-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WfE99QQ9WQMsuc11j/Hy8tAVhq2FkzoWJie5y+xYGAtQCtpUdkKbZZ7Rv3Gg5dzs ipzk3OryWyjLeLemk+pqTg== 0001163842-02-000040.txt : 20020514 0001163842-02-000040.hdr.sgml : 20020514 ACCESSION NUMBER: 0001163842-02-000040 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTEON INTERNATIONAL CORP CENTRAL INDEX KEY: 0001163842 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 133880755 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31258 FILM NUMBER: 02645785 BUSINESS ADDRESS: STREET 1: 3211 JERMANTOWNE ROAD STREET 2: SUITE 700 CITY: FAIRFAX STATE: VA ZIP: 22030-2801 BUSINESS PHONE: (703) 246-0200 MAIL ADDRESS: STREET 1: 3211 JERMANTOWN ROAD STREET 2: SUITE 700 CITY: FAIRFAX STATE: VA ZIP: 22030-2801 FORMER COMPANY: FORMER CONFORMED NAME: AZIMUTH TECHNOLOGIES INC DATE OF NAME CHANGE: 20011219 10-Q 1 anteon10q.txt MARCH 10Q Form 10-Q for ANTEON INTERNATIONAL CORPORATION filed on May 14, 2002 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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, 2002 -------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-31258 ANTEON INTERNATIONAL CORPORATION --------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3880755 ----------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3211 Jermantown Road, Fairfax, Virginia 22030-2801 - ------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) (703) 246-0200 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of close of business on May 10, 2002, there were 33,842,208 outstanding shares of the registrant's common stock, par value $.01 per share.
CONTENTS PAGE PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2002 AND DECEMBER 31, 2001 1 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 2 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 3 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22 PART II. OTHER INFORMATION REQUIRED IN REPORT ITEM 1. LEGAL PROCEEDINGS 23 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 23 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 24 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 24 ITEM 5. OTHER INFORMATION 25 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 25
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PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ANTEON INTERNATIONAL CORPORATION AND SUBSIDIARIES (A Delaware Corporation) CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, 2002 December 31, (Unaudited) 2001 ------------------ ---------------- ASSETS Current assets: Cash and cash equivalents $ 19,365 1,930 Accounts receivable, net 150,296 131,345 Prepaid expenses and other current assets 7,749 6,992 Deferred tax assets, net 2,332 4,151 ------------------ ----------------- Total current assets 179,742 144,418 Property and equipment, net 12,377 12,744 Goodwill, net 138,619 136,622 Intangible and other assets, net 10,465 12,867 ------------------ ----------------- Total assets $ 341,203 $ 306,651 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Term loan, current portion $ 3,798 $ 17,266 Senior subordinated notes payable, current portion 25,000 -- Subordinated notes payable, current portion 2,335 2,268 Business purchase consideration payable 530 515 Accounts payable 41,804 25,028 Due to related party 3,600 3,600 Accrued expenses 43,192 56,041 Income tax payable 340 509 Other current liabilities 716 2,889 Deferred revenue 5,787 8,743 --------------- -------------- Total current liabilities 127,102 116,859 Term loan, less current portion 20,252 29,788 Revolving facility 5,800 18,700 Senior subordinated notes payable, less current portion 75,000 100,000 Subordinated convertible note payable-related party -- 22,500 Subordinated notes payable-related party -- 4,369 Subordinated notes payable to stockholders -- 7,499 Noncurrent deferred tax liabilities, net 9,891 9,261 Other long term liabilities 598 690 ------------------ ----------------- Total liabilities 238,643 309,666 Minority interest in subsidiaries 147 427 Stockholders' equity: Preferred stock, $.01 par value 15,000,000 shares authorized, none issued and outstanding as of March 31, 2002 -- -- Common stock, $.01 par value 175,000,000 shares authorized, 33,737,249 shares issued and outstanding as of March 31, 2002 337 -- Common stock, Class B, voting, $.01 par value, 3,000 shares authorized, 2,450 shares issued and outstanding as of and December 31, 2001 -- -- Common stock, Class A, voting, $.01 par value, 30,000,000 shares authorized, 23,784,115 shares issued and outstanding as of and December 31, 2001 -- 238 Common stock, non-voting, $.01 par value, 7,500,000 shares authorized, none issued and outstanding as of and December 31, 2001 -- -- Stock subscription receivable (12) (12) Additional paid-in capital 102,721 2,366 Accumulated other comprehensive loss (482) (1,747) Accumulated deficit (151) (4,287) ------------------ ----------------- Total stockholders' equity (deficit) 102,413 (3,442) ------------------ ----------------- Total liabilities and stockholders' equity (deficit) $ 341,203 $ 306,651 ================== ================= See accompanying notes to unaudited condensed consolidated financial statements.
ANTEON INTERNATIONAL CORPORATION AND SUBSIDIARIES (A Delaware Corporation) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) For the three months ended March 31, --------------------------------------------- 2002 2001 ------------------ ------------------ Revenues $ 192,629 $ 162,366 Costs of revenues 167,020 143,154 --------------- --------------- Gross profit 25,609 19,212 --------------- --------------- Operating expenses: General and administrative expenses 10,615 10,905 Amortization of noncompete agreements -- 209 Goodwill amortization -- 1,446 Other intangibles amortization 477 546 --------------- --------------- Total operating expenses 11,092 13,106 --------------- --------------- Operating income 14,517 6,106 Other income 6 -- Interest expense, net of interest income of $43,000 and $91,000, respectively 7,430 6,961 Minority interest in earnings of subsidiaries (9) (1) --------------- --------------- Income (loss) before provision (benefit) for income taxes and extraordinary item 7,084 (856) Provision (benefit) for income taxes 2,765 (186) --------------- --------------- Income (loss) before extraordinary item 4,319 (670) Extraordinary loss, net of tax 185 -- --------------- --------------- Net income (loss) $ 4,134 $ (670) =============== =============== Basic earnings (loss) per common share: Income (loss) before extraordinary loss $ 0.17 $ (0.03) Extraordinary loss, net of tax (0.01) -- --------------- --------------- Net income (loss) $ 0.16 $ (0.03) =============== ================ Basic weighted average shares outstanding 26,127,101 23,786,565 Diluted earnings (loss) per common share: Income (loss) before extraordinary loss $ 0.15 $ (0.03) Extraordinary loss, net of tax (0.01) -- --------------- --------------- Net income (loss) $ 0.14 $ (0.03) =============== =============== Diluted weighted average shares outstanding 28,548,329 23,786,565 See accompanying notes to unaudited condensed consolidated financial statements.
ANTEON INTERNATIONAL CORPORATION AND SUBSIDIARIES (A Delaware Corporation) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the three months ended March 31, ------------------------------------------------ 2002 2001 ------------------ ------------------- OPERATING ACTIVITIES: Net income (loss) $ 4,134 $ (670) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities Extraordinary item, before income taxes 304 -- Depreciation and amortization of property and equipment 1,215 2,276 Amortization of noncompete agreements -- 209 Goodwill amortization -- 1,446 Other intangibles amortization 477 546 Amortization of deferred financing fees 331 300 Loss on disposals of property and equipment 2 1 Deferred income taxes 1,572 (149) Minority interest in earnings (losses) of subsidiaries 9 1 Changes in assets and liabilities (19,051) (1,567) ------------------ ------------------- NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (11,007) 2,393 ------------------ ------------------- INVESTING ACTIVITIES: Purchases of property, equipment and other assets (844) (629) Acquisitions, net of cash acquired -- (21) ------------------ ------------------- NET CASH USED FOR INVESTING ACTIVITIES (844) (650) ------------------ ------------------- FINANCING ACTIVITIES: Principal payments on notes payable (11) (59) Payment of credit facility amendment fee (604) -- Principal payments on term loan (23,004) (5,549) Proceeds from revolving facility 240,600 164,500 Principal payments on revolving facility (253,500) (158,300) Proceeds from issuance of common stock, net of expenses 77,673 19 Principal payments on subordinated notes payable to stockholders (7,499) -- Payment of subordinated notes payable-related party (4,369) -- ------------------ ------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 29,286 611 ------------------ ------------------- CASH AND CASH EQUIVALENTS: Net increase in cash and cash equivalents 17,435 2,354 Cash and cash equivalents, beginning of period 1,930 1,434 ------------------ ------------------- Cash and cash equivalents, end of period $ 19,365 $ 3,788 ================== =================== Supplemental disclosure of cash flow information (in thousands): Interest paid $ 5,802 $ 3,602 Income taxes paid (refunds received), net 262 (89) ================== =================== See accompanying notes to unaudited condensed consolidated financial statements.
ANTEON INTERNATIONAL CORPORATION AND SUBSIDIARIES (A Delaware Corporation) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Supplemental disclosure of non-cash investing and financing activities: In March 2002, in connection with the Company's initial public offering ("IPO") of shares of its common stock, a $22.5 million principal amount subordinated convertible promissory note of ours held by Azimuth Tech. II LLC, now one of our principal stockholders, was converted, pursuant to its terms, into 4,629,232 shares of our common stock at a conversion price of $4.86 per share. ANTEON INTERNATIONAL CORPORATION AND SUBSIDIARIES (A Delaware Corporation) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 AND 2001 (1) Basis of Presentation The information furnished in the accompanying Unaudited Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of such information. The operating results for the three months ended March 31, 2002 may not be indicative of the results of operations for the year ending December 31, 2002, or any future period. This financial information should be read in conjunction with the Company's December 31, 2001 audited consolidated financial statements and footnotes thereto, included in the Registration Statement on Form S-1 filed with the Securities and Exchange Commission by the Company on December 21, 2001, as amended (Commission File No. 333-75884). (2) Organization and Business Anteon International Corporation, a Delaware Corporation ("Anteon" or the "Company") (formerly Azimuth Technologies, Inc.), was incorporated on March 15, 1996 for the purpose of acquiring all of the outstanding stock of Ogden Professional Services Corporation, a wholly owned subsidiary of Ogden Technology Services Corporation and an indirectly wholly owned subsidiary of Ogden Corporation (collectively, "Ogden"). Upon completion of the acquisition, Ogden Professional Services Corporation was renamed Anteon Corporation effective April 22, 1996. On March 11, 2002, a registration statement filed on Form S-1 with the Securities and Exchange Commission, as amended, was declared effective in connection with the registration and issuance of shares of the Company's common stock in an initial public offering (the "IPO"). Immediately prior to the IPO, the Company entered into a series of reorganization transactions. First, the Company's $22.5 million principal amount subordinated convertible promissory note held by one of its principal stockholders, was converted according to its terms into shares of non-voting common stock. Second, the Company's majority-owned subsidiary, Anteon International Corporation, a Virginia corporation ("Anteon Virginia"), was merged with and into the Company. The Company is the surviving corporation of the merger. In the merger, all the outstanding shares of the Company's existing classes of stock, including Class A Voting Common Stock, Class B Voting Common Stock and Non-Voting Common Stock were converted into a single class of common stock. All the stock of Anteon Virginia held by the Company was cancelled and the stock of Anteon Virginia held by certain of the Company's employees and former employees immediately prior to the consummation of the IPO was converted into approximately 625,352 shares of the Company's common stock, constituting approximately 2.15% of the Company's outstanding stock immediately prior to the IPO. In connection with the merger described above, the outstanding stock options of Anteon Virginia were exchanged on a 2-for-1 basis for options of the Company. As a result of the merger, the Company succeeded to Anteon Virginia's obligations under its credit facility, the indenture governing its 12% Senior Subordinated Notes due 2009 (the "12% notes") and its Amended and Restated Omnibus Stock Plan. In addition, effective February 19, 2002, the Company increased the aggregate authorized shares of its common stock to 37,503,000 shares, and authorized a 2,449.95 for 1 stock split. . All references to the number and per share amounts relating to the Company's common shares have been retroactively restated for the stock split. On March 15, 2002, in connection with the merger of Anteon Virginia into the Company, the Company's certificate of incorporation was amended and restated to increase the aggregate authorized number of its shares of common stock to 175,000,000 and 15,000,000 shares of preferred stock. In connection with the IPO, the Company distributed one preferred share purchase right for each outstanding share of common stock to our stockholders of record as of March 15, 2002, and the Company entered into a rights agreement with each of these preferred shareholders. In general, the rights agreement imposes a significant penalty upon any person or group (subject to certain exceptions) that acquires 15% or more of the Company's outstanding common stock without the approval of the Company's board of directors. The Company and its subsidiaries provide professional information technology, systems and software development, high technology research, and systems integration services primarily to the U.S. government and its agencies. The Company is subject to all of the risks associated with conducting business with the U.S. federal government, including the risk of contract termination at the convenience of the government. In addition, government funding continues to be dependent on congressional approval of program level funding and on contracting agency approval for the Company's work. The extent to which the Company's existing contracts will be funded in the future cannot be determined. (3) Sales and Closure of Businesses (a) Sale of CITE On June 29, 2001, the Company sold its Center for Information Technology Education ("CITE") business to a subsidiary of Pinnacle Software Solutions, Inc. for a total purchase price of $100,000, of which $50,000 was paid on the date of closing, with the remainder due in six equal, monthly payments of approximately $8,300 beginning on August 1, 2001. CITE provides evening and weekend training for individuals to attain certification in Oracle developer and Java. Revenues generated by CITE were approximately $595,000 for the quarter ended March 31, 2001. Operating loss was $70,000 for the quarter ended March 31, 2001. (b) Closure of CITI-SIUSS LLC During 1999, the Company and Criminal Investigative Technology, Inc. ("CITI") entered into a joint venture ("CITI-SIUSS LLC"), formerly known as Anteon-CITI LLC (the "Venture"). The Venture developed and marketed certain investigative support products and services. On June 22, 2001, the Company decided to cease the software development operations of the Venture but to continue to support existing customers. The Company decided to close the business because it concluded that the Venture was not likely to establish a self-supporting business without significant capital contributions. Revenues generated by the Venture were approximately $106,000 for the quarter ended March 31, 2001. Operating losses were approximately $1.4 million for the quarter ended March 31, 2001. The Venture is obligated to provide maintenance and support services on existing contracts through June 30, 2002. The remaining expected cost of fulfilling the Venture's existing maintenance and support contracts exceeds the related expected revenue by approximately $55,000, which has been accrued at March 31, 2002. Subsequent to the decision to close the Venture, the Company was approached by several prospective customers about potential sales opportunities. Through March 31, 2002, none of these opportunities have resulted in sales, and management does not intend to make further investments in the software. (c) Sale of Interactive Media Corporation On July 20, 2001, the Company sold all of the stock in Interactive Media Corporation ("IMC") for $13.5 million in cash, subject to adjustment based on the amount of working capital (as defined in the sale agreement) as of the date of sale. In addition, the Company had a contingent right to receive an additional $500,000 in cash based on IMC's performance from the date of closing through the end of calendar year 2001. The Company has not to date and does not in the future expect to realize any amounts under this provision of the sale agreement. Prior to the sale, IMC transferred to the Company the assets of the government division of IMC, which specializes in training services primarily to the government marketplace. Accordingly, at the date of sale, IMC provided training services to customers primarily in the commercial marketplace. For the commercial division, revenues were approximately $5.6 million for the quarter ended March 31, 2001. Operating income was approximately $361,000 for the quarter ended March 31, 2001. The total gain recognized on the sale of IMC during the third quarter of 2001 was approximately $3.5 million, which reflected the Company's best estimate of the ultimate outcome of the working capital negotiation discussed above. With respect to the working capital adjustment, the Company had deferred approximately $550,000 of the sale proceeds at the time of closing. The Company has reached an agreement in principle with the purchaser of IMC to settle the adjustment in the amount of $475,000 as a result of working capital deficiencies at the closing of the transaction. The Company and the Purchaser are finalizing the written terms of this agreement. (d) Closure of South Texas Ship Repair On December 19, 2001, the Company decided to close the South Texas Ship Repair ("STSR") business, which was acquired as part of the Sherikon acquisition in October 2000. STSR specialized in the repair of ships for both government and commercial customers. Revenues were $653,000 and operating loss was $27,000 for the quarter ended March 31, 2001. The remaining expected costs of fulfilling STSR's existing contracts of $401,000 has been accrued at March 31, 2002. (4) Use of Proceeds from Initial Public Offering The net proceeds to the Company from the sale of 4,687,500 shares of common stock in the Company's IPO was $75.6 million, based on an initial public offering price of $18.00 per share, after deducting underwriting discounts and commissions of $5.9 million and estimated offering costs and expenses of $2.9 million. The Company used the net proceeds from the IPO to: o repay $11.4 million of its debt outstanding under the term loan portion of its credit facility; o repay $39.5 million of debt outstanding under the revolving portion of its credit facility, without permanently reducing the Company's borrowing availability under this facility; o repay in full its $7.5 million principal amount subordinated promissory note held by Azimuth Technologies, L.P., one of the Company's principal stockholders, including $50,000 aggregate principal amount of the Company's subordinated promissory notes held by present members of the Company's management; and o repay $4.4 million of the Company's subordinated notes, relating to accrued interest on the Company's $22.5 million principal amount subordinated convertible promissory note held by Azimuth Tech. II LLC, one of the Company's principal stockholders. The remainder of the net proceeds to the Company from the IPO, approximately $12.8 million, was temporarily invested in short-term investment grade securities pending the uses described below. The $12.8 million of short-term investments, together with $16.5 million of the IPO proceeds temporarily used to repay debt under the revolving portion of the Company's credit facility (as mentioned above) which was subsequently reborrowed by the Company, was used to redeem $25.0 million principal amount of its 12% notes on April 15, 2002, and to pay accrued interest of $1.3 million thereon and the associated $3.0 million pre-payment premium. The Company also intends to use an additional $2.5 million of the IPO proceeds temporarily used to repay debt under the revolving portion of its credit facility to repay in full, on or before October 20, 2002, a $2.5 million principal amount promissory note held by former stockholders of Sherikon, Inc., which was acquired by the Company in October 2000. As a result of the permanent reduction of a portion of its debt under the term loan, the Company wrote-off a proportionate amount of the unamortized deferred financing fees related to the portion of the term loan that was repaid. The write-off of $185,000, net of tax, has been reflected as an extraordinary loss in the accompanying unaudited condensed consolidated statements of operations. There is a current exposure draft to rescind Statement of Financial Accounting Standard No. 4 ("SFAS No. 4"), Reporting Gains and Losses From Extinguishment of Debt, which is expected to be issued in the second or third quarter of 2002. Upon issuance, the Company would be required to reclassify gains and losses from extinguishment of debt from extraordinary to operations for all periods presented. For the quarter ended March 31, 2002, the Company incurred approximately $604,000 in expenses related to obtaining an amendment to the Company's credit facility. These expenses have been capitalized as additional deferred financing fees and are being amortized over the remaining term of the credit facility. (5) Acquisition of the Training Division of SIGCOM, Inc. On July 20, 2001, the Company acquired the assets, contracts and personnel of the training division of SIGCOM, Inc. ("SIGCOM"). The principal business of SIGCOM's training division is the design, construction, instrumentation, training and maintenance of simulated live-fire training facilities to help acclimate members of the armed forces to combat conditions in urban areas. The Company's primary reason for acquiring SIGCOM was the significant capabilities of SIGCOM that will augment the Company's U.S. homeland defense training capabilities. The total purchase price was $11.0 million, including $409,000 of transaction costs, of which $10.0 million was paid in cash to the seller and $1.0 million of which was placed in escrow to secure the seller's obligations to indemnify the Company for certain potential liabilities which were not assumed. Transaction costs included a $100,000 fee paid to Caxton-Iseman Capital, Inc., an affiliate of and advisor to the Company. The transaction was accounted for using the purchase method, whereby the net tangible and identifiable intangible assets acquired and liabilities assumed were recognized at their estimated fair market values at the date of acquisition, based on preliminary estimates by management. The Company preliminarily has allocated approximately $4.1 million of the purchase price to accounts receivable, approximately $1.5 million to acquired accounts payable and accrued liabilities, and $440,000 of the purchase price to an intangible asset related to contract backlog, which prior to the implementation of SFAS No. 141 and 142 was being amortized over a two-year period. Approximately $8.1 million has been preliminarily allocated to tax deductible goodwill arising from the acquisition, which, in accordance with SFAS No. 141 and 142, is not being amortized (see note 12). The following unaudited pro forma summary presents consolidated information as if the acquisition of SIGCOM had occurred as of January 1, 2001. The pro forma summary is provided for informational purposes only and is based on historical information that does not necessarily reflect actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined entities (in thousands): Three Months Ended March 31, 2001 ------------------------ Total revenues $ 165,706 Total expenses 166,152 ---------------------- Net loss $ (446) ====================== Basic and diluted loss per common share $ (0.02) ====================== (6) Comprehensive Income (Loss) Comprehensive income (loss) for the three months ended March 31, 2002 and 2001 was approximately $5.4 million and $(1.3) million, respectively. Other comprehensive income (loss) for the three months ended March 31, 2002 and 2001 includes foreign currency translation losses of $(32,000), and $(56,000), respectively, and increases (decreases) in the fair value of interest rate swaps of $(.6) million, and $(.6) million, net of tax. For the quarter ended March 31, 2002, the Company exercised its cancellation rights under certain interest rate swap agreements and cancelled $30.0 million of such agreements. These interest rate swap agreements related primarily to term loan obligations that have been permanently reduced. Interest expense for the quarter ended March 31, 2002, includes losses of $1.9 million associated with these cancellations. Prior to cancellation, losses associated with these interest rate swap agreements were recorded as a component of accumulated other comprehensive loss. (7) Computation of Earnings Per Share
Three months ended March 31, 2002 Income Weighted average shares Per Share (Numerator) (Denominator) Amount ----------- ------------- ------ (in thousands, except share and per share data) Basic earnings per share: Income before extraordinary item $ 4,319 26,127,101 $ 0.17 Extraordinary loss 185 26,127,101 (0.01) ------------------------ ------------------------ Net income $ 4,134 26,127,101 $ 0.16 ======================== ======================== Dilutive earnings per share Stock options -- 2,421,228 -- Diluted earnings per share: Income before extraordinary item $ 4,319 28,548,329 $ 0.15 Extraordinary loss 185 28,548,329 (0.01) ------------------------ ------------------------ Net income $ 4,134 28,548,329 $ 0.14 ======================== ========================
(8) Domestic Subsidiaries Summarized Financial Information Under the terms of the 12% notes and the Company's credit facility, the Company's wholly-owned domestic subsidiaries (the "Guarantor Subsidiaries") are guarantors of the 12% notes and the Company's credit facility. Such guarantees are full, unconditional and joint and several. Separate unaudited condensed financial statements of the Guarantor Subsidiaries are not presented because the Company's management has determined that they would not be material to investors. The following supplemental financial information sets forth, on a combined basis, condensed balance sheets, statements of operations and statements of cash flows information for the Guarantor Subsidiaries, the Company's Non-Guarantor Subsidiaries and for the Company.
