for any reason, including without limitation the
inability of the Company to obtain from any governmental authority or regulatory
body having jurisdiction the authority deemed by such counsel to be necessary to
such issuance or sale, the Company shall not be obligated to issue or sell any
shares of Common Stock pursuant to the exercise of an Option to an Optionee or
any other authorized person unless a registration statement that complies with
the provisions of the Securities Act of 1933, as amended, (the ``Act'') in
respect of such shares of Common Stock is in effect at the time thereof, or
other appropriate action has been taken under and pursuant to the terms and
provisions of the Act, or the Company receives evidence satisfactory to such
counsel that the issuance and sale of such shares of Common Stock, in the
absence of an effective registration statement or other appropriate action,
would not constitute a violation of the Act or any applicable state securities
law. The Company is in no event obligated to register any such shares of Common
Stock, to comply with any exemption from registration requirements or to take
any other action which may be required in order to permit, or to remedy or
remove any prohibition or limitation on, the issuance or sale of such shares of
Common Stock of any optionee or other authorized person.
(b) Withholding Taxes. As a condition of exercise of an Option, the Company
may, in its sole discretion, withhold or require the optionee to pay or
reimburse the Company for any taxes which the Company determines are required to
be withheld in connection with the grant or any exercise of an Option.
8
<PAGE>
(c) Governing Law. The Plan shall be interpreted such that all options
hereunder intended to be Incentive Options shall meet the requirements therefor
set forth in Section 422 of the Code (and any applicable regulations, rulings or
judicial decisions interpreting said Section). Otherwise, the Plan shall be
governed by and interpreted under the laws of the State of Delaware.
13. TERMINATION OF GRANTING OF OPTIONS UNDER THE PLAN
No Option may be granted under the Plan after the tenth anniversary of the
effective date of the Plan.
9
<PAGE>
EXHIBIT 10.2
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
1998 STOCK OPTION PLAN
(as amended through April 1, 1999)
1. PURPOSE
The name of this plan is the Cambridge Technology Partners (Massachusetts),
Inc. 1998 Stock Option Plan (the "1998 Plan"). The purpose of the 1998 Plan is
to promote the long-term success of Cambridge Technology Partners
(Massachusetts), Inc., a Delaware corporation (the "Company"), by providing
financial incentives to employees and consultants of the Company who are in
positions to make significant contributions toward such success except that no
member of the Board of Directors of Cambridge Technology Partners
(Massachusetts), Inc. (the "Board") or officer of the Company appointed by the
Board shall be eligible for grants of options under the 1998 Plan. The 1998
Plan is designed to attract individuals of outstanding ability to become or to
continue as employees of the Company or consultants of the Company, to enable
such individuals to acquire or increase proprietary interests in the Company
through the ownership of shares of Common Stock of the Company, and to render
superior performance during their associations with the Company. The Company
intends that this purpose will be effected by the granting, pursuant to the 1998
Plan, of options for shares of the Company's Common Stock that do not meet the
definition of "incentive stock options" in Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code") (such options granted hereunder,
"Nonqualified Options").
References herein to "the Company" shall include any successor corporation
to the Company and, except where the context requires otherwise, also any direct
or indirect subsidiary of the Company (such that if the Company has one or more
subsidiaries, individuals who are employees thereof or consultants thereto are
eligible to be granted Nonqualified Options under the 1998 Plan). References
herein to "the Board" shall include the board of directors of any successor
corporation to the Company.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options Granted. Options granted under the 1998 Plan shall only be
Nonqualified Options.
(b) Administration of 1998 Plan. The 1998 Plan shall be administered by a
committee (the "Option Committee") of not less than two members of the Board
selected by and from the members of the Board in accordance with the provisions
of the Company's By-Laws relating to the appointment of Committees. Subject to
the provisions of the 1998 Plan, the Option Committee shall exercise all powers
under the 1998 Plan, unless and until other action is taken by the Board.
Action by the Option Committee shall require the affirmative vote of a majority
of all its members.
<PAGE>
(c) Option Committee. Subject to the terms and conditions of the 1998
Plan, the Option Committee shall have the power:
(i) To determine from time to time the Nonqualified Options to be
granted to eligible persons under the 1998 Plan, and to prescribe the terms and
provisions (which need not be identical) of each Nonqualified Option granted
under the 1998 Plan to such persons;
(ii) To construe and interpret the 1998 Plan and Nonqualified Options
granted thereunder and to establish, amend, and revoke rules and regulations for
administration of the 1998 Plan. In this connection, the Option Committee may
correct any defect or supply any omission, or reconcile any inconsistency in the
1998 Plan, or in any nonqualified option agreement, in the manner and to the
extent it shall deem necessary or expedient to make the 1998 Plan fully
effective. All decisions and determinations by the Option Committee in the
exercise of this power shall be final and binding upon the Company and all
optionees; and
(iii) Generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the Company
with respect to the 1998 Plan, including all actions the Option Committee deems
necessary, under Section 422 of the Code and the regulations thereunder, to
ensure that no Nonqualified Option issued hereunder is treated as an "incentive
stock option" under Section 422(b) of the Code.
