<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1996.
REGISTRATION NO. 333-3366
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
THE REGISTRY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 7379 04-2920563
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
189 WELLS AVENUE
NEWTON, MASSACHUSETTS 02159
(617) 527-6886
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
G. DREW CONWAY, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
THE REGISTRY, INC.
189 WELLS AVENUE
NEWTON, MASSACHUSETTS 02159
(617) 527-6886
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
THOMAS C. CHASE, ESQ. KEITH F. HIGGINS, ESQ.
ANDREA M. TEICHMAN, ESQ. ROPES & GRAY
HILL & BARLOW ONE INTERNATIONAL PLACE
ONE INTERNATIONAL PLACE BOSTON, MA 02110-2624
BOSTON, MA 02110-2607 (617) 951-7000
(617) 428-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ___________________
If this form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
_______________________________________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THE REGISTRY, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM AND HEADING IN FORM S-1
REGISTRATION STATEMENT LOCATION IN PROSPECTUS
---------------------------- ----------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page; Outside Back Cover
Page
3.Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges.............. Prospectus Summary; Risk Factors
4. Use of Proceeds................ Prospectus Summary; Risk Factors; Use of
Proceeds
5. Determination of Offering
Price.......................... Outside Front Cover Page; Underwriting
6. Dilution....................... Dilution
7. Selling Security Holders....... Principal and Selling Stockholder
8. Plan of Distribution........... Outside and Inside Front Cover Pages;
Underwriting; Outside Back Cover Page
9. Description of Securities to be
Registered..................... Prospectus Summary; Dividend Policy;
Capitalization; Description of Capital
Stock
10. Interests of Named Experts and
Counsel........................ Not Applicable
11. Information with Respect to the
Registrant..................... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Use of
Proceeds; Dividend Policy; Capitalization;
Dilution; Selected Consolidated Financial
Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholder; Description of Capital Stock;
Shares Eligible for Future Sale;
Consolidated Financial Statements
12.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 14, 1996
2,200,000 SHARES
[REGISTRY LOGO APPEARS HERE]
COMMON STOCK
-----------
Of the 2,200,000 shares of Common Stock offered hereby, 1,900,000 are being
sold by the Company and 300,000 shares are being sold by the Selling
Stockholder, who will own 77.8% of the Company's outstanding Common Stock upon
completion of this offering. See "Principal and Selling Stockholder." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $12.00 and $14.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for listing, subject to
official notice of issuance, on the Nasdaq National Market under the symbol
"REGI."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- --------------------------------------------------------------------------------
Total (3)....................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 330,000 additional shares of Common Stock solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to the Selling Stockholder will be $ , $ , $ and $ ,
respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to receipt and acceptance by them and to their right to reject any order in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made at the offices of Adams, Harkness & Hill, Inc., Boston,
Massachusetts, on or about , 1996.
ADAMS, HARKNESS & HILL, INC. A.G. EDWARDS & SONS, INC.
The date of this Prospectus is , 1996.
<PAGE>
Artwork - inside front cover
- title: "The Registry, Inc., Delivery Management System"
Graphical representation of the Company's Delivery Management System displaying
the following aspects of that system: National Resource Delivery; Continuous
Support; Consultant Retention; and Technology Sector Recruiting. Technology,
Sector Recruiting is divided into the following areas: Network & Communications;
Legacy Systems; Internet; Workgroup/Desktop; and Database Design & Development.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The logo of the Company is a registered service mark of the Company. All
trademarks and trade names referred to in this Prospectus are the property of
their respective owners.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Investors should carefully consider the
risk factors related to the purchase of Common Stock of the Company. See "Risk
Factors."
THE COMPANY
The Registry, Inc. ("The Registry" or the "Company") provides information
technology (IT) consultants on a contract basis to organizations with complex
IT operations. The Company currently has more than 1,400 IT consultants placed
with its clients to assist them in implementing solutions for systems and
applications development in such areas as distributed network design, database
design and development and client/server migration. These consultants, billed
primarily on an hourly basis, typically work on engagements lasting from six to
twelve months. In 1995, the Company provided IT consultants to approximately
350 clients in a diverse range of industries, including MCI Telecommunications
Corporation, Putnam Investments, Inc., Digital Equipment Corp., Pepsi Cola
International and Pfizer Inc. The Registry has grown from four offices and
$16.9 million in revenue in fiscal 1991 to 23 offices and $130.5 million in
revenue for the twelve months ended March 30, 1996.