For the three months ended March 31, 2002 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- Consolidated Unaudited Condensed Consolidated Anteon Anteon Balance Sheets International Guarantor Non-Guarantor Elimination International Corporation Subsidiaries Subsidiaries Entries Corporation ----------- ------------ ------------ ------------ ------------- (in thousands) Cash and cash equivalents $ 15,268 $ 3,215 $ 882 $ -- $ 19,365 Accounts receivable, net -- 149,081 1,215 -- 150,296 Other current assets 1,330 8,324 427 -- 10,081 Property and equipment, net 1,617 10,640 120 -- 12,377 Due from Parent (7,605) 8,103 (498) -- -- Investment in and advances to subsidiaries 23,898 -- -- (23,898) -- Goodwill, net 94,946 43,673 -- -- 138,619 Intangible and other assets, net 68,684 1,603 178 (60,000) 10,465 ------------ ----------- ------------- ------------ ------------- Total assets $ 198,138 $ 224,639 $ 2,324 $ (83,898) $ 341,203 ============ =========== ============= ============ ============= Indebtedness $ 132,185 $ 60,530 $ -- $ (60,000) $ 132,715 Accounts payable -- 41,556 248 -- 41,804 Due to related party -- 3,600 -- -- 3,600 Accrued expenses and other current liabilities 5,091 38,673 484 -- 44,248 Deferred revenue -- 5,114 673 -- 5,787 Other long-term liabilities -- 10,182 307 -- 10,489 ------------ ----------- ------------- ------------ ------------- Total liabilities 137,276 159,655 1,712 (60,000) 238,643 Minority interest in subsidiaries -- -- 147 -- 147 Total stockholders' equity 60,862 64,984 465 (23,898) 102,413 ------------ ----------- ------------- ------------ ------------- Total liabilities and stockholders' equity $ 198,138 $ 224,639 $ 2,324 $ (83,898) $ 341,203 ============ =========== ============= ============ =============
For the three months ended March 31, 2002 ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Anteon Guarantor Non-Guarantor Elimination Consolidated Unaudited Condensed Consolidated Anteon Statements of Operations International International Corporation Subsidiaries Subsidiaries Entries Corporation ---------------- --------------- ---------------- -------------- ---------------- (in thousands) Revenues $ -- $ 193,485 $ 1,764 $ (2,620) $ 192,629 Costs of revenues -- 168,030 1,610 (2,620) 167,020 ------------- ------------- --------------- ------------ ------------- Gross profit -- 25,455 154 -- 25,609 Total operating expenses (542) 11,542 92 -- 11,092 ------------- ------------- --------------- ------------ ------------- Operating income 542 13,913 62 -- 14,517 Other income 8 (2) -- 6 Interest expense (income), net 6,605 829 (4) -- 7,430 Minority interest in losses of -- -- (9) -- (9) ------------- ------------- --------------- ------------ ------------- subsidiaries Income before provision for income taxes and extraordinary loss (6,055) 13,082 57 -- 7,084 Provision for income taxes (2,175) 4,920 20 -- 2,765 ------------- ------------- --------------- ------------ ------------- Income before extraordinary loss (3,880) 8,162 37 -- 4,319 Extraordinary loss, net of tax 185 -- -- -- 185 ------------- ------------- --------------- ------------ ------------- Net income (loss) $ (4,065) $ 8,162 $ 37 $ -- $ 4,134 ============= ============= =============== ============ =============
For the three months ended March 31, 2002 --------------------------------------------------------------------------- Unaudited Condensed Consolidated Statements of Cash Guarantor Consolidated Flows Anteon Anteon International Non-Guarantor International Corporation Subsidiaries Subsidiaries Corporation ----------------- ----------------- ------------------- --------------- (in thousands) Net income (loss) $ (4,065) $ 8,162 $ 37 $ 4,134 Adjustments to reconcile change in net income (loss) to net cash provided by (used for) operations: Extraordinary loss 304 -- - 304 Loss on disposals of property and equipment -- 2 - 2 Depreciation and amortization of property and equipment 211 994 10 1,215 Other intangibles amortization 422 55 - 477 Amortization of deferred financing fees 331 -- - 331 Deferred income taxes 2,528 (965) 9 1,572 Minority interest in earnings of subsidiaries 9 -- -- 9 Changes in assets and liabilities (17,117) (2,515) 581 (19,051) --------------- --------------- ---------------- -------------- Net cash provided by (used for) operating (17,377) 5,733 637 (11,007) activities --------------- --------------- ---------------- -------------- Cash flows from investing activities: Purchases of property and equipment -- (839) (5) (844) --------------- --------------- ---------------- -------------- Net cash used for investing activities -- (839) (5) (844) --------------- --------------- ---------------- -------------- Cash flow from financing activities: Principal payments on notes payable -- (11) -- (11) Payment of credit facility amendment fee (604) -- -- (604) Principal payments on term loan (23,004) -- -- (23,004) Proceeds from revolving facility 240,600 -- -- 240,600 Principal payments on revolving facility (253,500) -- -- (253,500) Proceeds from issuance of common stock, net of expenses 77,673 -- -- 77,673 Principal payments on subordinated notes payable to stockholders (7,499) -- -- (7,499) Payment of subordinated notes payable-related party (4,369) -- -- (4,369) --------------- --------------- ---------------- -------------- Net cash provided by financing activities 29,297 (11) -- 29,286 --------------- --------------- ---------------- -------------- Net increase in cash and cash equivalents 11,920 4,883 632 17,435 Cash and cash equivalents, beginning of period 3,348 (1,668) 250 1,930 --------------- --------------- ---------------- -------------- Cash and cash equivalents, end of period $ 15,268 $ 3,215 $ 882 $ 19,365 =============== =============== ================ ==============
For the three months ended March 31, 2001 ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ Consolidated Unaudited Condensed Consolidated Statements Anteon Anteon of Operations International Guarantor Non-Guarantor Elimination International Corporation Subsidiaries Subsidiaries Entries Corporation --------------- -------------- ----------------- ------------- ---------------- (in thousands) Revenues $ -- $ 160,045 $ 2,752 $ (431) $ 162,366 Costs of revenues -- 141,061 2,524 (431) 143,154 --------------- -------------- ----------------- ------------- ---------------- Gross profit -- 18,984 228 -- 19,212 Total operating expenses 1,650 11,332 124 -- 13,106 --------------- -------------- ----------------- ------------- ---------------- Operating income (loss) (1,650) 7,652 104 -- 6,106 Interest expense (income), net 6,944 24 (7) -- 6,961 Minority interest in (earnings) losses of subsidiaries -- 18 (19) -- (1) --------------- -------------- ----------------- ------------- ---------------- Income (loss) before provision for income taxes (8,594) 7,646 92 -- (856) Provision (benefit) for income taxes (3,305) 3,077 42 -- (186) --------------- -------------- ----------------- ------------- ---------------- Net income (loss) $ (5,289) $ 4,569 $ 50 $ -- $ (670) =============== ============== ================= ============= ================
For the three months ended March 31, 2001 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Consolidated Anteon Anteon International Guarantor Non-Guarantor International Unaudited Condensed Consolidated Statements of Cash Flows Corporation ubsidiaries Subsidiaries Corporation --------------- ------------- ------------------- ---------------- (in thousands) Net income (loss) $ (5,289) $ 4,569 $ 50 $ (670) Adjustments to reconcile change in net income (loss) to net cash provided by (used for) operations: Depreciation and amortization of property and 280 1,991 5 2,276 equipment Loss on disposals of property and equipment -- 1 -- 1 Goodwill amortization 1,103 343 -- 1,446 Other intangibles amortization 546 -- -- 546 Amortization of noncompete agreements -- 209 -- 209 Amortization of deferred financing fees 300 -- -- 300 Deferred income taxes -- (149) -- (149) Minority interest in earnings (losses) of -- (18) 18 -- subsidiaries Changes in assets and liabilities 2,658 (5,272) 1,048 (1,566) --------------- ------------- ----------------- ---------------- Net cash provided by (used for) operating activities (402) 1,674 1,121 2,393 --------------- ------------- ----------------- ---------------- Cash flows from investing activities: Purchases of property and equipment (188) (436) (5) (629) Acquisition of Sherikon Inc., net of cash acquired (21) -- -- (21) Intercompany transfers (338) 121 217 -- --------------- ------------- ----------------- ---------------- --------------- ------------- ----------------- ---------------- Net cash provided by (used for) investing activities (547) (315) 212 (650) --------------- ------------- ----------------- ---------------- Cash flow from financing activities: Principal payments on notes payable -- (59) -- (59) Proceeds from revolving facility 164,500 -- -- 164,500 Principal payments on revolving facility (158,300) -- -- (158,300) Principal payments on term loan (5,549) -- -- (5,549) Proceeds from issuance of common stock, net of expenses 19 -- -- 19 ------------- ------------ ----------------- -------------- Net cash provided by (used for) financing activities 670 (59) -- 611 ------------- ------------ ----------------- -------------- Net increase (decrease) in cash and cash equivalents (279) 1,300 1,333 2,354 Cash and cash equivalents, beginning of period 844 491 99 1,434 ------------- ------------ ----------------- -------------- Cash and cash equivalents, end of period $ 565 $ 1,791 $ 1,432 $ 3,788 =============== ============= =================== ================
(9) Segment Information The Company has adopted Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"), Disclosure about Segments of an Enterprise and Related Information. SFAS No. 131 establishes annual and interim reporting standards for an enterprise's operating segments. Based on the Company's organization through July 20, 2001, the Company reported two business segments: the Company's government contracting business and the Company's commercial, custom training and performance solutions group (collectively, IMC, which was sold by the Company during the third quarter of fiscal 2001.) Although the Company is organized by strategic business unit, the Company considers each of its government contracting units to have similar economic characteristics, provide similar types of services, and have a similar customer base. Accordingly, the Company's government contracting segment aggregates the operations of the Company with Vector Data Systems, Techmatics, A&T, Sherikon, and SIGCOM, prior acquisitions that have been integrated into the Company's government contracting business. The amounts shown below reflect both IMC Commercial, the unit sold on July 20, 2001, and IMC Government. Immediately prior to the sale of IMC Commercial, the Company integrated the IMC Government unit into the government contracting business. The Company's chief operating decision maker utilizes both revenue and earnings before interest and taxes in assessing performance and making overall operating decisions and resource allocations. Certain indirect costs such as corporate overhead and general and administrative expenses are allocated to the segments. Allocations of overhead costs to segments are based on measures such as cost and employee headcount. General and administrative costs are allocated to segments based on the government-required three-factor formula, which uses measures of revenue, labor and net book value of fixed assets. Interest expense, investment income and income taxes are not allocated to the Company's segments.
As of and for the Three Months Ended March 31, 2001 (amounts in thousands) Government Interactive Media Contracting Eliminations Consolidated ------------------ ------------------- --------------- -------------- Total assets $ 321,636 $ 8,962 $ -- $ 330,598 ================ =================== ================ ============ Sales to unaffiliated customers 153,966 8,400 -- 162,366 Intersegment sales 27 15 (42) -- ---------------- ------------------- ----------------- ------------- Total revenues $ 153,993 8,415 (42) 162,366 Operating income 6,106 Minority interest in earnings of subsidiaries (1) Interest expense, net 6,961 ------------ ------------ Loss before benefit for income taxes (856) Benefit from income taxes (186) ------------ Net loss $ (670) ============
For the period ended March 31, 2002, the Company reports one aggregated segment, delivering a broad array of information technology and systems engineering and integration services under contracts with the U.S. Government. No single customer or individual contract accounted for 10% or more of the Company's accounts receivable or revenues for the period ended March 31, 2002. In addition, there were no sales to any customers within a single country except for the United States where the sales accounted for 10% or more of total revenue. Substantially all assets were held in the United States for the period ended March 31, 2002. (10) Interest Rate Swap Agreements For the quarter ended March 31, 2002, the Company exercised its cancellation rights under certain interest rate swap agreements and cancelled $30 million of such agreements. These interest rate swap agreements related primarily to term loan obligations that have been permanently reduced. Interest expense for the quarter ended March 31, 2002 includes losses of $1.9 million associated with these cancellations. Over the next twelve months, approximately $214,000 of losses related to the interest rate swaps are expected to be reclassified into remaining interest expense as a yield adjustment of the hedged debt obligation. As of March 31, 2002, the fair value of the Company's interest swap agreements resulted in a net liability of $667,000 and has been included in other current liabilities. (11) Legal Proceedings The Company is involved in various legal proceedings in the ordinary course of business. On March 8, 2002, the Company received a letter from one of the Company's principal competitors, which is the parent company of one of the Company's subcontractors, claiming that the Company had repudiated its obligation under a subcontract with the subcontractor. The letter alleged that the Company was soliciting employees of the subcontractor in violation of the subcontract and stated that the subcontractor would seek arbitration, injunctive relief and other available remedies. The Company notified the parent company of the subcontractor that the Company believed that it had completely abided by its agreements with the subcontractor and advised that the Company intended to defend itself vigorously against any claims asserted in the letter. The subcontractor filed a complaint and obtained temporary injunctive relief from a Virginia state court for a 60-day period beginning on March 18, 2002 prohibiting the Company from hiring employees of the subcontractor and from declining to issue further work under the subcontract to the subcontractor. The temporary injunction was intended to preserve the status quo between the parties pending a determination of the merits of the subcontractor's claim through arbitration. The subcontractor has also filed a demand for arbitration to which Anteon has filed an answer and counter demand. We cannot predict the ultimate outcome of these matters, but do not believe that they will have a material impact on our financial position or results of operations. (12) New Accounting Pronouncements On July 20, 2001, the Financial Accounting standards Board issued Statement No. 141 ("SFAS No. 141"), Business Combinations, and Statement No. 142 ("SFAS No. 142"), Goodwill and Other Intangible Assets. SFAS No. 141 addresses the accounting for acquisitions of businesses and is effective for acquisitions occurring on or after July 1, 2001. SFAS No. 142 addresses the method of identifying and measuring goodwill and other intangible assets acquired in a business combination, eliminates further amortization of goodwill, and requires periodic evaluations of impairment of goodwill balances using a fair value approach. SFAS No. 141 and 142 are effective January 1, 2002, except for acquisitions occurring on or after July 1, 2001, for which the provisions of SFAS No. 141 and 142 are applicable. Accordingly, through December 31, 2001, the Company continued to amortize goodwill and identifiable intangible assets related to acquisitions occurring before July 1, 2001, but in accordance with SFAS No. 142, did not amortize goodwill from the acquisition of the training division of SIGCOM, which was acquired on July 20, 2001. The Company adopted SFAS No. 141 and 142 as of January 1, 2002. During the quarter ended March 31, 2002, the Company reclassified approximately $1.9 million of intangible assets associated with employee workforce from intangible assets to goodwill, which in accordance with SFAS No. 142, are no longer being amortized. As of March 31, 2002, the Company has approximately $8.5 million of intangible assets ($4.2 million net of accumulated amortization) related to contract backlog intangibles, which is being amortized straight-line over periods of up to 4 years. As a result of adopting SFAS No. 142, the Company no longer records goodwill amortization. SFAS No. 142 requires that goodwill no longer be amortized to earnings, but instead reviewed periodically for impairment, with any initial impairment identified upon adoption treated as a cumulative effect of a change in accounting principle, while any subsequent impairments identified be recognized through earnings. The Company is in the process of completing its initial assessment of the impact of adopting SFAS No. 142, but currently does not believe the impact of adoption will be material to the consolidated financial statements. Had the amortization provisions of SFAS No. 142 been applied as of January 1, 2001, for all of the Company's acquisitions, the Company's income (loss) before extraordinary gain (loss), net income (loss) and earnings (loss) per common share would have been as follows (unaudited) (in thousands, except per share data):
Period ended March 31, 2001 --------------------- --------------------- Net loss, as reported................................ $ (670) Net income, as adjusted.............................. $ 380 Basic and diluted earnings (loss) per common share: Income (loss) before extraordinary item, as reported. $ (0.03) Net income, as adjusted.............................. $ 0.02
In June 2001, the Financial Accounting Standards Board issued Statement No. 143 ("SFAS No. 143"), Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective June 15, 2002. We are currently assessing the impact of the adoption of SFAS No. 143. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 ("SFAS No. 144"), Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement addresses financial accounting and reporting for the impairment of long-lived assets to be disposed of and supersedes SFAS No. 121, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30 ("APB No. 30"), Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual or Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in APB No. 30). SFAS No. 144 retains the requirements of SFAS No. 121 to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from its discounted cash flows and measure an impairment loss as the difference between the carrying amount and fair value of the asset; however, the Statement removes goodwill from its scope, and therefore eliminated the requirement of SFAS No. 121 to allocate goodwill to long-lived assets to be tested for impairment. The Company adopted SFAS No. 144 as of January 1, 2002, with no impact on the Company's financial statements. (13) Subsequent Event In connection with the Company's IPO, on April 15, 2002, the Company redeemed $25.0 million of the outstanding principal amount of its 12% senior subordinated notes due in 2009. The redemption payment of $29.3 million included a $3.0 million pre-payment premium and $1.3 million in accrued interest through the date of redemption. The $3.0 million pre-payment premium will be accounted for as an extraordinary item in the second quarter of 2002, as part of the loss on the extinguishment of debt under current accounting guidance. There is a current exposure draft to rescind SFAS No. 4, which is expected to be issued in the second or third quarter of 2002. If issued as currently drafted, the Company would be required to reclassify gains and losses from extinguishments of debt from extraordinary to operations for all periods presented. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or our future performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our Company's actual results, level of activity, performance or achievements to be materially different from any results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology like "may" , "will", "should", "expects", "plans", "projects", anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, funded backlog, estimated contract value, our expectations regarding the federal government's procurement budgets and reliance on outsourcing of services, and our financial condition and liquidity, as well as future cash flows and earnings. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report to conform these statements to actual results and do not intend to do so. These statements are only predictions. Actual events or results may differ materially. The factors that could cause actual results to differ materially include the following: the integration of acquisitions without disruption to our other business activities; changes in general economic and business conditions; changes in federal government procurement laws, regulations, policies, and budgets; the number and type of contracts and task orders awarded to us; technological changes; our ability to attract and retain qualified personnel; competition; and our ability to retain our contracts during any rebidding process. GENERAL We provide information technology solutions and systems engineering and integration services to government clients. We design, integrate, maintain and upgrade state-of-the-art information systems for national defense, intelligence, emergency response and other high priority government missions. We also provide many of our government clients with the systems analysis, integration and program management skills necessary to manage their mission systems development and operations. We currently serve over six hundred U.S federal government clients, as well as state and foreign governments. For the quarter ended March 31, 2002, we estimate that 89% of our revenue was from contracts where we were the lead, or "prime" contractor. We provide our services under long-term contracts that generally have terms of four to five years. We have obtained ISO 9001 registration for our quality management systems at key facilities and have achieved Software Engineering Institute (SEI) Level 3 certification for our software development facility's processes. Our contract base is well diversified among government agencies. No single award contract or task order accounted for more than 5% of revenues for the quarter ended March 31, 2002. DESCRIPTION OF CRITICAL ACCOUNTING POLICIES Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates including those related to uncollected accounts receivable and other contingent liabilities, revenue recognition and goodwill. Management bases its estimates on historical experience and on various other factors that are believed to be reasonable at the time the estimates are made. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. We maintain reserves for uncollectible accounts receivable and other liabilities which may arise in the normal course of business. Historically, we have not had significant write-offs of uncollectible accounts receivable. However, we do perform work on many contracts and task orders, where on occasion, issues may arise which would lead to accounts receivable not being fully collected. Should these issues occur more frequently, additional reserves may be required. During the quarter ended March 31, 2002, we estimate that 98.8% of our revenues were derived from services and 1.2% from product sales. Services are performed under contracts that may be categorized into three primary types: time and materials, cost-plus reimbursement and firm fixed price. Revenue for time and materials contracts is recognized as time is spent at hourly rates, which are negotiated with the customer. Time and materials contracts are typically more profitable than cost-plus contracts because of our ability to negotiate rates and manage costs on those contracts. Revenue is recognized under cost-plus contracts on the basis of direct and indirect costs incurred plus a negotiated profit calculated as a percentage of costs or as performance-based award fee. Cost-plus type contracts provide relatively less risk than other contract types because we are reimbursed for all direct costs and certain indirect costs, such as overhead and general and administrative expenses, and are paid a fee for work performed. For cost-plus award fee type contracts, we recognize the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as our prior award experience and communications with the customer regarding our performance, including any interim performance evaluations rendered by the customer. Revenues are recognized under fixed price contracts based on the percentage-of-completion basis, using the cost-to-cost or units-of-delivery methods. We recognize revenues under our federal government contracts when a contract has been executed, the contract price is fixed and determinable, delivery of the services or products has occurred and collectibility of the contract price is considered probable. Our contracts with agencies of the federal government are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception of the contract or ratably throughout the term of the contract as the services are provided. In evaluating the probability of funding for purposes of assessing collectibility of the contract price, we consider our previous experiences with the customer, communications with the customer regarding funding status, and our knowledge of available funding for the contract or program. If funding is not assessed as probable, revenue recognition is deferred until realization is probable. We recognize revenues under our federal government contracts based on allowable contract costs, as mandated by the federal government's cost accounting standards. The costs we incur under federal government contracts are subject to regulation and audit by certain agencies of the federal government. We provide an allowance for estimated contract disallowances based on the amount of probable cost disallowances. Such amounts have not historically been significant. We may be exposed to variations in profitability, including potential losses, if we encounter variances from estimated fees earned under award fee contracts and estimated costs under fixed price contracts. We generally do not pursue fixed price software development work that may create material financial risk. We do, however, perform under fixed price labor hour and fixed price level of effort contracts, which represent similar levels of risk as time and materials contracts. Our contract mix was approximately 35% time and materials, 36% cost-plus and 29% fixed price during the quarter ended March 31, 2002, and can change over time depending on contract awards and acquisitions. Under cost-plus contracts, operating profits are statutorily limited to 15% but typically range from 5% to 7%. Under fixed price and time and materials contracts, margins are not subject to statutory limits. However, the federal government's objective in negotiating such contracts is to seldom allow for operating profits in excess of 15% and, due to competitive pressures, operating profits on such contracts are often less than 10%. Our costs are categorized as either direct or indirect costs. Direct costs are those that can be identified with and allocated to specific contracts and tasks. They include labor, fringe (vacation time, medical/dental, 401K plan matching contribution, tuition assistance, employee welfare, workman's compensation and other benefits), subcontractor costs, consultant fees, travel expenses and materials. Indirect costs are either overhead or general and administrative expenses. Indirect costs cannot be identified with specific contracts or tasks, and to the extent that they are allowable, they are allocated to contracts and tasks using appropriate government-approved methodologies. Costs determined unallowable under the Federal Acquisition Regulations cannot be allocated to projects. Our principal unallowable costs are interest expense, amortization expense for goodwill and intangibles from acquisitions, and, prior to our initial public offering, management fees paid to Caxton-Iseman Capital, Inc., an affiliate of our principal stockholders, and certain general and administrative expenses. A key element to our success has been our ability to control indirect and unallowable costs, enabling us to profitably execute our existing contracts and successfully bid for new contracts. In addition, with the acquisition of new companies, we have been able to manage our indirect costs and improve operating margins by integrating the indirect cost structures and realizing opportunities for cost synergies. Goodwill relating to our acquisitions represents the excess of cost over the fair value of net tangible and identifiable intangible assets acquired and, for acquisitions completed prior to July 1, 2001, and until the adoption of SFAS No. 141 and SFAS No. 142 on January 1, 2002, goodwill was amortized on a straight-line basis over periods ranging from twenty to thirty years. Determination of the amortization period was dependent on the nature of the operations acquired. Effective January 1, 2002, we adopted SFAS No. 142, and no longer amortize goodwill, but rather test for impairment of our goodwill at least annually using a fair value approach. Long-lived assets and identifiable intangible assets are evaluated for impairment when events occur that suggest that such assets may be impaired. Such events could include, but are not limited to, the loss of a significant customer or contract, decreases in federal government appropriations or funding of certain programs, or other similar events. We determine if an impairment has occurred based on a comparison of the carrying amount of such assets to the future undiscounted net cash flows, excluding charges for interest. If considered impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds their fair value, as determined by an analysis of discounted cash flows using a discounted interest rate considering our cost of capital and the related risks of recoverability. In evaluating impairment, we consider, among other things, our ability to sustain our current financial performance on contracts and tasks, our access to and penetration of new markets and customers and the duration of, and estimated amounts from, our contracts. Any uncertainty of future financial performance is dependent on the ability to maintain our customers and the continued funding of our contracts and tasks by the government. Over the past four years, we have been able to win the majority of our contracts that have been recompeted. In addition, we have been able to sustain financial performance through indirect cost savings from our acquisitions, which have generally resulted in either maintaining or improving margins on our contracts and tasks. If we are required to record an impairment charge in the future, it would have an adverse impact on our results of operations. The following is a description of certain line items from our statement of operations. Costs of revenues include direct labor and fringe costs for program personnel and direct expenses incurred to complete contracts and task orders. Costs of revenues also include subcontract work, consultant fees, materials, depreciation and overhead. Overhead consists of indirect costs relating to operational managers, rent/facilities, administration, travel and other expenses. General and administrative expenses are primarily for corporate functions such as management, legal, finance and accounting, contracts and administration, human resources, company management information systems and depreciation, and also include other unallowable costs such as marketing, certain legal fees and reserves. Amortization expenses relate to the costs associated with goodwill (prior to our adoption of SFAS No. 142 on January 1, 2002) and intangible assets from our acquisitions. These intangible assets represent the fair value assigned to employee workforce as part of our acquisitions of A&T and Sherikon (prior to our adoption of SFAS No. 141 on January 1, 2002) and contract backlog as part of our acquisitions of A&T, Sherikon and SIGCOM Training. Amortization expenses also include costs associated with certain non-compete agreements entered into in connection with acquisitions. Interest expense is primarily for our 12% notes due 2009, our term loan and revolving credit facility, our subordinated debt and subordinated convertible promissory notes held by our stockholders prior to their repayment or conversion in connection with our IPO, and other miscellaneous interest costs. Other income is from non-core business items such as gains on the sales and closures of businesses and investments. Each year a significant portion of our revenue is derived from existing contracts with our government clients, and a portion of the revenue represents work related to maintenance, upgrade or replacement of systems under contracts or projects for which we are the incumbent provider. Proper management of contracts is critical to our overall financial success and we believe that we manage costs effectively, making us competitive on price. We believe that our demonstrated performance record and service excellence have enabled us to maintain our position as an incumbent service provider on more than 90% of our contracts that have been recompeted over the past four years. We have increased our total estimated contract value by $70.0 million, from December 31, 2001, to $3.6 billion at March 31, 2002, of which $337 million was funded backlog as of March 31, 2002. Our total estimated contract value represents the aggregate estimated contract revenue to be earned by us at a given time over the remaining life of our contracts. When more than one company is awarded a contract for a given work requirement, we include in total estimated contract value only our estimate of the contract revenue we expect to earn over the remaining term of the contract. Funded backlog is based upon amounts actually appropriated by a customer for payment for goods and services. Because the federal government operates under annual appropriations, agencies of the federal government typically fund contracts on an incremental basis. Accordingly, the majority of the total estimated contract value is not funded backlog. Our estimated contract value is based on our experience under contracts and we believe our estimates to be reasonable. However, there can be no assurance that our existing contracts will result in actual revenues in any particular period or at all. These amounts could vary depending upon government budgets and appropriations. In addition, we are periodically asked to work at-risk on projects. At-risk means that the customer has asked us to work, or to continue working, on a project even though there are no funds appropriated and released for payment. In most cases, the government is in the process of funding the contract or tasks and makes the request to avoid disruptions to the project. Historically, we have not recorded any significant write-offs because funding was not ultimately received. RESULTS OF OPERATIONS Our historical consolidated financial statements included herein do not reflect the full impact of the operating results of certain of our acquisitions, divestitures and closures, including our acquisition of the training division of SIGCOM, Inc. ("SIGCOM"), since their operating results are only included with our results from the date of acquisition, divestiture or closure, as applicable. In addition, our operating results from period to period may not be comparable with future results because of the impact of the allocation and amortization principles of SFAS No. 141 and SFAS No. 142 (discussed above). The following table sets forth our results of operations based on the amounts and percentage relationship of the items listed to contract revenues during the period shown:
For the Three Months Ended March 31, 2002 2001 -------------------------- ------------------------- ($ in thousands) Revenues $ 192,629 100.0% $ 162,366 100.0% Costs of revenues 167,020 86.7 143,154 88.2 ----------------- ----------- ---------------- ------------ Gross profit 25,609 13.3 19,212 11.8 ----------------- ----------- ---------------- ------------ Operating expenses: General and administrative expenses 10,615 5.5 10,905 6.7 Amortization 477 0.3 2,201 1.4 ----------------- ----------- ---------------- ------------ Total operating expenses 11,092 5.8 13,106 8.1 ----------------- ----------- ---------------- ------------ Operating income 14,517 7.5 6,106 3.8 Interest expense, net 7,430 3.9 6,961 4.3 Minority interest in earnings of subsidiaries (9) 0.0 (1) -- Other income, net 6 -- -- 0.0 ----------------- ----------- ---------------- ------------ Income (loss) before income taxes and extraordinary item 7,084 3.7 (856) (0.5) Provision (benefit) for income taxes 2,765 1.4 (186) (0.01) ----------------- ----------- ---------------- ------------ Income (loss) before extraordinary item 4,319 2.3 (670) (0.04) Extraordinary loss on early extinguishment of debt, net of tax 185 (.01) -- 0.0 ----------------- ----------- ---------------- ------------ Net income (loss) $ 4,134 2.2% $ (670) (0.04)% ================= ============= ================ =============
REVENUES For the quarter ended March 31, 2002, revenues increased to $192.6 million, or 18.6%, from $162.4 million for the quarter ended March 31, 2001. The increase in revenues was attributable to internal growth and the acquisition of SIGCOM. These increases were offset in part by the sale of the commercial business of IMC on July 20, 2001. IMC's revenues for the commercial division were $5.6 million during the quarter ended March 31, 2001. For the quarter ended March 31, 2002, internal growth was 21% or $33.1 million, excluding the impact of the closed or sold businesses. The growth in revenue was primarily driven by growth under our SAFTAS contract, expansion of contracts in our Intelligence Systems Division (ISD), and growth under our General Services Administration ("GSA") Professional Engineering Services contract ("PES"), and our other GSA schedule contracts. COSTS OF REVENUES For the quarter ended March 31, 2002, costs of revenues increased by $23.9 million, or 16.7% to $167.0 million from $143.2 million, for the quarter ended March 31, 2002. Costs of revenues as a percentage of revenues decreased to 86.7% from 88.2% . The costs of revenues decrease was due primarily to the corresponding growth in revenues resulting from internal growth, and the acquisition of SIGCOM Training. The majority of this growth was due to a $47.7 million increase in direct labor and fringe and a $17.3 million increase in other direct contract costs. For the quarter ended March 31, 2002, gross profit increased $6.4 million, or 33.3% to $25.6 million from $19.2 million for the quarter ended March 31,2001, primarily as a result of the sale or closure of unprofitable businesses during the prior year quarter and the impact of certain indirect cost reductions. GENERAL and ADMINISTRATIVE EXPENSES For the quarter ended March 31, 2002, general and administrative expenses decreased $290,000 or 2.7% to $10.6 million from $10.9 million for the quarter ended March 31, 2001. General and administrative expenses for the quarter ended March 31, 2002, as a percentage of revenues, decreased to 5.5% from 6.7%. Excluding certain items from the first quarter of 2001 and the impact of businesses sold or closed (described below), general and administrative expenses as a percentage of revenue would have been 5.3% of our revenues in the first quarter of 2001. In addition, certain items that were incurred in the first quarter of 2001, but not in 2002, included management fees of $250,000 paid to Caxton-Iseman Capital, Inc. for the quarter ended March 31, 2001, and a $600,000 settlement and $497,000 in legal fees incurred for matters relating to a dispute with a former subcontractor. General and administrative expenses for the quarter ended March 31, 2001 also included costs related to several businesses which were either sold or closed during 2001, including IMC, Center for Information Technology Education ("CITE"), Criminal Investigative Technology, Inc. ("CITI-SIUSS"), DisplayCheck and South Texas Ship Repair ("STSR"). AMORTIZATION For the quarter ended March 31, 2002, amortization expenses decreased $1.7 million or 78.4% to $477,000 from $2.2 million for the comparable period in 2001. Amortization as a percentage of revenues decreased to 0.3% from 1.4%. The decrease in amortization expenses was primarily attributable to the implementation of SFAS No. 141 and SFAS No. 142 on January 1, 2002; see footnote 12 to our financial statements included elsewhere in this Quarterly Report for further details. OPERATING INCOME For the quarter ended March 31, 2002, operating income increased $8.4 million or 137.8% to $14.5 million from $6.1 million for the quarter ended March 31, 2001. Operating income as a percentage of revenue increased to 7.5% for the quarter ended March 31, 2002 from 3.8% for the same period in fiscal 2001. Absent the $1.3 million of March 31, 2001 expenses described in the general and administrative expenses section above, assuming the allocation and amortization principles of SFAS No. 141 and SFAS No. 142 had been in effect as of January 1, 2001, and assuming the elimination of our sold or closed operations for the entire quarter ended March 21, 2001, our operating income would have been $10.5 million for the quarter ended March 31, 2001 and our operating margin would have been 6.6%. INTEREST EXPENSE For the quarter ended March 31, 2002, interest expense, net of interest income, increased $469,000, or 6.7% to $7.4 million from $7.0 million for the quarter ended March 31, 2001. The increase in interest expense was due to fees of $1.9 million related to the termination of $30 million of interest rate swap agreements, offset in large part by interest earned on excess funds available from the proceeds of the IPO. PROVISION FOR INCOME TAXES Our effective tax rate for the quarter ended March 31, 2002 was 39.0% compared with a benefit of 21.8% for the quarter ended March 31, 2001, due to a reduction in non-deductible goodwill as a result of the implementation of SFAS No. 141 and SFAS No. 142 as of January 1, 2002. LIQUIDITY AND CAPITAL RESOURCES Cash flows for the Quarter Ended March 31, 2002 We used $11.0 million in cash from operations for the quarter ended March 31, 2002. By comparison, we generated $2.4 million in cash from operations for the quarter ended March 31, 2001. The decrease in cash flow from operations was primarily attributable to an increase in contract receivables due to delayed funding from the government. Contract receivables increased $19.0 million for the quarter ended March 31, 2002. Total days sales outstanding increased from 66 days in 2001 to 70 days in 2002. Accounts receivable totaled $150.3 million at March 31, 2002 and represented 44.1% of total assets at that date. Additionally, increases in accounts payable and accrued expenses generated $3.9 million of cash from operations, a 53.7% decrease from 2001. For the quarter ended March 31, 2002, net cash generated by investing activities was $844,000, which was attributable to purchases of property, plant and equipment. Cash used by financing activities was $29.3 million for the quarter ended March 31, 2002. On March 15, 2002, the Company completed its IPO, with the sale of 4,687,500 shares of its common stock. The Company's net proceeds were $75.6 million, based on an IPO price of $18.00 per share, after deducting underwriting discounts and commissions of $5.9 million and estimated offering costs and expenses of $2.9 million. The Company used the net proceeds from the IPO to repay: $11.4 million of its debt outstanding under the term loan portion of its credit facility; $39.5 million of debt outstanding under the revolving portion of its credit facility without permanently reducing the Company's borrowing availability under this facility; its $7.5 million principal amount subordinated promissory note held by Azimuth Technologies, L.P., one of the Company's principal stockholders, including $50,000 aggregate principal amount of the Company's subordinated promissory notes held by present members of the Company's management: and $4.4 million of the Company's subordinated notes, relating to accrued interest on the Company's $22.5 million principal amount subordinated convertible promissory note held by Azimuth Tech. II LLC, one of the Company's principal stockholders. The remainder of the net proceeds to the Company from the IPO, approximately $12.8 million, was temporarily invested in short-term investment grade securities pending the uses described below. The $12.8 million of short-term investments, together with $16.5 million of the IPO proceeds temporarily used to repay debt under the revolving portion of the Company's credit facility (as mentioned above) which was subsequently reborrowed by the Company, was used to redeem $25.0 million principal amount of its 12% notes on April 15, 2002, and to pay accrued interest of $1.3 million thereon and the associated $3.0 million pre-payment premium. The Company also intends to use an additional $2.5 million of the IPO proceeds temporarily used to repay debt under the revolving portion of its credit facility, to repay in full, on or before October 20, 2002, a $2.5 million principal amount promissory note held by former stockholders of Sherikon, Inc., which was acquired by the Company in October 2000. As a result of the permanent reduction of a portion of its debt under the term loan, the Company wrote-off a proportionate amount of the unamortized deferred financing fees related to the portion of the term loan that was repaid. The write-off of $185,000, net of tax, has been reflected as an extraordinary loss in the accompanying unaudited condensed consolidated statements of operations. There is a current exposure draft to rescind Statement of Financial Accounting Standard No. 4, ("SFAS No. 4"), Reporting Gains and Losses From Extinguishment of Debt, which is expected to be issued in the second or third quarter of 2002. Upon issuance, the Company would be required to reclassify gains and losses from extinguishment of debt from extraordinary to operations for all periods presented. Historically, our primary liquidity requirements have been for debt service under our existing credit facility and 12% notes, and for acquisitions and working capital requirements. We have funded these requirements primarily through internally generated cash flow and funds borrowed under our existing credit facility. Our existing credit facility is a six-year line of credit that expires June 23, 2005. The facility consists of a term loan and a revolving line of credit of up to $120.0 million. Borrowings from the revolving line of credit can be made based upon a borrowing base consisting of a portion of our eligible billed and unbilled receivable balances. In addition, the credit facility requires us to meet certain quarterly financial covenants. The key covenants are the leverage ratio, fixed charge coverage ratio and interest coverage ratio. For the period ended March 31, 2002, we complied with all the financial covenants. At March 31, 2002, total debt outstanding under our credit facility was approximately $29.8 million, consisting of $24.0 million in term loans, and $5.8 million outstanding under our revolving credit facility. The total funds available to us under the revolving loan portion of our credit facility as of March 31, 2002 were $112.9 million. However, under certain conditions related to excess annual cash flow, as defined in our credit agreement, and the receipt of proceeds from certain asset sales and debt or equity issuances, the Company is required to prepay, in amounts specified in our credit agreement, borrowings under the term loan. Due to excess cash flows generated during 2001, we made an additional principal payment of $10.7 million under the term loan portion of our credit facility during the quarter ended March 31, 2002. In addition, loans under the credit facility mature on June 23, 2005, and we are scheduled to pay quarterly installments of $950,000 under the term portion until the credit facility matures on June 23, 2005. As of March 31, 2002, we did not have any capital commitments greater than $1.0 million. Our principal working capital need is for funding accounts receivable, which has increased with the growth in our business, and the delays in government funding. Our principal sources of cash to fund our working capital needs are cash generated from operating activities and borrowings under our revolving credit facility. We have relatively low capital investment requirements. Capital expenditures were $844,000 and $629,000 for the quarters ended March 31, 2002 and 2001, respectively, primarily for leasehold improvements and office equipment. The Company does use operating leases to fund some of its equipment needs, primarily for personal computers. As of March 31, 2002, the Company had equipment worth approximately $14.7 million on lease. We intend to, and expect over the next twelve months to be able to, fund our operating cash, capital expenditure and debt service requirements through cash flow from operations and borrowings under our credit facility. Over the longer term, our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside our control. On April 25, 2002, Standard & Poor's upgraded the Company's credit rating to (BB-) from (B+). INFLATION We do not believe that inflation has had a material effect on our business in the quarter ended March 31, 2002. ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have interest rate exposure relating to certain of our long-term obligations. While the interest rate on the remaining $75 million principal amount of our 12% notes is fixed at 12%, the interest rate on both the term and revolving portions of our credit facilities is affected by changes in market interest rates. We manage these fluctuations in part through interest rate swaps that are currently in place and our focus on reducing the amount of outstanding debt through cash flow. In addition, we have implemented a cash flow management plan focusing on billing and collecting receivables to pay down debt. On January 29, 2002, the Company cancelled $30 million of interest swap agreements and recognized losses of $1.9 million of interest expense for the quarter ended March 31, 2002. As of March 31, 2002, the fair value of the Company's interest swap agreements resulted in a net liability of $667,000 and has been included in other current liabilities. A 1% change in interest rates on variable rate debt would have resulted in our interest expense fluctuating by approximately $41,000 and $208,000 for the quarters ended March 31, 2002 and 2001, respectively. PART II. OTHER INFORMATION REQUIRED IN REPORT ITEM 1. LEGAL PROCEEDINGS The Company is involved in various legal proceedings in the ordinary course of business. On March 8, 2002, the Company received a letter from one of the Company's principal competitors, which is the parent company of one of the Company's subcontractors, claiming that the Company had repudiated its obligation under a subcontract with the subcontractor. The letter alleged that the Company was soliciting employees of the subcontractor in violation of the subcontract and stated that the subcontractor would seek arbitration, injunctive relief and other available remedies. The Company notified the parent company of the subcontractor that the Company believed that it had completely abided by its agreement with the subcontractor and advised that the Company intended to defend itself vigorously against any claims asserted in the letter. The subcontractor filed a complaint and obtained temporary injunctive relief from a Virginia state court for a 60-day period beginning on March 18, 2002 prohibiting the Company from hiring employees of the subcontractor and from declining to issue further work under the subcontract to the subcontractor. The temporary injunction was intended to preserve the status quo between the parties pending a determination of the merits of the subcontractor's claim through arbitration. The subcontractor has also filed a demand for arbitration to which Anteon has filed an answer and counter demand. We cannot predict the ultimate outcome of these matters, but do not believe that they will have a material impact on our financial position or results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) Immediately prior to the closing of the initial public offering (the "IPO") of shares of common stock of the Company on March 15, 2002, the $22.5 million principal amount convertible promissory note of the Company held by Azimuth Tech. II LLC, one of our principal stockholders, was converted pursuant to its terms into 4,629,232 shares of Non-Voting Common Stock, par value $0.01 per share, of the Company ("Non-Voting Stock"). Immediately after this and again prior to the closing of the IPO, Anteon International Corporation, a Virginia corporation and a majority-owned subsidiary of the Company ("Anteon Virginia"), merged with and into the Company (the "Merger"), with the Company as the surviving entity of the Merger. Each share of the Company's Class A Voting Common Stock, par value $0.01 per share ("Class A Stock"), Class B Voting Common Stock, par value $0.01 per share ("Class B Stock"), and Non-Voting Stock outstanding prior to the Merger was converted into one share of common stock, par value $0.01 per share ("Common Stock"), of the Company, as the surviving entity of the Merger. Each outstanding share of common stock of Anteon Virginia held by the Company was deemed canceled and retired by virtue of the Merger, and each other share of common stock of Anteon Virginia outstanding prior to the Merger (held by certain of the Company's employees and former employees) was converted in the Merger on a 2-for-1 basis for shares of Common Stock. Following the Merger, the Common Stock is the only class of stock of the Company outstanding, and it is entitled to vote 100% of the voting power of the Company. (d) In connection with the IPO, the Company issued and sold 4,687,500 shares of Common Stock at a price of $18.00 per share pursuant to a Registration Statement on Form S-1 (Commission File No. 333-75884) which was declared effective, as amended, on March 11, 2002. The offering commenced on March 15, 2002, and all of the shares were sold on the same date. The underwriters were led by Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Credit Suisse First Boston, Lehman Brothers and Merrill Lynch & Co. The net proceeds to the Company from the sale of these shares were $75.6 million, after deducting underwriting discounts and commissions of $5.9 million, and offering costs and expenses of $2.9 million. The Company used the net proceeds from the IPO to: o repay $11.4 million of its debt outstanding under the term loan portion of its credit facility; o repay $39.5 million of debt outstanding under the revolving portion of its credit facility, without permanently reducing the Company's borrowing availability under this facility; o repay in full its $7.5 million principal amount subordinated promissory note held by Azimuth Technologies, L.P., one of the Company's principal stockholders, including $50,000 aggregate principal amount of the Company's subordinated promissory notes held by present members of the Company's management; and o repay $4.4 million of the Company's subordinated notes, relating to accrued interest on the Company's $22.5 million principal amount subordinated convertible promissory note held by Azimuth Tech. II LLC, one of the Company's principal stockholders. The remainder of the net proceeds to the Company from the IPO, approximately $12.8 million, was temporarily invested in short-term investment grade securities pending the uses described below. The $12.8 million of short-term investments, together with $16.5 million of the IPO proceeds temporarily used to repay debt under the revolving portion of the Company's credit facility (as mentioned above) which was subsequently reborrowed by the Company, was used to redeem $25.0 million principal amount of its 12% notes on April 15, 2002, and to pay accrued interest of $1.3 million thereon and the associated $3.0 million pre-payment premium. The Company also intends to use an additional $2.5 million of the IPO proceeds temporarily used to repay debt under the revolving portion of its credit facility to repay in full, on or before October 20, 2002, a $2.5 million principal amount promissory note held by former stockholders of Sherikon, Inc., which was acquired by the Company in October 2000. Certain members of the Company's management are limited partners and are non-managing members of Azimuth Technologies, L.P. and Azimuth Tech II LLC, respectively. ITEM 3. DEFAULTS UPON SENIOR SECURITIES NONE. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Effective February 19, 2002, in connection with preparations for the IPO, by written consent of the then majority voting stockholders of the Company, Azimuth Technologies, L.P. and Georgica (Azimuth Technologies), Inc., the stockholders of the Company approved an amendment to the Amended and Restated Certificate of Incorporation of the Company which increased the authorized shares of common stock of the Company to 37,503,000, and approved a 2,449.95-for-1 split of all the outstanding shares of stock of the Company. At an annual meeting of the Company's stockholders held on March 11, 2002, the stockholders ratified the selection by the Company's Board of Directors of Robert A. Ferris, William J. Perry, General Henry Hugh Shelton, USA (ret.), and Thomas J. Tisch to serve as Class 1 Directors (term expiring in 2003), Joseph M. Kampf, Steven M. Lefkowitz and Dr. Paul Kaminski to serve as Class 2 Directors (term expiring in 2004), and Frederick J. Iseman, Thomas M. Cogburn and Gilbert F. Decker to serve as Class 3 Directors (term expiring in 2005) in accordance with the Amended and Restated Certificate of Incorporation that was to be filed upon the Merger of Anteon Virginia with and into the Company. On this matter, 22,820,794 shares were voted in favor, 0 shares were voted against, and 0 shares abstained. Effective March 13, 2002, by written consent of the then majority voting stockholders of the Company, Azimuth Technologies, L.P. and Georgica (Azimuth Technologies), Inc., the stockholders of the Company approved the Company's entry into a merger agreement with Anteon Virginia, the filing of a merger certificate (including an amended and restated certificate of incorporation and by-laws attached thereto) in connection therewith, and the merger of Anteon Virginia with and into the Company in accordance with the terms of the merger agreement. The Company's certificate of incorporation as amended and restated increased the aggregate authorized amount of its common shares to 175,000,000 and authorized 15,000,000 shares of preferred stock. ITEM 5. OTHER INFORMATION NONE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. EXHIBITS Please see Exhibit Index. B. REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the quarter ended March 31, 2002. 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. ANTEON INTERNATIONAL CORPORATION Date: May 14, 2002 /s/ Joseph Kampf - ---------------------- -------------------------------------- Joseph Kampf - President and Chief Executive Officer Date: May 14, 2002 /s/ Carlton B. Crenshaw - ---------------------- -------------------------------------- Carlton B. Crenshaw - Senior Vice President and Chief Financial Officer
EXHIBIT INDEX Exhibit Number Description of Documents 3.1 Amended and Restated Certificate of Incorporation of Anteon International Corporation. 3.2 Certificate of Designations of Series A Preferred Stock of Anteon International Corporation. 3.3 Amended and Restated By-laws of Anteon International Corporation. 4.1 Fifth Supplemental Indenture, dated July 1, 2001, among Anteon International Corporation and IBJ Whitehall Bank & Trust Company as trustee. 4.2 Sixth Supplemental Indenture, dated March 15, 2002, among Anteon International Corporation and the Bank of New York, as trustee. 4.3 Form of Specimen Stock Certificate (incorporated by reference to Exhibit 4.7 to Anteon International Corporation's Amendment No. 2 to Form S-1 Registration Statement, filed on February 19, 2002 (Commission File No. 333-75884)). 4.4 Form of Registration Rights Agreement, dated March 11, 2002, among Anteon International Corporation, Azimuth Technologies, L.P., Azimuth Tech. II LLC, Frederick J. Iseman, Joseph M. Kampf and the other parties named therein (incorporated by reference to Exhibit 4.8 to Anteon International Corporation's Amendment No. 1 to Form S-1 Registration Statement, filed on February 5, 2002 (Commission file No. 333-75884)). 4.5 Rights Agreement (incorporated by reference to Exhibit 4.1 to Anteon International Corporation's Current Report on Form 8-K, filed on April 5, 2002 (Commission File No. 001-31258)). 10.1 Amendment No. 6, dated as of February 1, 2002, to the Credit Agreement, dated as of June 23, 1999, among Anteon Corporation, Credit Suisse First Boston, Mellon Bank, N.A., Deutsche Bank AG and the lenders named therein (incorporated by reference to Exhibit 10.10 of Anteon International Corporation's Amendment No. 1 to Form S-1 Registration Statement filed on February 5, 2002 (Commission File No. 333-75884)). 10.2 Amended and Restated Omnibus Stock Plan. 10.3 Form of Stock Option Agreement (incorporated by reference to Exhibit 10.17 to Anteon International Corporation's Amendment No. 2 to Form S-1 Registration Statement filed on February 19, 2002 (Commission File No. 333-75884)). 10.4 Letter Agreement between Anteon International Corporation and Caxton-Iseman Capital, Inc., dated as of January 30, 2002, terminating Fee Agreement between such parties dated as of June 1, 1999 (incorporated by reference to Exhibit 10.21 to Anteon International Corporation's Amendment No. 1 to Form S-1 Registration Statement filed on February 5, 2002 (Commission File No. 333-75884)). 10.5 Form of Retention Agreement (incorporated by reference to Exhibit 10.22 to Anteon International Corporation's Amendment No. 1 to Form S-1 Registration Statement filed on February 5, 2002 (Commission File No. 333-75884)).
EX-4 3 supplimental5th.txt EXHIBIT 4.1 THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of July 1, 2001, among Anteon International Corporation, a Virginia corporation (the "Company"), (ii) Anteon Corporation, a Virginia corporation and a wholly-owned subsidiary of the Company, (iii) Sherikon, Inc., a Louisiana corporation and the wholly-owned subsidiary of the Company ("Sherikon"), (iv) South Texas Ship Repair, Inc., a Virginia corporation and a wholly-owned subsidiary of Sherikon ("South Texas") and (v) IBJ Whitehall Bank & Trust Company, as trustee (the "Trustee"). WHEREAS, an indenture, dated as of May 11, 1999 and as supplemented (the "Indenture"), was entered into by and among the Company, its subsidiaries identified therein, and the Trustee to provide for the issuance of the Company's 12% Senior Subordinated Notes due 2009; WHEREAS, on the date hereof, as part of the reorganization of Sherikon and its subsidiaries, Sherikon Space Systems, Inc., a Florida corporation and a wholly-owned subsidiary of Sherikon ("Sherikon Sub"), merged into Sherikon under the short-from provisions (the "Short-Form Merger"), and then Sherikon merged into Anteon (the "Merger" together with the Short-Form Merger, the "Mergers"). Pursuant to Section 5.01(b) of the Indenture, the Company, Anteon, Sherikon and the Trustee are required to enter into this supplemental indenture (the "Supplemental Indenture") in connection with the Mergers; WHEREAS, on October 20, 2000, the Company acquired all of the issued and outstanding shares of common stock of Sherikon, and South Texas became a wholly-owned indirect subsidiary of the Company (the "Sherikon Acquisition"). Pursuant to 4.10 of the Indenture, as a new Restricted Subsidiary, South Texas is required to enter into this Supplemental Indenture as a Subsidiary Guarantor; WHEREAS, the Company, Anteon, Sherikon, South Texas and the Trustee are authorized to enter into this Supplemental Indenture; and NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained in this Supplemental Indenture and for other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, the Company, Anteon, Sherikon, South Texas and the Trustee hereby agree for the equal and the ratable benefit of all Holders of the Securities as follows: ARTICLE ONE Definitions 1.1 Definitions. For purposes of this Supplemental Indenture, the terms defined in the recitals shall have the meanings therein specified; any terms defined in the Indenture and not defined herein shall have the same meanings herein as therein defined; and references to Articles or Sections shall, unless the context indicates otherwise, be references to Articles or Sections of the Indenture. ARTICLE TWO The Mergers 2.1 Mergers. Pursuant to Section 5.01(b) of the Indenture, in connection with the Mergers, Sherikon and Anteon hereby represents and agrees to the following: (a) Short-Form Merger. Sherikon, the surviving entity after the Short-Form Merger, is a corporation duly incorporated, organized, validly existing and in good standing under the laws of the State of Louisiana, and hereby expressly assumes, by virtue of this Supplemental Indenture, all the obligations of Sherikon Sub under its Subsidiary Guaranty; (b) Merger. Anteon, the surviving entity after the Merger, is a corporation duly incorporated, organized, validly existing and in good standing under the laws of the State of Virginia, and hereby expressly assumes, by virtue of this Supplemental Indenture, all the obligations of Sherikon under its Subsidiary Guaranty ARTICLE THREE Guaranty of Securities 3.1 South Texas Guarantee. Pursuant to Section 4.10 of the Indenture, in connection with the Sherikon Acquisition, South Texas hereby agrees to the following: (a) South Texas hereby unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (i) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company unde the Indenture and the Securities and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Company unde the Indenture and the Securities (all the foregoing being hereinafter collectively referred to as the "Obligations"). South Texas further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from South Texas and that South Texas will remain bound under this Section notwithstanding any extension or renewal of any Obligations. (b) South Texas, the Trustee and each Holder by its acceptance of s Security hereby agrees that the Subsidiary Guaranty of South Texas provided hereunder shall be subject to all terms, provisions and conditions in the Indenture that relate to a Subsidiary Guaranty (including, without limitation, Articles 11 and 12 of the Indenture). South Texas further agrees to be bound by, and to comply with, all provisions of the Indenture and Subsidiary Guarantee that are applicable to a Subsidiary Guarantor. 3.2 Execution and Delivery of Subsidiary Guaranties. The delivery of any Security by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guaranty on behalf of South Texas. 3.3 No Personal Liability. No Stockholder, officer, director, employee or incorporator, past, present or future, of South Texas, as such, shall have any personal liability under the Subsidiary Guaranty of South Texas by reason of his, her or its status as such stockholder, officer, director, employee or incorporator. ARTICLE FOUR Miscellaneous 4.1 Effect of the Supplemental Indenture. This Supplemental Indenture supplements the Indenture and shall be a part and subject to all the terms thereof. Except as supplemented hereby, the Indenture and the Securities issued thereunder shall continue in full force and effect. 4.2 Counterparts. This Supplemental Indenture may be executed in counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. The parties hereto confirm that any facsimile copy of another party's executed counterparts of this Supplemental Indenture (or its signature page hereof) will be deemed to be an executed original thereof. 4.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed on the date first above written. ANTEON INTERNATIONAL CORPORATION By: /s/ Joseph M. Kampf ------------------------- Name: Joseph M. Kampf Title: President ANTEON CORPORATION By: /s/ Joseph M. Kampf ------------------------- Name: Joseph M. Kampf Title: President SHERIKON, INC. By: /s/ Joseph M. Kampf ------------------------- Name: Joseph M. Kampf Title: President SOUTH TEXAS SHIP REPAIR, INC. By: /s/ Joseph M. Kampf ------------------------- Name: Joseph M. Kampf Title: President THE BANK OF NEW YORK, as Trustee By: /s/ Geovanni Barris ----------------------- Name: Geovanni Barris Title: Vice President EX-4 4 supplimental6th.txt EXHIBIT 4.2 THIS SIXTH SUPPLEMENTAL INDENTURE, dated as of March 15, 2002, among Anteon International Corporation (formerly known as Azimuth Technologies, Inc.), a Delaware corporation ("Anteon Delaware"), Anteon International Corporation (formerly known as Anteon Corporation), a Virginia corporation ("Anteon Virginia"), and The Bank of New York (as successor to IBJ Whitehall Bank & Trust Company), a New York banking corporation, as trustee (the "Trustee"). WHEREAS, Anteon Virginia, Anteon Corporation (formerly known as Techmatics, Inc.), a Virginia corporation and a subsidiary guarantor, CITI-SIUSS LLC, a Delaware corporation and a subsidiary guarantor, and the Trustee are parties to an Indenture, dated as of May 11, 1999, as amended and supplemented, providing for the issuance of Anteon Virginia's 12% Senior Subordinated Notes due 2009 (the "Indenture"); WHEREAS, on the date hereof, Anteon Virginia will merge with and into Anteon Delaware, with Anteon Delaware as the surviving entity (the "Merger"); WHEREAS, pursuant to Section 5.01(a) of the Indenture, Anteon Delaware and the Trustee are required to enter into this Supplemental Indenture (the "Supplemental Indenture") in connection with the Merger; and WHEREAS, Anteon Delaware and the Trustee are authorized to enter into this Supplemental Indenture. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained in this Supplemental Indenture and for other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, Anteon Delaware, Anteon Virginia and the Trustee hereby agree for the equal and the ratable benefit of all Holders of the Securities as follows: ARTICLE ONE Definitions 1.1 Definitions. For purposes of this Supplemental Indenture, the terms defined in the recitals shall have the meanings therein specified; any terms defined in the Indenture and not defined herein shall have the same meanings herein as therein defined; and references to Articles or Sections shall, unless the context indicates otherwise, be references to Articles or Sections of the Indenture. ARTICLE TWO The Merger 2.1 Merger. Pursuant to Section 5.01(a) of the Indenture, upon the effectiveness of the Merger, Anteon Delaware hereby expressly assumes, by virtue of this Supplemental Indenture, all the obligations of Anteon Virginia under the Indenture. ARTICLE THREE Miscellaneous 3.1 Effect of the Supplemental Indenture. This Supplemental Indenture supplements the Indenture and shall be a part and subject to all the terms thereof. Except as supplemented hereby, the Indenture, the Securities issued thereunder and the Guarantees shall continue in full force and effect. 3.2 Counterparts. This Supplemental Indenture may be executed in counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. The parties hereto confirm that any facsimile copy of another party's executed counterparts of this Supplemental Indenture (or its signature page hereof) will be deemed to be an executed original thereof. 3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed on the date first above written. ANTEON INTERNATIONAL CORPORATION (formerly known as Azimuth Technologies, Inc.) By: /s/ Joseph Kampf ----------------------------------------- Name: Joseph Kampf Title:President and Chief Executive Officer ANTEON INTERNATIONAL CORPORATION (formerly known as Anteon Corporation) By: /s/ Joseph Kampf ----------------------------------------- Name: Joseph Kampf Title:President and Chief Executive Officer THE BANK OF NEW YORK, as Trustee By: ------------------------------------------ Name: Title: EX-3.(II) 5 certofdesignation.txt EXHIBIT 3.2 CERTIFICATE OF DESIGNATIONS of SERIES A PREFERRED STOCK of ANTEON INTERNATIONAL CORPORATION (Pursuant to Section 151 of the Delaware General Corporation Law) Anteon International Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (hereinafter called the "Board of Directors" or the "Board") as required by Section 151 of the General Corporation Law at a meeting duly called and held on February 8, 2002: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors hereby creates a series of Preferred Stock, par value $0.01 per share, of the Corporation, and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof (in addition to the provisions set forth in the Amended and Restated Certificate of Incorporation which are applicable to the Preferred Stock of all classes and series) as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 100,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights and warrants and upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $0.01 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent), subject to the provisions for adjustment set forth in Section 8 equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. (B) If a dividend is declared on the Common Stock, the Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Preferred Stock shall nevertheless be declared and shall be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation (which shall no include any transaction covered by Section 7), no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment set forth in Section 8, equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination, exchange or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment set forth in Section 8, equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. Section 8. Effect of Common Stock Splits, etc. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under Sections 2, 6 or 7 shall be adjusted by multiplying each such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 9. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. Section 10. Rank. The Series A Preferred Stock shall rank junior to all other series of Preferred Stock of the Corporation as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters. Section 11. Reservation. The Corporation shall at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for issuance upon the conversion of the Series A Preferred Stock, free from any preemptive rights or other obligations such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all of the Series A Preferred Stock outstanding. Section 12. Amendment. The Amended and Restated Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its President and Chief Executive Officer and attested by its Secretary this 15th day of March 2002. ANTEON INTERNATIONAL CORPORATION By: /s/ Joseph Kampf ---------------------------------------------------- Name: Joseph Kampf Title: President and Chief Executive Officer Attest: /s/ Curtis Schehr ----------------- Name: Curtis Schehr Title: Secretary EX-3.(II) 6 by-laws.txt EXHIBIT 3.3 AMENDED AND RESTATED BY-LAWS of ANTEON INTERNATIONAL CORPORATION (A Delaware Corporation) ------------------------ ARTICLE 1 DEFINITIONS As used in these By-laws, unless the context otherwise requires, the term: 1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation. 1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation. 1.3 "Board" means the Board of Directors of the Corporation. 1.4 "Business Day" means any day that is not a Saturday, a Sunday or a day on which banks are authorized to close in the City of New York, State of New York. 1.5 "By-laws" means the by-laws of the Corporation, as amended from time to time. 1.6 "Certificate of Incorporation" means the amended and restated certificate of incorporation of the Corporation, as amended, supplemented or restated from time to time. 1.7 "Chairman" means the Chairman of the Board. 1.8 "Corporation" means Anteon International Corporation. 1.9 "Directors" means directors of the Corporation. 1.10 "Entire Board" means all Directors of the Corporation then in office, whether or not present at a meeting of the Board, but disregarding vacancies. 1.11 "General Corporation Law" means the General Corporation Law of the State of Delaware, as amended from time to time. 1.12 "Office of the Corporation" means the principal place of business of the Corporation, anything in Section 131 of the General Corporation Law to the contrary notwithstanding. 1.13 "President" means the President of the Corporation. 1.14 "Secretary" means the Secretary of the Corporation. 1.15 "Stockholders" means stockholders of the Corporation. 1.16 "Treasurer" means the Treasurer of the Corporation. 1.17 "Vice President" means a Vice President of the Corporation. ARTICLE 2 STOCKHOLDERS 2.1 Place of Meetings. Every meeting of Stockholders shall be held at a place, within or without the State of Delaware, as may be designated by resolution of the Board from time to time. 2.2 Annual Meeting. If required by applicable law, a meeting of Stockholders shall be held annually for the election of Directors and the transaction of other business at such hour and on such Business Day as may be designated by resolution of the Board from time to time. 2.3 Other Special Meetings. Unless otherwise prescribed by applicable law, special meetings of Stockholders may be called at any time only by the Board or the Chairman and may not be called at any time by any other person or persons. Business transacted at any special meeting of S tockholders shall be limited to the purpose stated in the notice. 2.4 Fixing Record Date. For the purpose of (a) determining the Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders or any adjournment thereof or (ii) to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock; or (b) any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date was adopted by the Board and which record date shall not be (y) in the case of clause (a)(i) above, unless otherwise required by applicable law, more than sixty (60) nor less than ten (10) days before the date of such meeting and (z) in the case of clause (a)(ii) or (b) above, more than sixty (60) days prior to such action. If no such record date is fixed: 2.4.1 the record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the Business Day next preceding the Business Day on which notice is given, or, if notice is waived, at the close of business on the Business Day next preceding the Business Day on which the meeting is held; and 2.4.2 the record date for determining Stockholders for any purpose other than those specified in Section 2.4.1 hereof shall be at the close of business on the Business Day on which the Board adopts the resolution relating thereto. When a determination of Stockholders entitled to notice of or to vote at any meeting of Stockholders has been made as provided in this Section 2.4, such determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. 