(d) No issued and outstanding Option shall be repriced to a lower purchase
price per share at any time during the term of such Option, without the prior
affirmative vote of a majority of the shares of stock of the Company present at
a stockholders' meeting in person or by proxy and entitled to vote thereon. Any
amendment or repeal of this Section 2, clause (d), shall require the affirmative
vote of a majority of shares of stock of the Company present at a stockholders'
meeting in person or by proxy and entitled to vote thereon.
3. STOCK SUBJECT TO THE 1998 PLAN
(a) Stock under the 1998 Plan. The stock subject to the Nonqualified
Options granted under the 1998 Plan shall be shares of the Company's authorized
but unissued common stock, par value $.01 per share (the "Common Stock"), or
previously issued shares of Common Stock that have been reacquired and reserved
by the Board for resale upon exercise of Nonqualified Options granted under the
1998 Plan. The total number of shares of Common Stock that may be issued
pursuant to Nonqualified Options granted under the 1998 Plan shall not exceed an
aggregate of 5,000,000 shares of Common Stock. Such number shall be subject to
adjustment as provided in Section 9 hereof.
(b) Reallocation of Unexercised Options. Whenever any outstanding
Nonqualified Option under the 1998 Plan expires, is canceled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such Nonqualified Option may again be the subject of
Nonqualified Options under the 1998 Plan.
-2-
<PAGE>
4. STOCK OPTION GRANTS
Nonqualified Options may be granted to employees of the Company, to
consultants to the Company who are not employees of the Company, and to such
other persons as the Option Committee shall select from time to time, provided
--------
that, in no event, shall any member of the Board or any officer of the Company
- ----
appointed by the Board be eligible to receive any grants of Nonqualified Options
issued under the 1998 Plan. The determination of the persons eligible to
receive grants and the number of shares of Common Stock for which Nonqualified
Options are granted shall be made by the Option Committee.
5. TERMS OF THE NONQUALIFIED OPTION AGREEMENTS
Each nonqualified option agreement for Nonqualified Options granted under
the 1998 Plan (each, a "Nonqualified Option Agreement") shall contain such
provisions as the Option Committee shall from time to time deem appropriate.
The Nonqualified Option Agreements need not be identical, but each Nonqualified
Option Agreement by appropriate language, or by reference to this Section 5 of
the 1998 Plan, shall include the substance of all of the following provisions:
(a) Expiration. Each Nonqualified Option shall expire on the date
specified in the Nonqualified Option Agreement, which date shall not be later
than the tenth anniversary of the date on which the Nonqualified Option was
granted. Unless otherwise determined by the Option Committee, each Nonqualified
Option shall in any event expire not later than three months after the optionee
is for any reason no longer employed by (or in the case of a consultant, engaged
in a business relationship with) the Company, except (i) if such termination of
employment (or business relationship) results from optionee's disability (within
the meaning of Section 22(e)(3) of the Code), a Nonqualified Option may be
exercised within twelve months thereafter (but in no event later than the
scheduled expiration date set forth in the Nonqualified Option Agreement),
whether or not exercisable at the time of such termination, and (ii) if such
termination of employment (or business relationship) results from the optionee's
death, a Nonqualified Option may be exercised by his executors or administrators
within twenty-four months thereafter (but in no event later than the scheduled
expiration date set forth in the Nonqualified Option Agreement), whether or not
exercisable at the time of such termination.
(b) Exercise. Unless the Option Committee shall otherwise determine at the
time a Nonqualified Option is granted, each Nonqualified Option shall become
vested and exercisable with respect to 25% of the shares of Common Stock subject
to such Nonqualified Option as of the first anniversary of the date of grant
and, thereafter, with respect to an additional 2.083% of the shares subject to
such Nonqualified Option as of the same day (or the immediately preceding day if
a month does not have such day) of each calendar month thereafter, so that such
Nonqualified Option shall be exercisable in full as of the fourth anniversary of
the date of grant. Unless otherwise provided by the Option Committee, for this
purpose the date of the grant of a Nonqualified Option shall be the date on
which the Option Committee approves the grant. To the extent not exercised,
vested installments shall accumulate and be exercisable in whole or in part at
any time after becoming exercisable, but not later than the date the
Nonqualified Option expires or terminates. Nonqualified Option Agreements may
also contain provisions relating to
-3-
<PAGE>
the treatment of Nonqualified Options in the event of a merger, consolidation or
liquidation of, or sale of assets by, the Company.