In recent years, the IT services industry has grown significantly. According
to a 1996 study by Dataquest, Inc., the U.S. market for IT
implementation/integration and development services was estimated at $13.4
billion in 1994 and is projected to grow to $24.2 billion in 1999. This growth
is a result of numerous factors including: (i) an increased focus on core
business operations by organizations; (ii) the need to access specialized IT
skills to keep pace with rapidly changing technologies; (iii) the growing trend
toward flexible staffing which provides a variable cost solution to a fixed
cost problem; and (iv) the desire to reduce the cost of recruiting, training
and terminating employees as IT requirements change.
The Company believes that its ability to identify, attract and retain
qualified IT consultants is critical to its success. Each of the Company's
Resource Managers recruits in one of five technology sectors, thereby enabling
the Company to more effectively match the needs of its clients with the skills
of its IT consultants. The Company has also established a National Resource
Delivery Team (NRDT) which provides access to consultants from across the
nation when local resources for a particular skill set are scarce. To enhance
retention, the Company actively remarkets its consultants and offers a
comprehensive benefits package.
Account Managers manage the Company's client relationships; the primary
responsibility of each Account Manager is to develop and implement a specific
account plan for each assigned client. Account Managers work closely with
Resource Managers to identify new assignments at existing client sites as well
as to locate potential new clients. Resource Managers are responsible for
soliciting, recruiting and assessing technical consultants, developing and
maintaining consultant relationships and maintaining and updating the Company's
database of IT consultant resumes.
The Registry's goal is to be a leading nationwide provider of IT professional
services. The Company's strategy encompasses the following elements: (i) focus
on resource management to effectively identify, qualify, place and retain
quality IT consultants; (ii) focus on application development and software
engineering; (iii) emphasize long-term client relationships; (iv) enhance
growth through internal development, acquisitions and development of new
services; and (v) continue to expand a national presence, leveraging the
Company's resource management capabilities as well as its nationwide resource
pool and customer base. As a result of its involvement in the IT planning
process of many of its clients, the Company is often afforded an opportunity to
anticipate clients' needs for additional IT consultants and services.
Following this offering, G. Drew Conway, President and founder of The
Registry, will own 77.8% of the Company's outstanding Common Stock.
The Company was incorporated in Massachusetts on June 10, 1986. Unless the
context otherwise requires, references herein to "The Registry" and the
"Company" refer to The Registry, Inc., a Massachusetts corporation ("TRI"), and
its wholly owned subsidiaries, America's Registry, Inc., a Massachusetts
corporation ("ARI"), and The Registry, Inc. Network Consulting Practice, a New
Hampshire corporation. The Company's executive offices are located at 189 Wells
Avenue, Newton, Massachusetts 02159. Its telephone number is (617) 527-6886.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company....................... 1,900,000 shares
The Selling Stockholder........... 300,000 shares
Common Stock to be outstanding after
the offering....................... 9,900,000 shares (1)
Use of proceeds..................... For repayment of indebtedness and working
capital. See "Use of Proceeds."
Nasdaq National Market symbol....... REGI
</TABLE>
- --------
(1) Excludes 2,000,000 shares of Common Stock reserved for issuance under the
Company's stock option and stock purchase plans, of which 1,106,500 shares
were subject to outstanding options as of March 30, 1996 at a weighted
average exercise price of $11.00 per share. See "Capitalization" and
"Management -- Stock Awards."