2.5 Notice of Meetings of Stockholders. Whenever under the provisions of applicable law, the Certificate of Incorporation or these By-laws, Stockholders are required or permitted to take any action at a meeting, written notice shall be given stating the place, if any, date and hour of the meeting, the means of remote communications, if any, by which Stockholders and proxyholders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, the notice of any meeting shall be given, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each Stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the Stockholder at his or her address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice required by this Section 2.5 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time, place, if any, and the means of remote communications, if any, by which Stockholders and proxyholders may be deemed to be present in person and vote at such meeting are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. 2.6 Waivers of Notice. Whenever the giving of any notice to Stockholders is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, in writing, signed by the person entitled to said notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Stockholder at a meeting shall constitute a waiver of notice of such meeting except when the Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by applicable law, the Certificate of Incorporation or these By-laws. 2.7 List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of Stockholders, a complete list of the Stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder, the Stockholder's agent or attorney, at the Stockholder's expense, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting, either on a reasonably accessible electronic network as permitted by applicable law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the Office of the Corporation at the election of the Secretary. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to Stockholders of the Corporation. If the meeting is to be held at a place, the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any Stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Upon the willful neglect or refusal of the Directors to produce such a list at any meeting for the election of Directors held at a place, or to open such a list to examination on a reasonably accessible electronic network during any meeting for the election of Directors held solely by means of remote communication, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the Stockholders entitled to examine the stock ledger, the list of Stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders. 2.8 Quorum of Stockholders; Adjournment. Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-laws, at each meeting of Stockholders, the presence in person or by proxy of the holders of a majority of all outstanding shares of stock entitled to vote at the meeting of Stockholders shall constitute a quorum for the transaction of any business at such meeting, except that, where a separate vote by a class or series or classes or series is required, a quorum shall consist of no less than a majority of the shares of such class or series or classes or series. When a quorum is present to organize a meeting of Stockholders and for purposes of voting on any matter, the quorum for such meeting or matter is not broken by the subsequent withdrawal of any Stockholders. In the absence of a quorum, the holders of a majority of the shares of stock present in person or represented by proxy at any meeting of Stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of Directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. 2.9 Voting; Proxies. Unless otherwise provided in the Certificate of Incorporation, every Stockholder entitled to vote at any meeting of Stockholders shall be entitled to one (1) vote for each share of stock held by such Stockholders which has voting power upon the matter in question. If the Certificate of Incorporation provides for more or less than one vote for any share on any matter, each reference in the By-laws or the General Corporation Law to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock. The provisions of Sections 212 and 217 of the General Corporation Law shall apply in determining whether any shares of stock may be voted and the persons, if any, entitled to vote such shares; but the Corporation shall be protected in assuming that the persons in whose names shares of stock stand on the stock ledger of the Corporation are entitled to vote such shares. At any meeting of Stockholders (at which a quorum was present to organize the meeting), all matters, except as otherwise provided by applicable law, pursuant to any regulation applicable to the Corporation or its securities or by the Certificate of Incorporation or by these By-laws, shall be decided by the affirmative vote of a majority in voting power of shares present in person or represented by proxy and entitled to vote thereon. At all meetings of Stockholders for the election of Directors, a plurality of the votes cast shall be sufficient to elect. Except as otherwise provided by the Certificate of Incorporation, each Stockholder entitled to vote at a meeting of Stockholders may authorize another person or persons to act for such Stockholder by proxy. The validity and enforceability of any proxy shall be determined in accordance with Section 212 of the General Corporation Law. A Stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary. 2.10 Voting Procedures and Inspectors of Election at Meetings of Stockholders. The Board, in advance of any meeting of Stockholders, may, and shall, if required by applicable law, appoint one or more inspectors to act at the meeting and make a written report thereof. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If required by applicable law, if no inspector or alternate is able to act at a meeting, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. At the meeting, the inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, (b) determine the shares represented at the meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of their duties. Unless otherwise provided by the Board, the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at a meeting shall be determined by the person presiding at the meeting and shall be announced at the meeting. No ballot, proxies or votes, or any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by a Stockholder shall determine otherwise. In determining the validity and counting of proxies and ballots cast at any meeting of Stockholders, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for office at an election may serve as an inspector at such election. 2.11 Conduct of Meetings. (a) The Board may adopt by resolution such rules and regulations for the conduct of the meeting of Stockholders as it shall deem appropriate. At each meeting of Stockholders, the Chairman, or in the absence of the Chairman or if one shall not have been appointed, the President, or if the President is absent, a Vice President, and in case more than one (1) Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age, present), shall act as chairman of the meeting. Except to the extent inconsistent with any rules and regulations for the conduct of the meeting of Stockholders adopted by the Board, the chairman of the meeting shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules and regulations for the conduct of the meeting and to do such acts as, in the judgment of the chairman of the meeting, are appropriate for the proper conduct of the meeting. The Secretary, or in his or her absence, one of the Assistant Secretaries, shall act as secretary of the meeting. In the absence of the Secretary or one of the Assistant Secretaries, the chairman of the meeting shall appoint a person to act as secretary of the meeting. In case none of the officers above designated to act as chairman or secretary of the meeting, respectively, shall be present, a chairman or a secretary of the meeting, as the case may be, shall be chosen by resolution of the Board, and in case the Board has not so acted, by a majority of the votes cast at such meeting by the holders of shares of stock present in person or represented by proxy and entitled to vote at the meeting. (b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board may be made at an annual meeting or special meeting of Stockholders only (i) by or at the direction of the Board, (ii) by any nominating committee designated by the Board or (iii) by any Stockholder of the Corporation who was a Stockholder of record of the Corporation at the time the notice provided for in this Section 2.11 is delivered to the Secretary, who is entitled to vote for the election of Directors at the meeting and who complies with the applicable provisions of Section 2.11(d) hereof (persons nominated in accordance with (iii) above are referred to herein as "Stockholder nominees"). (c) At any annual meeting of Stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting of Stockholders, (i) business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the meeting by or at the direction of the Board or (iii) otherwise properly brought before the meeting by a Stockholder who was a Stockholder of record of the Corporation at the time the notice provided for in this Section 2.11 is delivered to the Secretary, who is entitled to vote at the meeting and who complies with the applicable provisions of Section 2.11(d) hereof (business brought before the meeting in accordance with (iii) above is referred to as "Stockholder business"). (d) In addition to any other applicable requirements, at any annual or special meeting of Stockholders (i) all nominations of Stockholder nominees must be made by timely written notice given by or on behalf of a Stockholder of record of the Corporation (the "Notice of Nomination") and (ii) all proposals of Stockholder business must be made by timely written notice given by or on behalf of a Stockholder of record of the Corporation (the "Notice of Business"). To be timely, the Notice of Nomination or the Notice of Business, as the case may be, must be delivered personally to, or mailed to, and received at the Office of the Corporation, addressed to the attention of the Secretary, (i) in the case of the nomination of a person for election to the Board, or business to be conducted, at an annual meeting of Stockholders, not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the first anniversary of the date of the prior year's annual meeting of Stockholders or (ii) in the case of the nomination of a person for election to the Board at a special meeting of Stockholders, not more than one hundred and twenty (120) days prior to and not less than the later of (a) ninety (90) days prior to such special meeting or (b) the tenth day following the day on which the notice of such special meeting was made by mail or Public Disclosure; provided, however, that in the event that (i) the annual meeting of Stockholders is advanced by more than thirty (30) days, or delayed by more than seventy (70) days, from the first anniversary of the prior year's annual meeting of Stockholders, (ii) no annual meeting was held during the prior year or (iii) in the case of the Corporation's first annual meeting of Stockholders as a corporation with a class of equity security registered under the Securities Act of 1933, as amended (the "IPO Date"), notice by the Stockholder to be timely must be received (i) no earlier than one hundred and twenty (120) days prior to such annual meeting and (ii) no later than the later of ninety (90) days prior to such annual meeting or ten (10) days following the day the notice of such annual meeting was made by mail or Public Disclosure, regardless of any postponement, deferral or adjournment of the meeting to a later date. In no event shall the Public Disclosure of an adjournment or postponement of an annual or special meeting commence a new time period (or extend any time period) for the giving of the Notice of Nomination or Notice of Business, as applicable. Notwithstanding anything in the immediately preceding paragraph to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is increased and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a Notice of Nomination shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered at the Office of the Corporation, addressed to the attention of the Secretary, not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. The Notice of Nomination shall set forth (i) the name and record address of the Stockholder and/or beneficial owner proposing to make nominations, as they appear on the Corporation's books, (ii) the class and number of shares of stock held of record and beneficially by such Stockholder and/or such beneficial owner, (iii) a representation that the Stockholder is a holder of record of stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose such nomination, (iv) all information regarding each Stockholder nominee that would be required to be set forth in a definitive proxy statement filed with the Securities and Exchange Commission pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, or any successor statute thereto (the "Exchange Act"), and the written consent of each such Stockholder nominee to being named in a proxy statement as a nominee and to serve if elected and (v) all other information that would be required to be filed with the Securities and Exchange Commission if the person proposing such nominations were a participant in a solicitation subject to Section 14 of the Exchange Act or any successor statute thereto. The Corporation may require any Stockholder nominee to furnish such other information as it may reasonably require to determine the eligibility of such Stockholder nominee to serve as a Director of the Corporation. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that any proposed nomination of a Stockholder nominee was not made in accordance with the foregoing procedures and, if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. The Notice of Business shall set forth (i) the name and record address of the Stockholder and/or beneficial owner proposing such Stockholder business, as they appear on the Corporation's books, (ii) the class and number of shares of stock held of record and beneficially by such Stockholder and/or such beneficial owner, (iii) a representation that the Stockholder is a holder of record of stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose such business, (iv) a brief description of the Stockholder business desired to be brought before the annual meeting, the text of the proposal (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the By-laws, the language of the proposed amendment, and the reasons for conducting such Stockholder business at the annual meeting, (v) any material interest of the Stockholder and/or beneficial owner in such Stockholder business and (vi) all other information that would be required to be filed with the Securities and Exchange Commission if the person proposing such Stockholder business were a participant in a solicitation subject to Section 14 of the Exchange Act. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at the annual meeting of Stockholders except in accordance with the procedures set forth in this Section 2.11(d), provided, however, that nothing in this Section 2.11(d) shall be deemed to preclude discussion by any Stockholder of any business properly brought before the annual meeting in accordance with said procedure. Nevertheless, it is understood that Stockholder business may be excluded if the exclusion of such Stockholder business is permitted by the applicable regulations of the Securities and Exchange Commission. Only such business shall be conducted at a special meeting of Stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting, that business was not properly brought before the meeting in accordance with the foregoing procedures and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.11, if the Stockholder (or a qualified representative of the Stockholder) does not appear at the annual or special meeting of Stockholders to present the Stockholder nomination or the Stockholder business, as applicable, such nomination shall be disregarded and such business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.11, "Public Disclosure" shall be deemed to be first made when disclosure of such date of the annual or special meeting of Stockholders, as the case may be, is first made in a press release reported by the Dow Jones News Services, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act or any successor statute thereto. Notwithstanding the foregoing, a Stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.11. Nothing in this Section 2.11 shall be deemed to affect any rights of the holders of any series of preferred stock of the Corporation pursuant to any applicable provision of the Certificate of Incorporation. 2.12 Order of Business. The order of business at all meetings of Stockholders shall be as determined by the chairman of the meeting. 2.13 Written Consent of Stockholders Without a Meeting. Except as otherwise provided for or fixed pursuant to the provisions of the Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock, no action that is required or permitted to be taken by the Stockholders of the Corporation at any annual or special meeting of Stockholders may be effected by written consent of Stockholders in lieu of a meeting of Stockholders. ARTICLE 3 DIRECTORS 3.1 General Powers. Except as otherwise provided in the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Certificate of Incorporation or these By-laws or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation. 3.2 Number; Qualification; Term of Office. The Board shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board. Directors need not be Stockholders. Each Director shall hold office until a successor is duly elected and qualified or until the Director's death, resignation or removal. The Board (other than those Directors elected by the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of the Certificate of Incorporation (the "Preferred Stock Directors")) shall be divided into three classes, as nearly equal in number as possible, designated Class I, Class II and Class III. Class I Directors shall initially serve until the first annual meeting of Stockholders held after the IPO Date; Class II Directors shall initially serve until the second annual meeting of Stockholders held after the IPO Date; and Class III Directors shall initially serve until the third annual meeting of Stockholders held after the IPO Date. Commencing with the first annual meeting of Stockholders held after the IPO Date, Directors of each class the term of which shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting of Stockholders and until the election and qualification of their respective successors in office. In case of any increase or decrease, from time to time, in the number of Directors (other than Preferred Stock Directors), the number of directors in each class shall be apportioned as nearly equal as possible. 3.3 Election. Directors shall, except as otherwise required by applicable law or by the Certificate of Incorporation, be elected by a plurality of the votes cast at a meeting of Stockholders by the holders of shares present in person or represented by proxy at the meeting and entitled to vote in the election. 3.4 Newly Created Directorships and Vacancies. Unless otherwise provided by applicable law or the Certificate of Incorporation and subject to the rights of the holders of any series of Preferred Stock then outstanding, any newly created Directorships resulting from any increase in the authorized number of Directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled by a majority vote of the remaining Directors then in office although less than a quorum, or by a sole remaining Director, and Directors so chosen shall hold office until the expiration of the term of office of the Director whom he or she has replaced or until his or her successor is duly elected and qualified. No decrease in the number of Directors constituting the Board shall shorten the term of any incumbent Director. When any Director shall give notice of resignation effective at a future date, the Board may fill such vacancy to take effect when such resignation shall become effective in accordance with the General Corporation Law. 3.5 Resignation. Any Director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified in such resignation, the acceptance of such resignation shall not be necessary to make it effective. 3.6 Removal. Except for Preferred Stock Directors, any Director, or the Entire Board, may be removed from office at any time, but only for cause and only by the affirmative vote of at least a majority of the total voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class. 3.7 Compensation. Each Director, in consideration of his or her service as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at Directors' meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such Director in connection with the performance of his or her duties. Each Director who shall serve as a member of any committee of Directors in consideration of serving as such shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such Director in the performance of his or her duties. Nothing contained in this Section 3.7 shall preclude any Director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation therefor. 3.8 Regular Meetings. Regular meetings of the Board may be held without notice at such times and at such places within or without the State of Delaware as shall from time to time be determined by the Board. 3.9 Special Meetings. Special meetings of the Board may be held at any time or place, within or without the State of Delaware, whenever called by the Chairman, the President or the Secretary or by any two or more Directors then serving as Directors on at least twenty-four hours' notice to each Director given by one of the means specified in Section 3.12 hereof other than by mail, or on at least three days' notice if given by mail. Special meetings shall be called by the Chairman, President or Secretary in like manner and on like notice on the written request of any two or more of the Directors then serving as Directors. 3.10 Telephone Meetings. Directors or members of any committee designated by the Board may participate in a meeting of the Board or of such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.10 shall constitute presence in person at such meeting. 3.11 Adjourned Meetings. A majority of the Directors present at any meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. At least one (1) day's notice of any adjourned meeting of the Board shall be given to each Director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.12 hereof other than by mail, or at least three (3) days' notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called. 3.12 Notice Procedure. Subject to Sections 3.9 and 3.15 hereof, whenever, under the provisions of applicable law, the Certificate of Incorporation or these By-laws, notice is required to be given to any Director, such notice shall be deemed given effectively if given in person or by telephone, by mail addressed to such Director at such Director's address as it appears on the records of the Corporation, with postage thereon prepaid, or by telegram, telex, telecopy or other means of electronic transmission. 3.13 Waiver of Notice. Whenever the giving of any notice to Directors is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, in writing, signed by the person or persons entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Directors or a committee of Directors need be specified in any written waiver of notice unless so required by applicable law, the Certificate of Incorporation or these By-laws. 3.14 Organization. At each meeting of the Board, the Chairman, or in the absence of the Chairman, the President, or in the absence of the President, a chairman chosen by a majority of the Directors present, shall preside. The Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting. 3.15 Quorum of Directors. The presence in person of a majority of the Entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board. 3.16 Action by Majority Vote. Except as otherwise expressly required by applicable law, the Certificate of Incorporation or these By-laws, the act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board. 3.17 Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all Directors or members of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. ARTICLE 4 COMMITTEES OF THE BOARD The Board may designate one or more committees, each committee to consist of one or more of the Directors. The Board may remove any Director from any committee at any time, with or without cause. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board passed as aforesaid, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be impressed on all papers that may require it, but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the Stockholders, any action or matter expressly required by the General Corporation Law to be submitted to Stockholders for approval or (ii) adopting, amending or repealing these By-laws. Unless the Board provides otherwise, at all meetings of such committee a majority of the total number of members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings, copies of which shall be delivered to the Secretary. Unless the Board provides otherwise, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article 3 of these By-laws. ARTICLE 5 OFFICERS 5.1 Positions. The officers of the Corporation shall be a President, a Secretary, a Treasurer and such other officers as the Board may appoint, including a Chairman, one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The Board may designate one or more Vice Presidents as Executive Vice Presidents and may use descriptive words or phrases to designate the standing, seniority or areas of special competence of the Vice Presidents elected or appointed by it. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-laws otherwise provide. 5.2 Appointment. The officers of the Corporation shall be chosen by the Board at its annual meeting or at such other time or times as the Board shall determine. 5.3 Compensation. The compensation of all officers of the Corporation shall be fixed by the Board. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that the officer is also a Director. 