(c) Purchase Price. Unless the Option Committee shall otherwise determine
at the time the Nonqualified Option is granted, the purchase price per share of
Common Stock under each Nonqualified Option shall be not less than the fair
market value of a share of Common Stock on the date the Nonqualified Option is
granted. For the purposes of the 1998 Plan, the fair market value of the shares
of Common Stock of the Company shall be determined by the Option Committee.
6. LIMITATION ON RIGHTS OF OPTIONEES
(a) Transferability of Nonqualified Options. Except as set forth below,
(i) no Nonqualified Option shall be transferable by any optionee other than by
will or by the laws of descent and distribution and (ii) Nonqualified Options
may be exercised during the optionee's lifetime only by the optionee (or, if the
optionee is disabled and so long as the Nonqualified Option remains exercisable,
by the optionee's duly appointed guardian or other legal representative).
However, the Option Committee may, in its discretion, permit a Nonqualified
Option recipient to transfer such Nonqualified Option to family members or other
persons for estate planning purposes. In connection with permitting transfers,
the Option Committee may require that (i) no consideration be given or payment
made for any such transfer, (ii) the Nonqualified Option Agreement pursuant to
which such Nonqualified Option is granted must be approved by the Option
Committee, and must expressly provide for transferability at the date of grant
in a manner consistent with the 1998 Plan, and (iii) subsequent transfers of the
transferred Nonqualified Option shall be prohibited except those in accordance
with this Section. Following any such transfer, any such Nonqualified Options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Sections 2(c)(ii),
6(b), 6(c), 7, 8, 9 and 12 hereof the term "optionee" shall be deemed to refer
to the transferee. The events of termination of employment (or business
relationship in the case of a consultant) set forth in an optionee's
Nonqualified Option Agreement shall continue to be applied with respect to the
original optionee, following which the Nonqualified Options shall be exercisable
by the transferee only to the extent, and for the periods specified, therein.
(b) No Shareholder Rights. No optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any Nonqualified Option
unless and until (i) the Nonqualified Option shall have been exercised pursuant
to the terms thereof, (ii) the Company shall have issued and delivered the
shares to the optionee, and (iii) the optionee's name shall have been entered as
a shareholder of record on the books of the Company. Thereupon, the optionee
shall have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.
(c) No Employment Rights. Neither the 1998 Plan nor the grant of any
Nonqualified Option thereunder shall be deemed to confer upon any optionee any
rights of employment with the Company, including, without limitation, any right
to continue in the employ of the Company,
-4-
<PAGE>
or affect the right of the Company to terminate the employment of an optionee at
any time, with or without cause.
(d) Authority of the Company. The existence of the Nonqualified Options
shall not affect: the right or power of the Company or its shareholders to make
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; any issue of bonds, debentures,
preferred or prior preference stock affecting the Common Stock or the rights
thereof; the dissolution or liquidation of the Company, or sale or transfer of
any part of its assets or business; or any other act, whether of a similar
character or otherwise.
7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Notice of Exercise. Any Nonqualified Option granted under the 1998
Plan may be exercised by the optionee by delivering to the Chief Financial
Officer of the Company (or such other representative of the Company as the
Option Committee may designate) on any business day a written notice specifying
the number (which shall be consistent with the provisions of Section 5(b)
hereof) of shares of Common Stock the optionee then desires to purchase (the
"Notice").
(b) Payment. Payment for the shares of Common Stock purchased pursuant to
the exercise of a Nonqualified Option shall be made either (i) in cash or by
check representing good funds in an amount equal to the option price for the
number of shares of Common Stock specified in the Notice (the "Total Option
Price"), or (ii) if authorized by the Nonqualified Option Agreement, by the
valid and properly completed transfer to the Company of a number of shares of
Common Stock having a fair market value, determined as provided in Section 5(c)
hereof, equal to or less than the Total Option Price, plus cash or check in an
amount equal to the excess, if any, of the Total Option Price over the fair
market value of such shares of Common Stock.
8. WITHHOLDING; ESCROW
The Company shall be entitled to withhold from any compensation or other
payments then or thereafter due to the optionee such amounts as may be necessary
to satisfy any withholding requirements of federal or state law or regulation
and, further, to collect from the optionee any additional amounts which may be
required for such purpose as a condition of delivering the shares of Common
Stock acquired pursuant to a Nonqualified Option. The Option Committee may, in
its discretion, require shares of the Common Stock acquired by an optionee upon
the exercise of a Nonqualified Option to be held in an escrow arrangement for
the purpose of enabling compliance with this Section 8.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) Events for Adjusting Number and Price. If the shares of Common Stock
as a whole are changed into or exchanged for a different number or kind of
shares or securities of the
-5-
<PAGE>
Company, whether through reorganization, recapitalization, reclassification,
stock dividend or other distribution, split, combination of interests, exchange
of interests, change in corporate structure or the like, an appropriate and
proportionate adjustment shall be made in the number and kind of shares of
Common Stock subject to the 1998 Plan and in the number, kind, and per share
exercise price of shares of Common Stock subject to unexercised Nonqualified
Options or portions thereof granted prior to any such change. In the event of
any such adjustment in an outstanding Nonqualified Option, the optionee
thereafter shall have the right to purchase the number of shares of Common Stock
under such Nonqualified Option at the per share price, as so adjusted, which the
optionee could purchase at the total purchase price applicable to the
Nonqualified Option immediately prior to such adjustment.