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
---------------------------------------- ----------------------
MAY 31,
------------------------------- JUNE 24, MAR. 25, MAR. 30,
1991 1992 1993 1994 1995 (1) 1995 1996
------- ------- ------- ------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue................. $16,927 $24,021 $39,845 $60,367 $98,687 $70,258 $102,094
Cost of revenue......... 12,774 18,358 30,630 46,262 74,288 53,033 75,210
------- ------- ------- ------- ------- ------- --------
Gross profit............ 4,153 5,663 9,215 14,105 24,399 17,225 26,884
Selling, general and
administrative
expenses............... 3,812 4,760 8,319 12,831 22,925 16,091 22,768
------- ------- ------- ------- ------- ------- --------
Income from operations.. 341 903 896 1,274 1,474 1,134 4,116
Interest and other ex-
pense, net............. 100 163 292 459 1,145 741 1,525
------- ------- ------- ------- ------- ------- --------
Income before taxes..... 241 740 604 815 329 393 2,591
Pro forma provision for
income taxes (2)....... 98 218 281 430 243 221 1,130
------- ------- ------- ------- ------- ------- --------
Pro forma net income
(2).................... $ 143 $ 522 $ 323 $ 385 $ 86 $ 172 $ 1,461
======= ======= ======= ======= ======= ======= ========
Pro forma net income per
share (2).............. $ 0.01 $ 0.02 $ 0.18
======= ======= ========
Weighted average common
and common equivalent
shares (3)............. 8,173 8,173 8,173
SELECTED OPERATING DATA:
Number of branch offices
open at end of period.. 4 6 9 16 21 20 23
<CAPTION>
MARCH 30, 1996
----------------------
AS
ACTUAL ADJUSTED (4)
-------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $ -- $ 173
Working capital.................................................. (748) 20,925
Total assets..................................................... 34,884 34,623
Total debt....................................................... 25,053 3,005
Total stockholder's equity....................................... 2,045 23,832
</TABLE>
4
<PAGE>
(1) The Company changed its fiscal year end from May 31 to the last Saturday in
June, effective with the fiscal year ended June 24, 1995. Accordingly, the
June 1994 results are not included in the data presented above. See Note 2
to Consolidated Financial Statements.
(2) On January 1, 1996, the Company effected the Merger described below. The
pro forma data have been computed as if ARI, which was an S corporation for
federal and state income tax purposes, were subject to federal and all
applicable state corporate income taxes since February 1991, based on the
statutory tax rates and the tax laws then in effect. See Notes 2, 8 and 14
to Consolidated Financial Statements.
(3) Weighted average common and common equivalent shares outstanding consist of
8,000,000 shares of Common Stock after giving effect to the Merger and
stock split described below and 173,308 shares related to the dilution
attributable to options granted in the twelve months prior to the offering
using the treasury stock method.
(4) Adjusted to give effect to the sale of 1,900,000 shares of Common Stock by
the Company offered hereby at an assumed initial public offering price of
$13.00 per share and the application of the net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
----------------
Except as otherwise noted, all information in this Prospectus (i) assumes no
exercise of the Underwriters' over-allotment option and (ii) reflects a
177.77778-for-1 stock split of the Company's Common Stock effected on March 22,
1996. See "Capitalization," "Description of Capital Stock" and "Underwriting."
Until January 1, 1996, G. Drew Conway was the sole stockholder of TRI and ARI.
Pursuant to a plan and agreement of merger entered into among TRI, ARI and The
Registry Newco, Inc., a wholly-owned subsidiary of TRI, The Registry Newco,
Inc. merged with and into ARI effective January 1, 1996 (the "Merger"). As a
result, ARI became a wholly-owned subsidiary of TRI.
5
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to the
other information in this Prospectus before purchasing the Common Stock
offered by this Prospectus.
Dependence on Availability of Qualified IT Consultants. Substantially all of
the Company's revenue is derived from providing IT consultants on a contract
basis. The Company's success depends upon its ability to continue to attract
and retain IT consultants who possess the technical skills and experience
required to meet the staffing needs of its clients. The Company must
continually update and add to its database of technical personnel in each
market in which it operates. The vast majority of the IT consultants in The
Registry's database are also included in one or more of the databases of the
Company's competitors, and there can be no assurance that experienced
professionals currently working on projects for the Company will not choose to
work on projects for competitors on their next assignment. Competition for IT
consultants is intense and demand for their services has, to date,
substantially exceeded their supply, and the Company expects such competition
will continue to increase. There can be no assurance that qualified technical
personnel will continue to be available to the Company in sufficient numbers,
and any failure to attract or retain qualified IT consultants in sufficient
numbers could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- IT Consultants"
and "-- Competition."
Dependence on Key Personnel. The Company depends to a significant extent on
key management, technical and other personnel. The Company's continued growth
and success will depend in significant part on the continued service of its
founder, President and Chief Executive Officer, Mr. G. Drew Conway. The loss
of Mr. Conway or other key employees could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Management."