5.4 Term of Office. Each officer of the Corporation shall hold office for the term for which he or she is elected and until such officer's successor is chosen and qualifies or until such officer's earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contractual or other legal rights of the Corporation, if any. Any officer elected or appointed by the Board may be removed at any time, with or without cause, by the Board. Any vacancy occurring in any office of the Corporation shall be filled by the Board. The removal of an officer without cause shall be without prejudice to the officer's contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. 5.5 Fidelity Bonds. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. 5.6 Chairman. The Chairman, if one shall have been appointed, shall preside at all meetings of the Board and Stockholders (unless the Chairman has delegated such powers to the President) and shall exercise such powers and perform such other duties as shall be determined from time to time by the Board. 5.7 President. The President shall be the Chief Executive Officer of the Corporation and shall have general supervision over the business of the Corporation, subject, however, to the control of the Board and of any duly authorized committee of Directors. The President shall preside at all meetings of Stockholders and the Board at which the Chairman (if there be one) has delegated such powers to the President or at which the Chairman is not present. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation or shall be required by applicable law otherwise to be signed or executed and, in general, the President shall perform all duties incident to the office of President of a corporation and such other duties as may from time to time be assigned to the President by the Board. 5.8 Vice Presidents. At the request of the President, or, in the President's absence, at the request of the Board, the Vice Presidents shall (in such order as may be designated by the Board) perform all of the duties of the President and, in so performing, shall have all the powers of, and be subject to all restrictions upon, the President. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed, and each Vice President shall perform such other duties as from time to time may be assigned to such Vice President by the Board or by the President. 5.9 Secretary. The Secretary shall attend all meetings of the Board and of the Stockholders and shall record all the proceedings of the meetings of the Board and of the Stockholders in a book to be kept for that purpose, and shall perform like duties for committees of the Board, when required. The Secretary shall give, or cause to be given, notice of all special meetings of the Board and of the Stockholders and shall perform such other duties as may be prescribed by the Board or by the President, under whose supervision the Secretary shall be. The Secretary shall have custody of the corporate seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to impress the same on any instrument requiring it, and when so impressed the seal may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to impress the seal of the Corporation and to attest the same by such officer's signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the President or any Vice President. The Secretary shall have charge of all the books, records and papers of the Corporation relating to its organization and management, shall see that the reports, statements and other documents required by applicable law are properly kept and filed and, in general, shall perform all duties incident to the office of Secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by the Board or by the President. 5.10 Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined by the Board and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the Corporation; have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the President or the Board, whenever the President or the Board shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation; exhibit at all reasonable times the records and books of account to any of the Directors upon application at the Office of the Corporation where such records and books are kept; disburse the funds of the Corporation as ordered by the Board; and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by the Board or the President. 5.11 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by the Board or by the President. ARTICLE 6 CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. 6.1 Execution of Contracts. The Board, except as otherwise provided in these By-laws, may prospectively or retroactively authorize any officer or officers, employee or employees or agent or agents, in the name and on behalf of the Corporation, to enter into any contract or execute and deliver any instrument, and any such authority may be general or confined to specific instances, or otherwise limited. Any action by the Board authorizing the President to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation shall be deemed to authorize the President to delegate such authority to such other officer as the President may choose. 6.2 Loans. The Board may prospectively or retroactively authorize the President or any other officer, employee or agent of the Corporation to effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances the person so authorized may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, and, when authorized by the Board so to do, may pledge and hypothecate or transfer any securities or other property of the Corporation as security for any such loans or advances. Such authority conferred by the Board may be general or confined to specific instances, or otherwise limited. 6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the payment of money out of the funds of the Corporation and all evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board. 6.4 Deposits. The funds of the Corporation not otherwise employed shall be deposited from time to time to the order of the Corporation with such banks, trust companies, investment banking firms, financial institutions or other depositaries as the Board may select or as may be selected by an officer, employee or agent of the Corporation to whom such power to select may from time to time be delegated by the Board. ARTICLE 7 STOCK AND DIVIDENDS 7.1 Certificates Representing Shares. The shares of stock of the Corporation shall be represented by certificates in such form (consistent with the provisions of Section 158 of the General Corporation Law) as shall be approved by the Board. Such certificates shall be signed by the Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be impressed with the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may, unless otherwise ordered by the Board, be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 7.2 Transfer of Shares. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the holder thereof or by the holder's duly authorized attorney appointed by a power of attorney duly executed and filed with the Secretary, an Assistant Secretary or a transfer agent of the Corporation, and on surrender of the certificate or certificates representing such shares of stock properly endorsed for transfer and upon payment of all necessary transfer taxes. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Cancelled," with the date of cancellation, by the Secretary or an Assistant Secretary or the transfer agent of the Corporation. A person in whose name shares of stock shall stand on the books of the Corporation shall be deemed the owner thereof to receive dividends, to vote as such owner and for all other purposes as respects the Corporation. No transfer of shares of stock shall be valid as against the Corporation, its Stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by applicable law, until such transfer shall have been entered on the books of the Corporation by an entry showing from and to whom transferred. 7.3 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board. 7.4 Lost, Destroyed and Stolen Certificates. The holder of any shares of stock of the Corporation shall notify the Corporation of any loss, destruction or theft of the certificate representing such shares, and the Corporation may issue a new certificate to replace the certificate alleged to have been lost, destroyed or stolen. The Board may, in its discretion, as a condition to the issue of any such new certificate, require the owner of the lost, destroyed or stolen certificate, or his or her legal representatives, to make proof satisfactory to the Board of such loss, destruction or theft and to advertise such fact in such manner as the Board may require, and to give the Corporation a bond in such form, in such sums and with such surety or sureties as the Board may direct, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate and the issuance of such new certificate. 7.5 Rules and Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with applicable law, these By-laws or with the Certificate of Incorporation, concerning the issue, transfer and registration of certificates representing shares of its stock. 7.6 Restriction on Transfer of Stock. A written restriction or restrictions on the transfer or registration of transfer of stock of the Corporation, or on the amount of the Corporation's stock that may be owned by any person or group of persons, if permitted by Section 202 of the General Corporation Law and noted conspicuously on the certificate or certificates representing such stock, may be enforced against the holder of the restricted stock or any successor or transferee of the holder, including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder. Unless noted conspicuously on the certificate or certificates representing such stock, a restriction, even though permitted by Section 202 of the General Corporation Law, shall be ineffective except against a person with actual knowledge of the restriction. A restriction on the transfer or registration of transfer of stock of the Corporation, or on the amount of the Corporation's stock that may be owned by any person or group of persons, may be imposed either by the Certificate of Incorporation or these By-laws or by an agreement among any number of Stockholders or among such Stockholders and the Corporation. No restrictions so imposed shall be binding with respect to stock issued prior to the adoption of the restriction unless the holders of such stock are parties to an agreement or voted in favor of the restriction. 7.7 Dividends, Surplus, Etc. Subject to the provisions of the Certificate of Incorporation and of applicable law, the Board: 7.7.1 may declare and pay dividends or make other distributions on the outstanding shares of stock in such amounts and at such time or times as it, in its discretion, shall deem advisable; 7.7.2 may use and apply, in its discretion, any of the surplus of the Corporation in purchasing or acquiring any shares of stock of the Corporation, or purchase warrants therefor, in accordance with law, or any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness; and 7.7.3 may set aside from time to time out of such surplus or net profits such sum or sums as, in its discretion, it may think proper, as a reserve fund to meet contingencies, or for equalizing dividends or for the purpose of maintaining or increasing the property or business of the Corporation, or for any purpose it may think conducive to the best interests of the Corporation. ARTICLE 8 INDEMNIFICATION 8.1 Indemnity Undertaking. To the extent not prohibited by applicable law, the Corporation shall indemnify any person (a "Covered Person") who is or was made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding (a "Proceeding"), whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a Director or officer of the Corporation, or, while a Director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of any other corporation or in a capacity with comparable authority or responsibilities for any partnership, joint venture, trust, employee benefit plan or other enterprise (an "Other Entity"), against expenses (including attorneys' fees) in the event of an action by or in the right of the Corporation and against judgments, fines, and amounts paid in settlement and expenses (including attorneys' fees), in the event of any other proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal proceeding, had no reason to believe the person's conduct was unlawful. Persons who are not Directors or officers of the Corporation may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board at any time specifies that such persons are entitled to the benefits of this Article 8. Notwithstanding the preceding sentence, except as otherwise provided in Section 8.9, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board. 8.2 Advancement of Expenses. The Corporation shall, from time to time, reimburse or advance to any Covered Person the funds necessary for payment of expenses, including attorneys' fees and disbursements, incurred in defense of any Proceeding, in advance of the final disposition of such Proceeding; provided, however, that, if required by the General Corporation Law, such payment of expenses in advance of the final disposition of a Proceeding shall be made only upon receipt by the Corporation of an undertaking, by the Covered Person, to repay any such amount so advanced if it shall ultimately be determined that such Covered Person is not entitled to be indemnified for such expenses. 8.3 Rights Not Exclusive. The rights to indemnification or advancement of expenses provided by, or granted pursuant to, this Article 8 shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under applicable law, the Certificate of Incorporation, these By-laws, any agreement, any vote of Stockholders or disinterested Directors or otherwise. 8.4 Continuation of Benefits. The rights to indemnification or advancement of expenses provided by, or granted pursuant to, this Article 8 shall continue as to a person who has ceased to be a Director or officer and shall inure to the benefit of the executors, administrators, legatees and distributees of such person. 8.5 Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of an Other Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article 8, the Certificate of Incorporation or under Section 145 of the General Corporation Law or any other provision of law. 8.6 Binding Effect. Any repeal or modification of the provisions of this Article 8 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. 8.7 Procedural Rights. The rights to indemnification or advancement of expenses provided by, or granted pursuant to, this Article 8 shall be enforceable by any Covered Person in the Court of Chancery of the State of Delaware. The burden of proving that such indemnification or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board, its independent legal counsel and its Stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board, its independent legal counsel and its Stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or advancement of expenses, in whole or in part, in any such proceeding. 8.8 Contribution. The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at the Corporation's request as a director, officer, employee or agent of any Other Entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such Other Entity. 8.9 Claims. If a claim for indemnification or advancement of expenses under this Article 8 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law. 8.10 Indemnification of Others. This Article 8 shall not limit the right of the Corporation, to the extent and in the manner permitted by applicable law, to indemnify and advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. ARTICLE 9 BOOKS AND RECORDS 9.1 Books and Records. There shall be kept at the principal Office of the Corporation correct and complete records and books of account recording the financial transactions of the Corporation and minutes of the proceedings of the Stockholders, the Board and any committee of the Board. The Corporation shall keep at its principal office, or at the office of the transfer agent or registrar of the Corporation, a record containing the names and addresses of all Stockholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. 9.2 Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the General Corporation Law. 9.3 Inspection of Books and Records. Except as otherwise provided by applicable law, the Board shall determine whether, and, if allowed, when and under what conditions and regulations, the accounts, books, minutes and other records of the Corporation, or any of them, shall be open to the Stockholders for inspection. ARTICLE 10 SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. ARTICLE 11 FISCAL YEAR The fiscal year of the Corporation shall be the calendar year, unless otherwise determined by resolution of the Board. ARTICLE 12 PROXIES AND CONSENTS Unless otherwise provided by resolution of the Board, the Chairman, the President, any Vice President, the Secretary or the Treasurer, or any one of them, may execute and deliver on behalf of the Corporation proxies respecting any and all shares or other ownership interests of any Other Entity owned by the Corporation appointing such person or persons as the officer executing the same shall deem proper to represent and vote the shares or other ownership interests so owned at any and all meetings of holders of shares or other ownership interests, whether general or special, and/or to execute and deliver written consents respecting such shares or other ownership interests; or any of the aforesaid officers may attend any meeting of the holders of shares or other ownership interests of such Other Entity and thereat vote or exercise any or all other powers of the Corporation as the holder of such shares or other ownership interests. ARTICLE 13 AMENDMENTS Subject to the provisions of the Certificate of Incorporation, (i) these By-laws may be altered, amended or repealed and new By-laws may be adopted by a vote of the Stockholders or by the Board and (ii) any By-laws altered, adopted or amended by the Board may be altered, amended or repealed by the Stockholders. EX-3.(I) 7 certofinc.txt EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION of ANTEON INTERNATIONAL CORPORATION 1. Name. The name of the corporation is "Anteon International Corporation." 2. Address; Registered Office and Agent. The address of the Corporation's registered office is 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware, 19808, and the name of its registered agent at such address is Corporation Service Company. 3. Purposes. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law. 4. Number of Shares. The total number of shares of stock that the Corporation shall have authority to issue is: One Hundred and Ninety Million (190,000,000) divided as follows: Fifteen Million (15,000,000) shares of Preferred Stock, of the par value of $0.01 per share (the "Preferred Stock"), and One Hundred Seventy Five Million (175,000,000) shares of Common Stock, of the par value of $0.01 per share (the "Common Stock"). 4.1 The designation, relative rights, preferences and limitations of the shares of each class are as follows: 4.1.1 The shares of Preferred Stock may be issued from time to time in one or more series of any number of shares, provided that the aggregate number of shares issued and not retired of any and all such series shall not exceed the total number of shares of Preferred Stock hereinabove authorized, and with such powers, including voting powers, if any, and the designations, preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, all as shall hereafter be stated and expressed in the resolution or resolutions providing for the designation and issue of such shares of Preferred Stock from time to time adopted by the Board of Directors of the Corporation (the "Board") pursuant to authority so to do which is hereby expressly vested in the Board. The powers, including voting powers, if any, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. Each series of shares of Preferred Stock: (a) may have such voting rights or powers, full or limited, if any; (b) may be subject to redemption at such time or times and at such prices, if any; (c) may be entitled to receive dividends (which may be cumulative or non-cumulative) at such rate or rates, on such conditions and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of stock, if any; (d) may have such rights upon the voluntary or involuntary liquidation, winding up or dissolution of, upon any distribution of the assets of, or in the event of any merger, sale or consolidation of, the Corporation, if any; (e) may be made convertible into or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation (or any other securities of the Corporation or any other person) at such price or prices or at such rates of exchange and with such adjustments, if any; (f) may be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of such series in such amount or amounts, if any; (g) may be entitled to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional shares (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Corporation or any subsidiary of, any outstanding shares of the Corporation, if any; (h) may be subject to restrictions on transfer or registration of transfer, or on the amount of shares that may be owned by any person or group of persons; and (i) may have such other relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, if any; all as shall be stated in said resolution or resolutions of the Board providing for the designation and issue of such shares of Preferred Stock. 4.1.2 Except as otherwise provided by law or by this Certificate of Incorporation and subject to the express terms of any series of shares of Preferred Stock, the holders of outstanding shares of Common Stock shall exclusively possess voting power for the election of Directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in his or her name on the books of the Corporation. Except as otherwise provided by law or by this Certificate of Incorporation and subject to the express terms of any series of shares of Preferred Stock, the holders of shares of Common Stock shall be entitled, to the exclusion of the holders of shares of Preferred Stock of any and all series, to receive such dividends as from time to time may be declared by the Board. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of shares of Common Stock shall be entitled to share ratably according to the number of shares of Common Stock held by them in all remaining assets of the Corporation available for distribution to its stockholders. 4.1.3 Subject to the rights of the holders of any one or more series of Preferred Stock then outstanding, the number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law or any corresponding provision hereinafter enacted. 5. Board of Directors. The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. Unless and except to the extent that the By-laws of the Corporation (the "By-laws") shall so require, the election of the Directors of the Corporation need not be by written ballot. 5.1 The Board (other than those Directors elected by the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of this Certificate of Incorporation (the "Preferred Stock Directors")) shall be divided into three classes, as nearly equal in number as possible, designated Class I, Class II and Class III. Class I Directors shall initially serve until the first annual meeting of stockholders held following March 15, 2002; Class II Directors shall initially serve until the second annual meeting of stockholders held following March 15, 2002; and Class III Directors shall initially serve until the third annual meeting of stockholders held following March 15, 2002. Commencing with the first annual meeting of stockholders held following March 15, 2002, Directors of each class the term of which shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting of stockholders and until the election and qualification of their respective successors in office. In case of any increase or decrease, from time to time, in the number of Directors (other than Preferred Stock Directors), the number of Directors in each class shall be apportioned as nearly equal as possible. 5.2 Subject to the rights of the holders of any one or more series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of Directors or any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board. Any Director so chosen shall hold office until the next election of the class for which such Director shall have been chosen and until his or her successor shall be elected and qualified. No decrease in the number of Directors shall shorten the term of any incumbent Director. 5.3 The nomination for the election of Directors on behalf of the Board shall be subject to the following provisions: 5.3.1 At any time that the Caxton-Iseman Stockholders (as defined below) Beneficially Own (as defined below) at least a majority of the outstanding Common Stock (as of the record date for determining stockholders who are entitled to vote for the election of Directors (the "Record Date")), the Caxton-Iseman Stockholders shall exclusively have and exercise all power and authority of the Board in respect of nominating, by delivery of written notice to the Corporation executed on behalf of the Caxton-Iseman Stockholders by the Caxton-Iseman Stockholders then Beneficially Owning Common Stock constituting at least a majority of the Common Stock then Beneficially Owned in the aggregate by all Caxton-Iseman Stockholders setting forth the nominees selected by the Caxton-Iseman Stockholders (a "Nomination Notice"), a number of nominees for election as Directors, at any meeting of stockholders of the Corporation at which one or more Directors are to be elected, which, if elected, when added to the number of continuing Directors who are not then subject to election and who are Caxton-Iseman Directors (as defined below), would equal the smallest number that constitutes a majority of the total number of Directors of the Corporation immediately following such election. 5.3.2 At any time that the Caxton-Iseman Stockholders Beneficially Own more than 10% of the outstanding Common Stock and less than a majority of the Common Stock (as of the relevant Record Date), the Caxton-Iseman Stockholders shall exclusively have and exercise all power and authority of the Board in respect of nominating, by delivery of a Nomination Notice, a number of nominees for election as Directors, at any meeting of stockholders of the Corporation at which one or more Directors are to be elected, which, if elected, when added to the number of continuing Directors who are not then subject to election and who are Caxton-Iseman Directors, would equal the number obtained by dividing (i) the product of (a) the number of outstanding shares of Common Stock Beneficially Owned by the Caxton-Iseman Stockholders (as of the relevant Record Date) and (b) the number of Directors expected to constitute the Board immediately following such election, by (ii) the number of shares of outstanding Common Stock (as of the relevant Record Date); provided, however, that if such number is not a whole number, such number shall be deemed to equal the next highest whole number. 