(b) Option Committee Action. Adjustments under this Section 9 shall be
determined by the Option Committee and such determinations shall be conclusive.
The Option Committee shall have the discretion, and power in any such event to
determine and to make effective provision for acceleration of the time or times
at which any Nonqualified Option or portion thereof shall become exercisable.
No fractional interests shall be issued under the 1998 Plan on account of any
adjustment specified above.
10. AMENDMENT OR TERMINATION OF 1998 PLAN
The Board may modify, revise or terminate the 1998 Plan at any time and
from time to time. Except as provided in Section 9 hereof, rights and
obligations under any Nonqualified Option granted before any amendment of the
1998 Plan shall not be altered or impaired by such amendment, except with the
consent of the optionee.
11. EFFECTIVE DATE; NONEXCLUSIVITY
(a) Effective Date. This 1998 Plan will be deemed to have been adopted and
to be effective when approved by the Board.
(b) Nonexclusivity. The adoption of the 1998 Plan shall not be construed
as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of options otherwise than under the 1998 Plan, and such
arrangements may be either applicable generally or only in specific cases.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) Securities Laws. If in the opinion of legal counsel for the Company,
the issuance or sale of any shares of Common Stock pursuant to the exercise of a
Nonqualified Option would not be lawful for any reason, including, without
limitation, the inability of the Company to obtain from any governmental
authority or regulatory body having jurisdiction the authority deemed by such
counsel to be necessary to such issuance or sale, the Company shall not be
obligated to issue or sell any shares of Common Stock pursuant to the exercise
of a Nonqualified Option to an optionee or any other authorized person unless a
registration statement that complies with the provisions of the Securities Act
of 1933, as amended (the "Act"), in respect of such shares of
-6-
<PAGE>
Common Stock is in effect at the time thereof, or other appropriate action has
been taken under and pursuant to the terms and provisions of the Act, or the
Company receives evidence satisfactory to such counsel that the issuance and
sale of such shares of Common Stock, in the absence of an effective registration
statement or other appropriate action, would not constitute a violation of the
Act or any applicable state securities law. The Company is in no event obligated
to register any such shares of Common Stock, to comply with any exemption from
registration requirements or to take any other action which may be required in
order to permit, or to remedy or remove any prohibition or limitation on, the
issuance or sale of such shares of Common Stock to any optionee or other
authorized person.
(b) Governing Law. The 1998 Plan shall be governed by and interpreted
under the laws of the State of Delaware.
13. TERMINATION OF GRANTING OF NONQUALIFIED OPTIONS UNDER THE 1998 PLAN
No Nonqualified Option may be granted under the 1998 Plan after the tenth
anniversary of the effective date of the 1998 Plan (as set forth in Section 11
hereto).
-7-
<PAGE>
Exhibit 11
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
------------ --------------
<S> <C> <C>
Net income $ 7,459 $12,480
======= =======
Basic:
Weighted average number of common shares outstanding 59,301 57,217
======= =======
Net income per share $ .13 $ .22
======= =======
Diluted:
Weighted average number of common shares outstanding 59,301 57,217
Dilutive effects of stock options 4,758 5,442
------- -------
Weighted average number of common and
common equivalent shares outstanding 64,059 62,659
======= =======
Net income per share $ .12 $ .20
======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 73,696
<SECURITIES> 27,360
<RECEIVABLES> 133,280
<ALLOWANCES> 4,678
<INVENTORY> 0
<CURRENT-ASSETS> 289,389
<PP&E> 84,626
<DEPRECIATION> 36,467
<TOTAL-ASSETS> 356,831
<CURRENT-LIABILITIES> 94,493
<BONDS> 0
0
0
<COMMON> 596
<OTHER-SE> 259,624
<TOTAL-LIABILITY-AND-EQUITY> 260,220
<SALES> 0
<TOTAL-REVENUES> 151,373
<CGS> 0
<TOTAL-COSTS> 140,235
<OTHER-EXPENSES> (953)
<LOSS-PROVISION> 509
<INTEREST-EXPENSE> 60
<INCOME-PRETAX> 12,031
<INCOME-TAX> 4,572
<INCOME-CONTINUING> 7,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,459
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.12
</TABLE>