History of Marginal Profitability. Through fiscal 1995, the Company grew
rapidly through the opening of new offices. New offices generally have
experienced either losses or marginal profitability for a period of
approximately 12 to 18 months after opening. As these offices have matured and
the Company has implemented certain cost control policies, the Company's
profitability has improved; however, new office openings in the future, among
other factors, could adversely affect the Company's business, operating
results and financial condition. There can be no assurance that the Company
can maintain profitability on a quarterly or annual basis in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Ability to Sustain and Manage Growth. The Company's business has grown
rapidly during the past four years due to the increased number of branch
offices and the increased demand for services from existing clients. The
Company's continued growth is dependent upon a number of factors, including:
(i) the successful performance of new and recently-opened offices; (ii) the
continued identification and training of corporate personnel to staff new and
recently-opened branch offices; (iii) the ability to identify and qualify IT
consultants within both new and existing markets; and (iv) the Company's
ability to develop additional business from existing clients and to obtain new
clients. There can be no assurance that recently-opened offices will reach or
maintain any level of profitability or that the Company's historical revenue
growth will continue. Further, the Company's rapid growth and expansion has
placed and could continue to place a significant strain on the Company's
personnel and resources, and the failure to manage growth effectively could
have a material adverse effect on the Company's business, operating results
and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Growth Strategy"
and "Management."
Dependence on Key Clients; Price Reduction Agreements; Terminability of
Client Arrangements. The Company's ten largest clients accounted for
approximately 36.5% of revenue in fiscal 1995 and approximately 35.8% of
revenue in the first nine months of fiscal 1996. The loss of a significant
client could have a material adverse effect on the Company's business,
operating results and financial condition.
6
<PAGE>
The Company provides certain large clients with reduced prices for its
services in order to retain the volume of business and/or to obtain a
preferred vendor status with such clients. There can be no assurance that the
Company will be able to maintain desired pricing levels with these or other
clients. All of the Company's arrangements with clients are terminable by the
client at will and without any penalty. There can be no assurance that
existing clients will continue to engage the Company's services at historical
levels, if at all. See "Business -- Client Base."
Concentration of Ownership. Upon completion of the offering, the Company's
Chief Executive Officer and principal stockholder, Mr. G. Drew Conway, will
own 77.8% of the Company's outstanding shares of Common Stock (75.3% if the
over-allotment option is exercised in full). As a result, Mr. Conway will be
able to exercise effective control over almost all matters requiring
stockholder approval. This concentration of ownership could have the effect of
making it difficult for a third party to acquire control of the Company and
may discourage third parties from attempting to do so. Further, future sales
of substantial amounts of Common Stock by Mr. Conway, or the potential for
such sales, could adversely affect the prevailing market price of the Common
Stock. See "Management," "Principal and Selling Stockholder," "Description of
Capital Stock" and "Shares Eligible for Future Sale."
Risks Associated with Acquisitions and Development of Ancillary
Services. The Company has grown, and intends to continue to grow, in part
through the acquisition of other businesses and development of ancillary
services. The Company's ability to expand through acquisition depends on many
factors, including the successful identification and acquisition of businesses
and management's ability to effectively integrate and operate the new
businesses. There is competition for acquisition opportunities in the
industry, which may intensify due to consolidation in the industry, increasing
the costs of capitalizing on such opportunities. The Company competes for
acquisition opportunities with other companies that have significantly greater
financial and management resources. There can be no assurance that the Company
will be able to identify, acquire and integrate suitable acquisition
candidates on reasonable terms. In addition, the Company's ability to develop
successful ancillary practices depends on various factors, including
identification of suitable practice areas in which to invest resources and the
Company's ability to effectively integrate such practices into its overall
operating structure. There can be no assurance that any ancillary practice
developed by the Company will perform according to management's expectations.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources" and "Business -- Growth
Strategy."