5.3.3 At any time that the Caxton-Iseman Stockholders Beneficially Own more than 10% of the outstanding Common Stock (as of the relevant Record Date), the Caxton-Iseman Stockholders shall exclusively have and exercise all power and authority of the Board in respect of filling, by delivery of a written notice to the corporation, (i) any vacancy occurring in a directorship which was held by a Caxton-Iseman Director or (ii) any newly created directorships that result from increasing the size of the Board (but only to the extent that the number of any such newly created directorships, when added to the number of continuing Directors who are Caxton-Iseman Directors, is equal to or less than the number of Directors that the Caxton-Iseman Stockholders would be entitled to nominate pursuant to the provisions of Sections 5.3.1 or 5.3.2 above had such newly created directorships existed at any meeting of stockholders of the Corporation at which one or more Directors were to be elected). 5.3.4 In the event that the Board solicits proxies from the stockholders of the Corporation for the election of any Directors at any meeting of stockholders and fails to solicit proxies for the election at such meeting of the persons nominated by the Caxton-Iseman Stockholders pursuant to the provisions of Sections 5.3.1 and 5.3.2 (the "Caxton-Iseman Nominees"), then the Caxton-Iseman Stockholders may, at the expense of the Company, solicit proxies for the election as Directors at such meeting of the Caxton-Iseman Nominees. 5.3.5 At any time that the Caxton-Iseman Stockholders Beneficially Own less than a majority and more than one-third of the outstanding Common Stock, Section 5.3 of this Certificate of Incorporation may not be amended, altered or repealed (including by merger, consolidation or otherwise), without the affirmative vote of the holders of at least two-thirds of the then outstanding Common Stock. At any time that the Caxton-Iseman Stockholders Beneficially Own less than one-third of the outstanding Common Stock, this Section 5.3 of this Certificate of Incorporation may not be amended, altered or repealed (including by means of a merger, consolidation or otherwise), without the affirmative vote of the holders of at least three-fourths of the then outstanding Common Stock. 5.3.6 For purposes of this Certificate of Incorporation, (i) "Caxton-Iseman Stockholders" shall mean Frederick J. Iseman, Azimuth Technologies, L.P., Azimuth Tech. II LLC or any of their respective Affiliates (as defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Rules")) and Associates (as defined in the Rules), (ii) "Caxton-Iseman Directors" shall mean any Director who was nominated by the Caxton-Iseman Stockholders pursuant to this Section 5.3 and elected by the stockholders of the Corporation, and, at any time prior to the end of their respective initial terms following the date hereof, Frederick J. Iseman, Steven M. Lefkowitz, Robert A. Ferris and Thomas J. Tisch and (iii) "Beneficially Own," "Beneficially Owned" or "Beneficial Ownership" shall have the meaning set forth in Rule 13d-3 of the Rules. 6. Limitation of Liability. No Director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, provided that this provision shall not eliminate or limit the liability of a Director (a) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under section 174 of the General Corporation Law or (d) for any transaction from which the Director derived any improper personal benefits. If the General Corporation Law is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended. Any repeal or modification of the foregoing provision shall not adversely affect any right or protection of a Director of the Corporation in respect of any act or omission occurring prior to the time of such repeal or modification. All references in this Section 6 to a Director or Directors of the Corporation shall also be deemed to refer to the Caxton-Iseman Stockholders to the extent that they exercise the power and authority of the Board pursuant to the provisions of Section 5.3 above. 7. Indemnification. 7.1 To the extent not prohibited by applicable law, the Corporation shall indemnify any person (a "Covered Person") who is or was made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding (a "Proceeding"), whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a Director or officer of the Corporation, or, while a Director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of any other corporation or in a capacity with comparable authority or responsibilities for any partnership, joint venture, trust, employee benefit plan or other enterprise (an "Other Entity"), against expenses (including attorneys' fees) in the event of an action by or in the right of the Corporation and against judgments, fines, and amounts paid in settlement and expenses (including attorneys' fees), in the event of any other proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal proceeding, had no reason to believe the person's conduct was unlawful. Persons who are not Directors or officers of the Corporation may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board at any time specifies that such persons are entitled to the benefits of this Section 7. Notwithstanding the foregoing, except as otherwise provided in Section 7.9, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board. 7.2 The Corporation shall, from time to time, reimburse or advance to any Covered Person the funds necessary for payment of expenses, including attorneys' fees and disbursements, incurred in defense of any Proceeding, in advance of the final disposition of such Proceeding; provided, however, that, if required by the General Corporation Law, such payment of expenses in advance of the final disposition of a Proceeding shall be made only upon receipt by the Corporation of an undertaking, by the Covered Person, to repay any such amount so advanced if it shall ultimately be determined that such Covered Person is not entitled to be indemnified for such expenses. 7.3 The rights to indemnification or advancement of expenses provided by, or granted pursuant to, this Section 7 shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under applicable law, this Certificate of Incorporation, the By-laws, any agreement, any vote of stockholders or disinterested Directors or otherwise. 7.4 The rights to indemnification or advancement of expenses provided by, or granted pursuant to, this Section 7 shall continue as to a person who has ceased to be a Director or officer and shall inure to the benefit of the executors, administrators, legatees and distributees of such person. 7.5 The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of an Other Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Section 7, the By-laws or under Section 145 of the General Corporation Law or any other provision of law. 7.6 Any repeal or modification of the provisions of this Section 7 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. 7.7 The rights to indemnification or advancement of expenses provided by, or granted pursuant to, this Section 7 shall be enforceable by any Covered Person in the Court of Chancery of the State of Delaware. The burden of proving that such indemnification or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or advancement of expenses, in whole or in part, in any such proceeding. 7.8 The Corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at the Corporation's request as a director, officer, employee or agent of any Other Entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such Other Entity. 7.9 If a claim for indemnification or advancement or reimbursement of expenses under this Article 7 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement or reimbursement of expenses under applicable law. 7.10 This Section 7 shall not limit the right of the Corporation, to the extent and in the manner permitted by applicable law, to indemnify and advance or reimburse expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. 8. Section 203. The Corporation hereby expressly elects not to be governed by the provisions of Section 203 of the General Corporation Law (or any successor provision thereof), and the restrictions and limitations set forth therein. 9. Action by Written Consent. Except as otherwise provided for or fixed pursuant to the provisions of this Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock to vote as a class on certain matters, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders. 10. Qualification of Directors. There shall be no limitation on the qualification of any person to be a Director or on the ability of any Director to vote on any matter brought before the Board or any Board committee, except (i) as required by applicable law, (ii) as set forth in this Certificate of Incorporation or (iii) as set forth in any By-laws adopted by the Board with respect to the eligibility of a person for election as a Director upon reaching a specified age or, in the case of employee Directors, with respect to the qualification for continuing service of Directors upon ceasing employment from the Corporation. 11. Adoption, Amendment and/or Repeal of By-Laws. The Board may from time to time adopt, amend or repeal the By-laws; provided, however, that any By-laws adopted or amended by the Board may be amended or repealed, and any By-laws may be adopted, by the stockholders of the Corporation by, (i) at any time that the Caxton-Iseman Stockholders Beneficially Own a majority of the outstanding Common Stock, the affirmative vote of the holders of a majority in voting power of the outstanding stock of the Corporation and (ii) at any time that the Caxton-Iseman Stockholders Beneficially Own less than a majority of the outstanding Common Stock, the affirmative vote of the holders of at least three-fourths in voting power of the outstanding stock of the Corporation. EX-10 8 stockplan.txt EXHIBIT 10.2 AMENDED AND RESTATED ANTEON INTERNATIONAL CORPORATION OMNIBUS STOCK PLAN 1. Establishment, Purpose and Types of Awards. Anteon International Corporation hereby establishes the AMENDED AND RESTATED ANTEON INTERNATIONAL CORPORATION OMNIBUS STOCK PLAN (the "Plan"). The purpose of the Plan is to promote the long-term growth and profitability of Anteon International Corporation (the "Corporation") by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Corporation, and (ii) enabling the Corporation to attract, retain and reward the best available persons for positions of substantial responsibility. The Plan permits the granting of stock options (including nonqualified stock options and incentive stock options qualifying under Section 422 of the Code), stock appreciation rights (including freestanding, tandem and limited stock appreciation rights), restricted or unrestricted stock awards, phantom stock, or any combination of the foregoing (collectively, "Awards"). The Plan is a compensatory benefit plan within the meaning of Rule 701 under the Securities Act of 1933 (the "Securities Act"). Except to the extent any other exemption from the Securities Act is expressly relied upon in connection with any agreement entered into pursuant to the Plan or the securities issuable hereunder are registered under the Securities Act, the issuance of Common Stock pursuant to the Plan is intended to qualify for the exemption from registration under the Securities Act provided by Rule 701. To the extent that an exemption from registration under the Securities Act provided by Rule 701 is unavailable, all unregistered offers and sales of Awards and shares of Common Stock issuable upon exercise of an Award are intended to be exempt from registration under the Securities Act in reliance upon the private offering exemption contained in Section 4(2) of the Securities Act, or other available exemption, and the Plan shall be so administered. 2. Definitions. Under this Plan, except where the context otherwise indicates, the following definitions apply: (a) "Affiliate" shall mean (i) any person controlled by, controlling or under common control with the Corporation, or (ii) to the extent determined by the Committee, any entity in which the Corporation has a significant equity interest. (b) "Award" shall mean any stock option, stock appreciation right, stock award, or phantom stock award. (c) "Board" shall mean the Board of Directors of the Corporation. (d) "Caxton-Iseman Stockholder" shall mean Frederick J. Iseman, Azimuth Technologies, L.P., Azimuth Tech. II, LLC or any of their Affiliates and Associates (within the meaning of Rule 12b-2 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (e) "Change in Control" shall, unless in the case of a particular Award, the applicable Grant Agreement states otherwise or contains a different definition of "Change in Control," be deemed to occur upon: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock of the Corporation, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the "Outstanding Corporation Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); provided, however, that for purposes of this Agreement, the following acquisitions shall not constitute a Change of Control: (I) any acquisition by the Corporation or any Affiliate, (II) any acquisition by any employee benefit plan sponsored or maintained by the Corporation or any Affiliate, (III) any acquisition by any Caxton-Iseman Stockholder, (IV) any acquisition which complies with clauses (A), (B) and (C) of subsection (v) of this Section 2(d), or (V) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); (ii) Individuals who, on the date hereof, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Corporation in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; (iii) the dissolution or liquidation of the Corporation; (iv) the sale of all or substantially all of the business or assets of the Corporation to any Person (other than a Caxton-Iseman Stockholder); or (v) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Corporation that requires the approval of the Corporation's stockholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the directors of the Surviving Corporation (the "Parent Corporation"), is represented by the Outstanding Corporation Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Corporation Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Corporation's Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation or a Caxton-Iseman Stockholder), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Board members at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder. (g) "Committee" shall mean the Committee of Board, unless otherwise determined by the Board. (h) "Common Stock" shall mean shares of the Corporation's Class I Common Stock, par value of five cents ($0.05) per share. (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (j) "Executive Compensation Committee" shall mean the committee of Board members appointed pursuant to Section 3(b) of the Plan to administer the Plan with respect to the individuals specified therein. (k) "Fair Market Value" of a share of the Corporation's Common Stock for any purpose on a particular date shall be determined in a manner such as the Committee shall in good faith determine to be appropriate; provided, however, that if the Common Stock is publicly traded, then, unless the Committee shall otherwise determine, the Fair Market Value shall mean the last reported sale price per share of Common Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on a national securities exchange or included for quotation on the Nasdaq-National Market, or if the Common Stock is not so listed or admitted to trading or included for quotation, the last quoted price, or if the Common Stock is not so quoted, the average of the high bid and low asked prices, regular way, in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation system or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices, regular way, as furnished by a professional market maker making a market in the, Common Stock as selected in good faith by the Committee or by such other source or sources as shall be selected in good faith by the Committee; and provided further, that in the case of incentive stock options, the determination of Fair Market Value shall be made by the Committee in good faith in compliance with the Treasury Regulations under Section 422 of the Code. If, as the case may be, the relevant date is not a trading day, the determination shall be made as of the next preceding trading day. As used herein, the term "trading day" shall mean a day on which public trading of securities occurs and is reported in the principal consolidated reporting system referred to above, or if the Common Stock is not listed or admitted to trading on a national securities exchange or included for quotation an the Nasdaq-National Market, any day other than a Saturday, a Sunday or a day in which banking institutions in the State of New York are closed. (l) "Grant Agreement" shall mean a written agreement between the Corporation and a grantee memorializing the terms and conditions of an Award granted pursuant to the Plan. (m) "Grant Date" shall mean the date on which the Committee formally acts to grant an Award to a grantee or such other date as the Committee shall so designate at the time of taking such formal action. (n) "Parent" shall mean a corporation, whether now or hereafter existing, within the meaning of the definition of "Parent corporation" provided in Section 424(e) of the Code, or any successor thereto of similar import. (o) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act on the effective date of the Plan, or any successor provision prescribing conditions necessary to exempt the issuance of securities under the Plan (and further transactions in such securities) from Section 16(b) of the Exchange Act. (p) "Subsidiary" and "subsidiaries" shall mean only a corporation or corporations, whether now or hereafter existing, within the meaning of the definition of "subsidiary corporation" provided in Section 424(f) of the Code, or any successor thereto of similar import. 3. Administration. (a) Procedure. The Plan shall be administered by a Committee consisting of not less than two (2) members of the Board to administer the Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe. The Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and, thereafter, directly administer the Plan. Notwithstanding the foregoing or any other provisions of this Plan, (i) the Board may at any time or from time to time resolve to administer the Plan and, in such case, references herein to the Committee shall mean the Board when so acting as the Committee, and (ii) when the Committee is acting and not the Board, all of the Committee's decisions under this Plan will be subject to the approval of the Board. Members of the Board or Committee who are either eligible for Awards or have been granted Awards may vote on any and all matters, including matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of a specific Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board or the Committee during which action is taken with respect to the granting of an Award to him or her. The Committee shall meet at such times and places and upon such notice as it may determine. A majority of the Committee shall constitute a quorum. Any acts by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all of the members of the Committee shall be valid acts of the Committee. (b) Procedure After Registration of Common Stock. Notwithstanding the provisions of subsection (a) above, in the event that the Common Stock or any other capital stock of the Corporation becomes registered under Section 12 of the Exchange Act, for purposes of complying with Rule 16b-3 and Section 162(m) of the Code, references herein to the "Committee" shall refer to the members of the Executive Compensation Committee of the Corporation but only with respect to persons subject to Section 16(b) of the Exchange Act or those that the Committee determines may be "covered employees" within the meaning of Section 162(m) of the Code. The Executive Compensation Committee shall consist of at least two (2) members who are both "Non-Employee Directors" within the meaning of Rule 16b-3, and "outside directors" within the meaning of Section 162(m) of the Code to the extent intended to be applicable and all of the Executive Compensation Committee's decisions under this plan will be subject to the approval of the Committee (as constituted under Section 3(a)); provided, however, the mere fact that a Committee member shall fail to qualify under the foregoing requirements shall not invalidate any award made by the Committee which award is otherwise validly made under the Plan. (c) Power of the Committee. The Committee shall have all the powers vested in it by the terms of the Plan, such powers to include the authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards. The Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted, (ii) determine the types of Awards to be granted, (iii) determine the number of shares to be covered by or used for reference purposes for each Award, (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate, (v) modify, extend or renew outstanding Awards, accept the surrender of outstanding Awards and substitute new Awards, provided that no such action shall be taken with respect to any outstanding Award which would adversely affect the grantee without the grantee's consent, (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award following termination of any grantee's employment, and (vii) to establish objectives and conditions, if any, for earning Awards and determining whether Awards will be paid after the end of a performance period. The Committee shall have full power and authority to administer and interpret the Plan and any Grant Agreements, and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable and to interpret the same, all within the Committee's sole and absolute discretion. Without limiting the generality of the preceding provisions, the Committee may, but solely with the Participants consent, agree to cancel any Award under the Plan and issue a new Award in substitution therefor upon such terms as the Committee may in its sole discretion determine, provided that the substituted Award satisfies all applicable Plan requirements as of the date such new Award is made. The determination of the Committee on all matters relating to the Plan or any Grant Agreement shall be conclusive. (d) Limited Liability. To the maximum extent permitted by law, no member of the Board or Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. (e) Indemnification. To the maximum extent permitted by law, the members, including former members, of the Board and Committee shall be indemnified by the Corporation in respect of all their activities under the Plan. (f) Effect of Committee's Decision. All actions taken and decisions and determinations made by the Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Committee's sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Corporation, its stockholders, any participants in the Plan and any other employee of the Corporation, and their respective successors in interest. 4. Shares Available for the Plan; Maximum Awards. (a) Subject to adjustments as provided in Section 11 of the Plan, the shares of stock that may be delivered or purchased or used for reference purposes (with respect to stock appreciation rights, phantom stock units or performance awards payable in cash) with respect to Awards granted under the Plan, including with respect to incentive stock options intended to qualify under Section 422 of the Code, shall not exceed an aggregate of 3,121,200 shares of Common Stock of the Corporation. The Corporation shall reserve said number of shares for Awards under the Plan, subject to adjustments as provided in Section 11 of the Plan. If any Award, or portion of an Award under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of Common Stock or other consideration, the shares subject to such Award shall thereafter be available for further Awards under the Plan. (b) Shares of Common Stock shall be deemed to have been used in payment of Awards whether they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash. In accordance with (and without limitation upon) the preceding sentence, if and to the extent an Award under the Plan expires, terminates or is canceled for any reason whatsoever without the eligible participant having received any benefit therefrom, the shares covered by such Award shall again become available for future Awards under the Plan. (c) Common Stock delivered by the Corporation in settlement of Awards under the Plan may be authorized and unissued Common Stock or Common Stock held in the treasury of the Corporation. (d) Subject to Section 11, no person may be granted Options or SARs under the Plan during any calendar year with respect to more than 125,000 shares of Common Stock; provided that such number shall be adjusted pursuant to Section 11, and shares otherwise counted against such number only in a manner which will not cause Options or SARs granted under the Plan to fail to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code, if and to the extent so intended to qualify. 5. Participation. Participation in the Plan shall only be open to employees, officers, directors and consultants of the Corporation, or of any Parent, Subsidiary or Affiliate of the Corporation. Notwithstanding the foregoing, participation in the Plan with respect to Awards of incentive stock options shall be limited to employees of the Corporation or of any Parent or Subsidiary of the Corporation. Awards may be granted to such eligible persons and for or with respect to such number of shares of Common Stock as the Committee shall determine, subject to the limitations in Section 4 of the Plan. A grant of any type of Award made in any one year to an eligible person shall neither guarantee nor preclude a further grant of that or any other type of Award to such person in that year or subsequent years. 