Fluctuations in Operating Results; Seasonality. The Company's operating
results have fluctuated in the past based on many factors, including the
opening of new branch offices. In view of the Company's significant growth in
recent years, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. Because the Company only derives
revenue when its consultants are actually working, its operating results are
adversely affected when client facilities close due to holidays or inclement
weather. In particular, the Company generally experiences a certain amount of
seasonality in its second fiscal quarter due to the number of holidays in that
quarter. Further, the Company generally experiences lower operating margins in
its third fiscal quarter due in part to the timing of unemployment tax
accruals. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Fluctuations in the General Economy. Demand for IT professional services is
significantly affected by the general level of economic activity. When
economic activity slows, clients may delay or cancel plans that involve the
hiring of IT consultants. The Company is unable to predict the level of
economic activity at any particular time, and fluctuations in the general
economy could adversely affect the Company's business, operating results and
financial condition.
7
<PAGE>
Employment Liability Risks. Providers of IT professional services employ and
place individuals in the workplace of other businesses. Inherent risks of such
activity include possible claims of errors and omissions, misuse of client
proprietary information, misappropriation of funds, discrimination and
harassment, theft of client property, other criminal activity or torts and
other claims. Although historically the Company has not experienced any
material claims of these types, there can be no assurance that the Company
will not experience such claims in the future.
Potential Effect of Anti-Takeover Provisions. The Company's Board of
Directors has the authority without action by the Company's stockholders to
fix the rights and preferences of and to issue shares of the Company's
Preferred Stock, which may have the effect of delaying, deterring or
preventing a change in control of the Company. The Company has also imposed
various procedural and other requirements, such as supermajority voting
requirements for specified corporate actions, that could make it more
difficult for stockholders to effect certain corporate actions. In addition,
the classification of the Board of Directors of the Company and certain
provisions of Massachusetts law could have the effect of delaying, deterring
or preventing a change in control of the Company. See "Description of Capital
Stock."
No Prior Public Market; Determination of Public Offering Price; Possible
Volatility of Stock Price. Before this offering, there was no public market
for the Common Stock, and there can be no assurance that an active trading
market will develop or be sustained. The initial public offering price will be
determined by negotiation between the Company and the representatives of the
Underwriters based on several factors, including prevailing market conditions
and recent operating results of the Company. The initial public offering price
may not be indicative of the market price of the Common Stock after this
offering. In addition, the stock market historically has experienced
volatility which has affected the market price of securities of many companies
and which has sometimes been unrelated to the operating performance of such
companies. In addition, factors such as announcements of new services or
offices or strategic alliances by the Company or its competitors or third
parties, as well as market conditions in the IT professional services
industry, may have a significant impact on the market price of the Common
Stock. The market price may also be affected by movements in prices of stocks
in general. See "Underwriting."
Shares Eligible for Future Sale. Sales of Common Stock in the public market
after this offering could adversely affect the market price of the Common
Stock. In addition to the 2,200,000 shares offered hereby (assuming no
exercise of the Underwriters' over-allotment option or exercise of outstanding
stock options) and taking into account the contractual restrictions imposed by
lock-up agreements with the Company's sole stockholder, an aggregate of
approximately 7,700,000 shares of Common Stock will become eligible for sale
in the open market pursuant to Rule 144 beginning 180 days following the date
of this Prospectus. See "Description of Capital Stock -- Shares Eligible for
Future Sale." The Company intends to register an aggregate of 2,000,000 shares
of Common Stock reserved for issuance under its stock plans. See
"Management -- Stock Awards."
Absence of Dividends. Except as noted in "Dividend Policy," the Company has
never paid any cash dividends on the Common Stock and does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future. In
addition, the Company is prohibited under the terms of its revolving line of
credit from paying dividends without the consent of the lender. See "Dividend
Policy."
Dilution. Based on an assumed initial public offering price of $13.00 per
share, purchasers of the Common Stock offered hereby will suffer an immediate
dilution of $10.67 per share in the net tangible book value per share of the
Common Stock from the initial public offering price. See "Dilution."
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,900,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $13.00 per share, after deducting the underwriting discount
and estimated offering expenses payable by the Company, are estimated to be
approximately $22.2 million. The principal purposes of this offering are to
increase the Company's working capital and financial flexibility and to
facilitate future access by the Company to the public equity markets. The
Company will not receive any of the proceeds from the sale of shares by the
Company's sole stockholder, G. Drew Conway (the "Selling Stockholder"). See
"Principal and Selling Stockholder."