6. Stock Options. Subject to the other applicable provisions of the Plan, the Committee may from time to time grant to eligible participants Awards of nonqualified stock options or incentive stock options as that term is defined in Section 422 of the Code. The stock option Awards granted shall be subject to the following terms and conditions. (a) Grant of Option. The grant of a stock option shall be evidenced by a Grant Agreement, executed by the Corporation and the grantee, stating the number of shares of Common Stock subject to the stock option evidenced thereby and the terms and conditions of such stock option, in such form as the Committee may from time to time determine. (b) Price. The price per share payable upon the exercise of each stock option ("exercise price") shall be determined by the Committee, provided, however, that in the case of incentive stock options, the exercise price shall not be less than 100% of the Fair Market Value of the shares on the date the stock option is granted. (c) Payment. Stock options may be exercised in whole or in part by payment of the exercise price of the shares to be acquired in accordance with the provisions of the Grant Agreement, and/or such rules and regulations as the Committee may have prescribed, and/or such determinations, orders, or decisions as the Committee may have made. Payment may be made (i) in cash (or cash equivalents acceptable to the Committee), or (ii) in shares of Common Stock based on the Fair Market Value of the shares of Common Stock so delivered; provided, however, that such shares are not subject to any pledge or other security interest and have either been held by the eligible participant for six months, previously acquired by the eligible participant on the open market or meet such other requirements as the Committee may determine including, but not limited to, requirements necessary in order to avoid an accounting earnings charge in respect of the option, or (iii) upon approval of the Committee and subject to such limitations as the Committee may determine, by delivery of a properly executed exercise notice, together with irrevocable instructions, to: (A) a brokerage firm designated by the Corporation to deliver promptly to the Corporation the aggregate amount of sale or loan proceeds to pay the exercise price and any withholding tax obligations that may arise in connection with the exercise, and (B) the Corporation to deliver the certificates for such purchased shares directly to such brokerage firm, or (iv) any combination of the foregoing, or (v) by such other means as the Committee may prescribe. For purposes of the foregoing clause (ii), the Fair Market Value of shares of Common Stock delivered on exercise of stock options shall be determined as of the date of exercise. Shares of Common Stock delivered in payment of the exercise price may be previously owned shares or, if approved by the Committee, shares acquired upon the exercise of the stock option. Any fractional share will be paid in cash. Subject to any restrictions imposed by the Corporation's lenders or creditors, the Corporation may make loans to grantees to assist grantees in exercising stock options and satisfying any related withholding tax obligations. (d) Terms of Options. The term during which each stock option may be exercised shall be determined by the Committee and set forth in the Grant Agreement between the Corporation and the grantee. Prior to the exercise of the stock option and delivery of the shares certificates represented thereby, the grantee shall have none of the rights of a stockholder with respect to any shares represented by an outstanding stock option. (e) Restrictions on Incentive Stock Options. Incentive stock option Awards granted under the Plan shall comply in all respects with Code Section 422 and, as such, shall meet the following additional requirements: (i) Grant Date. An incentive stock option must be granted within 10 years of the earlier of the Plan's adoption by the Board of Directors or approval by the Corporation's shareholders. (ii) Exercise Price and Term. The exercise price of an incentive stock option shall not be less than 100% of the Fair Market Value of the shares on the date the stock option is granted. An incentive stock option must be exercised within 10 years following the date of grant of the incentive stock option. Also, the exercise price of any incentive stock option granted to a grantee who owns (within the meaning of Section 422(b)(6) of the Code, after the application of the attribution rules in Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of shares of the Corporation or its Parent or Subsidiary corporations (within the meaning of Sections 422 and 424 of the Code) shall be not less than 110 % of the Fair Market Value of the Common Stock on the grant date and the term of such stock option shall not exceed five years. (iii) Maximum Grant. The aggregate Fair Market Value (determined as of the Grant Date) of shares of Common Stock with respect to which all incentive stock options first become exercisable by any grantee in any calendar year under this or any other plan of the Corporation and its Parent and Subsidiary corporations may not exceed $100,000 or such other amount as may be permitted from time to time under Section 422 of the Code. To the extent that such aggregate Fair Market Value shall exceed $100,000, or other applicable amount, such stock options shall be treated as nonqualified stock options. In such case, the Corporation may designate the shares of Common Stock that are to be treated as stock acquired pursuant to the exercise of an incentive stock option by issuing a separate certificate for such shares and identifying the certificate as incentive stock option shares in the stock transfer records of the Corporation. (iv) Grantee. Incentive stock options shall only be issued to employees of the Corporation, or of a Parent or Subsidiary of the Corporation. (v) Designation. No stock option shall be an incentive stock option unless so designated by the Committee at the time of grant or in the Grant Agreement evidencing such stock option. (f) Reload Options. The Committee may provide for the grant to any eligible participant of additional options ("Reload Options") upon the exercise of options, including Reload Options, through the delivery of shares of Common Stock; provided, however, that (i) Reload Options may be granted only with respect to the same number of shares as were surrendered to exercise the options, (ii) the exercise price per share of the Reload Options shall be not less than 100% of the Fair Market Value as of the Grant Date of the Reload Options and (iii) the Reload Options shall not be exercisable after the expiration of the term of the options, and otherwise shall have the same terms and conditions of the options, the exercise of which resulted in the grant of the Reload Options. (g) Other Terms and Conditions. Stock options may contain such other provisions, not inconsistent with the provisions of the Plan, as the Committee shall determine appropriate from time to time. 7. Stock Appreciation Rights. (a) Award of Stock Appreciation Rights. Subject to the other applicable provisions of the Plan, the Committee may at any time and from time to time grant stock appreciation rights ("SARs") to eligible participants, either on a free-standing basis (without regard to or in addition to the grant of a stock option) or on a tandem basis (related to the grant of an underlying stock option), as it determines. SARs granted in tandem with or in addition to a stock option may be granted either at the same time as the stock option or at a later time; provided, however, that a tandem SAR shall not be granted with respect to any outstanding incentive stock option Award without the consent of the grantee. SARs shall be evidenced by Grant Agreements, executed by the Corporation and the grantee, stating the number of shares of Common Stock subject to the SAR evidenced thereby and the terms and conditions of such SAR, in such form as the Committee may from time to time determine. The term during which each SAR may be exercised shall be determined by the Committee. The grantee shall have none of the rights of a stockholder with respect to any Shares of Common Stock represented by an SAR. (b) Restrictions of Tandem SARs. No incentive stock option may be surrendered in connection with the exercise of a tandem SAR unless the Fair Market Value of the Common Stock subject to the incentive stock option is greater than the exercise price for such incentive stock option. SARs granted in tandem with stock options shall be exercisable only to the same extent and subject to the same conditions as the stock options related thereto are exercisable. The Committee may, in its discretion, prescribe additional conditions to the exercise of any such tandem SAR. (c) Amount of Payment Upon Exercise of SARS. An SAR shall entitle the grantee to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Grant Agreement, which shall be determined by the Committee but which shall not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant of the SAR, times (ii) the number of shares specified by the SAR, or portion thereof, which is exercised. In the case of exercise of a tandem SAR, such payment shall be made in exchange for the surrender of the unexercised related stock option (or any portion or portions thereof which the grantee from time to time determines to surrender for this purpose). (d) Form of Payment Upon Exercise of SARS. Payment by the Corporation of the amount receivable upon any exercise of an SAR may be made by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole and absolute discretion of the Committee from time to time. If upon settlement of the exercise of an SAR a grantee is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the Fair Market Value of a share of Common Stock on the exercise date. No Fractional shares shall be used for such payment and the Committee shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated. (e) Automatic exercise. If on the last day of the option term in the case of an option having a tandem SAR (or in the case of an SAR independent of an option, the period established by the Committee after which the SAR shall expire), the Fair Market Value exceeds the amount receivable upon any exercise of the SAR, the eligible participant has not exercised the SAR or the corresponding option, and neither the SAR nor the corresponding option has expired, such SAR shall be deemed to have been exercised by the eligible participant on such last day and the Corporation shall make the appropriate payment therefor. 8. Stock Awards (Including Restricted and Unrestricted Shares and Phantom Stock). (a) Stock Awards in General. Subject to the other applicable provisions of the Plan, the Committee may at any time and from time to time grant stock Awards to eligible participants in such amount and for such consideration, including no consideration or such minimum consideration as may be required by law, as it determines. A stock Award may be denominated in shares of Common Stock or stock-equivalent units ("phantom stock"), and may be paid in Common Stock, in cash, or in a combination of Common Stock and cash, as determined in the sole and absolute discretion of the Committee from time to time. (b) Restricted Shares. Each stock Award shall, specify the applicable restrictions, if any, on such shares of Common Stock, the duration of such restrictions, and the time or times at which such restrictions shall lapse with respect to all or a specified number of shares of Common Stock that are part of the Award. Notwithstanding the foregoing, the Committee may reduce or shorten the duration of any restriction applicable to any shares of Common Stock awarded to any grantee under the Plan. Share certificates with respect to restricted shares of Common Stock granted pursuant to a stock Award may be issued at the time of grant of the Stock Award, subject to Forfeiture as defined in the Grant Agreement if the restrictions do not lapse, or upon lapse of the restrictions. If share certificates are issued at the time of grant of the stock Award, the certificates shall bear an appropriate legend with respect to the restrictions applicable to such stock Award or, alternatively, the grantee may be required to deposit the certificates with the Corporation during the period of any restriction thereon and to execute a blank stock power or other instrument of transfer therefor. Except as otherwise provided by the Committee, during such period of restriction following issuance of share certificates, the grantee shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive dividends (or amounts equivalent to dividends) and to vote with respect to the restricted shares. If share certificates are issued upon lapse of restrictions on a stock Award, the Committee may provide that the grantee will be entitled to receive any amounts per share pursuant to any dividend or distribution paid by the Corporation on its Common Stock to stockholders of record after grant of the stock Award and prior to the issuance of the share certificates. (c) Phantom Stock. The grant of phantom stock units, if any, shall be evidenced by a Grant Agreement, executed by the Corporation and the grantee, that incorporates the terms of the Plan and states the number of Phantom stock units evidenced thereby and the terms and conditions of such Phantom stock units in such form as the Committee may from time to time determine. Phantom stock units granted to a grantee shall be credited to a bookkeeping reserve account solely for accounting purposes and shall not require a segregation of any of the Corporation's assets. Phantom stock units may be exercised in whole or in part by delivery of an appropriate exercise notice to the Committee in accordance with the provisions of the Grant Agreement, and/or such rules and regulations as the Committee may prescribe, and/or such determinations, orders, or decisions as the Committee may make. Except as otherwise provided in the applicable Grant Agreement, the grantee shall have none of the rights of a stockholder with respect to any shares of Common Stock represented by a phantom stock unit as a result of the grant of a phantom stock unit to the grantee. Phantom stock units may contain such other provisions, not inconsistent with the provisions of the Plan, as the Committee shall determine appropriate from time to time. 9. Withholding of Taxes. The Corporation may require, as a condition to the grant of any Award under the Plan or exercise pursuant to such Award or to the delivery of certificates for shares issued or payments of cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter collectively referred to as a "taxable event"), that the grantee pay to the Corporation, in cash or, unless otherwise determined by the Corporation, in shares of Common Stock, including shares acquired upon grant of the Award or exercise of the Award, valued at Fair Market Value on the date as of which the withholding tax liability is determined, any federal, state or local taxes of any kind required by law to be withheld with respect to any taxable event under the Plan. The Corporation, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any taxable event under the Plan, or to retain or sell without notice a sufficient number of the shares to be issued to such grantee to cover any such taxes. 10. Transferability. No Award granted under the Plan shall be transferable, except and to the extent that a Grant Agreement provides with respect to an Award that is not an incentive stock option (or related SAR). Unless otherwise determined by the Committee in accord with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee's guardian or legal representative. 11. Adjustments; Business Combinations. In the event of a reclassification, recapitalization, stock split, stock dividend, combination of shares, or other similar or extraordinary event, the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan as provided in Section 4 shall be adjusted to reflect such event, and the Committee shall make such adjustments as it deems appropriate and equitable in the number, kind and price of shares covered by outstanding Awards made under the Plan, and in any other matters which relate to Awards and which are affected by the changes in the Common Stock referred to above. In the event of any proposed Change in Control, the Committee shall take such action as it deems appropriate and equitable to effectuate the purposes of this Plan and to protect the grantees of Awards, which action may include, but without limitation, the following: (i) acceleration or change of the exercise dates of any Award so that the unvested portion of any Award shall become 100% vested and immediately exercisable; (ii) arrangements with grantees for the payment of appropriate consideration to them for the cancellation and surrender of any Award, which shall not be less than consideration paid for other Common Stock of the Corporation which is acquired, sold, transferred, or exchanged because of the proposed Change in Control; and (iii) in any case where equity securities other than Common Stock of the Corporation are proposed to be delivered in exchange for or with respect to Common Stock of the Corporation, arrangements providing that any Award shall become one or more Awards with respect to such other equity securities. The Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in the preceding two paragraphs of this Section 11) affecting the Corporation, or the financial statements of the Corporation or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. In the event the Corporation dissolves and liquidates (other than pursuant to a plan of merger or reorganization), then notwithstanding any restrictions on exercise set forth in this Plan or any Grant Agreement, or other agreement evidencing a stock option, stock appreciation right or restricted stock Award: (i) each grantee shall have the right to exercise his stock option or stock appreciation right, or to require delivery of share certificates representing any such restricted stock Award, at any time up to ten (10) days prior to the effective date of such liquidation and dissolution; and (ii) the Committee may make arrangements with the grantee for the payment of appropriate consideration to him or her for the cancellation and surrender of any unvested stock option, stock appreciation right or restricted stock Award that is so canceled or surrendered at any time up to ten (10) days prior to the effective date of such liquidation and dissolution. The Committee may establish a different period (and different conditions) for such exercise, delivery, cancellation, or surrender to avoid subjecting the grantee to liability under Section 16(b) of the Exchange Act. Any stock option or stock appreciation right not so exercised, canceled, or surrendered shall terminate on the last day for exercise prior to such effective date; and any restricted stock as to which there has not been such delivery of share certificates or that has not been so canceled or surrendered, shall be forfeited on the last day prior to such effective date. The Committee shall give to each grantee written notice of the commencement of any proceedings for such liquidation and dissolution of the Corporation and the grantee's rights with respect to his outstanding Award. 12. Termination and Modification of the Plan. The Board, without further approval of the stockholders, may modify or terminate the Plan or any portion thereof at any time, except that no modification shall become effective without prior approval of the stockholders of the Corporation if stockholder approval is necessary to comply with any tax or regulatory requirement or rule of any exchange or Nasdaq System upon which the Common Stock is listed or quoted, including for this purpose stockholder approval that is required to enable the Committee to grant incentive stock options pursuant to the Plan. The Committee shall be authorized to make minor or administrative modifications to the Plan as well as modifications to the Plan that may be dictated by requirements of federal or state laws applicable to the Corporation or that may be authorized or made desirable by such laws. The Committee may amend or modify the grant of any outstanding Award in any manner to the extent that the Committee would have had the authority to make such Award as so modified or amended. 13. Non-Guarantee of Employment. Nothing in the Plan or in any Grant Agreement thereunder shall confer any right on an employee to continue in the employ of the Corporation or shall interfere in any way with the right of the Corporation to terminate an employee at any time. 14. Termination of Employment. For purposes of maintaining a grantee's continuous status as an employee and accrual of rights under any Award, transfer of an employee among the Corporation and the Corporation's Parent or Subsidiaries shall not be considered a termination of employment. Nor shall it be considered a termination of employment for such purposes if an employee is placed on military or sick leave or such other leave of absence which is considered as continuing intact the employment relationship; in such a case, the employment relationship shall be continued until the date when an employee's right to reemployment shall no longer be guaranteed either by law or contract. 15. Designation and Change of Beneficiary. Each eligible participant shall file with the Committee a written designation of one or more persons as the beneficiary who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his death. An eligible participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the eligible participant's death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by an eligible participant, the beneficiary shall be deemed to be his or her spouse or, if the eligible participant is unmarried at the time of death, his or her estate. 16. Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Corporation, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Corporation therefor. 17. Written Agreement. Each Grant Agreement entered into between the Corporation and a grantee with respect to an Award granted under the Plan shall incorporate the terms of this Plan and shall contain such provisions, consistent with the provisions of the Plan, as may be established by the Committee, in its sole and absolute discretion, may decide from time to time. 18. Non-Uniform Determinations. The Committee's determinations under the Plan (including without limitation determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. 19. Limitation on Benefits. With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 20. Listing and Registration. If the Corporation determines that the listing, registration or qualification upon any securities exchange or upon any listing or quotation system established by the National Association of Securities Dealers, Inc. ("Nasdaq System") or under any law, of shares subject to any Award is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of shares thereunder, no such Award may be exercised in whole or in part and no restrictions on such Award shall lapse, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Corporation. 21. Government and Other Regulations. The obligation of the Corporation to make payment of Awards in Common Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Corporation shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Corporation has received an opinion of counsel, satisfactory to the Corporation, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Corporation shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. If the shares of Common Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Corporation may restrict the transfer of such shares and may legend the Common Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption. The Committee may require the grantee to provide appropriate written investment or other representations, in order to comply with applicable securities laws or in furtherance of the preceding provisions of this Section 21. 22. No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Corporation or its Parent or Subsidiary corporations from adopting or continuing in effect other compensation arrangements (whether such arrangements be generally applicable or applicable only in specific cases) as the Committee or the Board in its sole and absolute discretion determines desirable, including without limitation the granting of stock options, stock awards, stock appreciation rights or phantom stock units otherwise than under the Plan 23. No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Corporation and a grantee or any other person. To the extent that any grantee or other person acquires a right to receive payments from the Corporation pursuant to an Award, such right shall be no greater that the right of any unsecured general creditor of the Corporation. 24. Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Corporation and its Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than himself. 25. Expenses. The expenses of administering the Plan shall be borne by the Company and its Affiliates. 26. Pronouns. Masculine pronouns and other words of masculine gender shall refer to both men and women. 27. Titles and Headings. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. 28. Severability. If any provision of the Plan or any Grant Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. 29. Governing Law. The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Board or Committee, relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of Delaware without regard to its conflict of laws rules and principles. 30. Plan Subject to Charter and By-Laws. This Plan is subject to the Charter and By-Laws of the Corporation, as they may be amended from time to time. 31. Effective Date; Termination Date. (a) The Plan is effective as of the date on which the Plan was adopted by the Board, subject to approval of the stockholders within twelve months before or after such date. No Award shall be granted under the Plan after the close of business on the day immediately preceding the tenth anniversary of the effective date of the Plan. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards. (b) No option shall be treated as an incentive stock option unless the Plan has been approved by the shareholders of the Corporation in a manner intended to comply with the shareholder approval requirements of Section 422(b)(i) of the Code; provided that any option intended to be an incentive stock option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such option shall be treated as a nonqualified stock option unless and until such approval is obtained. -----END PRIVACY-ENHANCED MESSAGE-----