The Company expects to use approximately $1.4 million of the net proceeds to
repay the outstanding indebtedness under three secured loan agreements with
Phoenixcor, Inc., dated October 27, 1994 (the "1994 Loan"), April 4, 1995 (the
"April 1995 Loan") and August 1, 1995 (the "August 1995 Loan"), respectively.
The 1994 Loan bears interest at a rate of 10.7% per annum and will mature on
September 30, 1997. The April 1995 Loan bears interest at a rate of 11.06% per
annum and will mature on March 13, 1998, while the August 1995 Loan bears
interest at a rate of 10.03% per annum and will mature on July 4, 1998. The
Company expects to use the remaining net proceeds to repay the outstanding
indebtedness under its revolving line of credit with BNY Financial
Corporation. Since February 29, 1996, the date on which the BNY debt was
originally incurred, the weighted average interest rate was 8.12%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The revolving line of credit
expires on February 28, 1999. If any proceeds remain after the repayment of
indebtedness, the Company intends to use them for general corporate purposes.
A portion of the net proceeds may also be used for acquisitions of businesses
that are complementary to that of the Company. No such acquisitions are being
planned or negotiated as of the date of this Prospectus, and no portion of the
net proceeds has been allocated for any specific acquisition. Pending such
uses, the net proceeds of this offering will be invested in short-term,
investment-grade, interest-bearing securities.
DIVIDEND POLICY
TRI paid a cash dividend in the amount of $50,000 to Mr. Conway in December
1992. ARI paid cash dividends in the approximate aggregate amount of $862,000
to Mr. Conway in December 1995, of which amount $645,000 was immediately used
to repay certain indebtedness of Mr. Conway to TRI. See "Certain
Transactions." The Company currently intends to retain future earnings, if
any, to fund the development and growth of its business and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. In addition, the Company's revolving line of credit with BNY Financial
Corporation prohibits the payment of dividends without consent of the lender.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
9
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company as of March 30, 1996 and as adjusted to reflect the application of the
estimated net proceeds from the sale of 1,900,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$13.00 per share. This table should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 30, 1996
-------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Revolving line of credit................................. $20,613 $ --
======= =======
Current portion of long-term debt (1).................... $ 1,173 $ 286
Long-term debt (2)......................................... 3,110 2,562
Stockholders' equity (3):
Preferred stock, $0.10 par value per share; pro forma:
1,000,000 shares authorized, none issued and
outstanding.............................................
Common stock, no par value per share; pro forma:
29,000,000 shares authorized, 8,000,000 shares issued
and outstanding; as adjusted: 9,900,000 shares issued
and outstanding......................................... 10 10
Additional paid-in capital............................... 344 22,131
Retained earnings........................................ 1,691 1,691
------- -------
Total stockholders' equity.............................. 2,045 23,832
------- -------
Total capitalization.................................... $ 6,328 $26,680
======= =======
</TABLE>
- --------
(1) Includes $36,000 of debt owed by the 189 Wells Avenue Realty Trust (the
"Realty Trust"), of which the Selling Stockholder is the sole beneficiary
and an executive officer of the Company is the sole trustee. See Note 5 to
"Selected Consolidated Financial Data" and Note 13 to Consolidated
Financial Statements.
(2) Includes $2,062,000 of debt owed by the Realty Trust. See Note 5 to
"Selected Consolidated Financial Data" and Note 13 to Consolidated
Financial Statements.
(3) Gives effect to the increase in the Company's authorized capital stock, to
be effective on or before the effective date of the Registration Statement
of which this Prospectus is a part, to 1,000,000 shares of Preferred Stock
and 29,000,000 shares of Common Stock. See "Prospectus Summary" and
"Description of Capital Stock." Excludes 1,106,500 shares of Common Stock
issuable upon exercise of outstanding stock options as of March 30, 1996
at a weighted average exercise price of $11.00 per share. See
"Management -- Stock Awards."
10
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock as of March 30,
1996 was approximately $1.2 million or $0.16 per share. Net tangible book
value per share represents the Company's total tangible assets less total
liabilities, divided by the total number of shares of Common Stock
outstanding.
After giving effect to the sale of the 1,900,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$13.00 per share and the receipt of the net proceeds therefrom, the pro forma
net tangible book value of the Company as of March 30, 1996 would have been
approximately $23.0 million or $2.33 per share. This represents an immediate
increase in net tangible book value of $2.17 per share to the Selling
Stockholder and an immediate dilution in net tangible book value of $10.67 per
share to purchasers of Common Stock in this offering. The following table
illustrates the per share dilution as of March 30, 1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $13.00
Net tangible book value per share as of March 30, 1996........... $0.16
Increase per share attributable to new stockholders.............. 2.17
-----
Pro forma net tangible book value per share after offering......... 2.33
------
Dilution per share to new stockholders............................. $10.67
======
</TABLE>
The following table sets forth on a pro forma basis the number of shares
purchased from the Company, the total consideration paid and the average price
per share paid by the existing stockholder and new stockholders:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Selling Stockholder............ 8,000,000 80.8% $ 465,000 1.8% $ 0.06
New stockholders............... 1,900,000 19.2 24,700,000 98.2 13.00
--------- ----- ----------- -----
Total........................ 9,900,000 100.0% $25,165,000 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of any stock options. At March 30,
1996, there were outstanding options to purchase 1,106,500 shares at a
weighted average exercise price of $11.00 per share. To the extent such
options are exercised, there will be further dilution to new stockholders.
The sale of shares by the Selling Stockholder in this offering will reduce
the number of shares held by the Selling Stockholder to 7,700,000 shares or
approximately 77.8% of the Company's outstanding Common Stock immediately
after the offering (75.3% if the Underwriters' over-allotment is exercised in
full), and will increase the number of shares held by new stockholders to
2,200,000 shares or 22.2% of the Company's outstanding Common Stock
immediately after the offering (2,530,000 shares or 24.7% if the Underwriters'
over-allotment is exercised in full). See "Principal and Selling Stockholder."
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data and
is derived from the more detailed Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus. The Consolidated Balance Sheet
Data at May 31, 1994, June 24, 1995 and March 30, 1996 and the Consolidated
Statement of Income Data for each of the two years in the period ended May 31,
1994, for the year ended June 24, 1995 and for the nine months ended March 30,
1996 have been derived from the Consolidated Financial Statements of the
Company that have been audited by Price Waterhouse LLP, independent
accountants, and are included elsewhere in this Prospectus. The Consolidated
Balance Sheet Data as of May 31, 1991, 1992 and 1993 and the Consolidated
Statement of Income Data for each of the two years in the period ended May 31,
1992 have been derived from the Company's audited Consolidated Financial
Statements. The Consolidated Statement of Income Data for the nine months ended
March 25, 1995 has been derived from unaudited financial statements also
appearing herein and which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the unaudited interim period. Operating
results for the nine months ended March 30, 1996 are not necessarily indicative
of results for future periods. The selected consolidated financial data should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
---------------------------------------- -----------------
MAY 31,
------------------------------- JUNE 24, MAR. 25, MAR. 30,
1991 1992 1993 1994 1995 (1) 1995 1996
------- ------- ------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DA-
TA:
Revenue................. $16,927 $24,021 $39,845 $60,367 $98,687 $70,258 $102,094
Cost of revenue......... 12,774 18,358 30,630 46,262 74,288 53,033 75,210
------- ------- ------- ------- ------- ------- --------
Gross profit............ 4,153 5,663 9,215 14,105 24,399 17,225 26,884
Selling, general and ad-
ministrative
expenses............... 3,812 4,760 8,319 12,831 22,925 16,091 22,768
------- ------- ------- ------- ------- ------- --------
Income from operations.. 341 903 896 1,274 1,474 1,134 4,116
Interest and other ex-
pense, net............. 100 163 292 459 1,145 741 1,525
------- ------- ------- ------- ------- ------- --------
Income before taxes..... 241 740 604 815 329 393 2,591
Provision for income
taxes.................. 98 218 281 430 4 113 1,208
------- ------- ------- ------- ------- ------- --------
Net income.............. $ 143 $ 522 $ 323 $ 385 $ 325 $ 280 $ 1,383
======= ======= ======= ======= ======= ======= ========
Distributions to stock-
holder (2)............. -- -- $ 50 -- -- -- $ 1,511
------- ------- ------- ------- ------- ------- --------
Income before taxes..... $ 329 $ 393 $ 2,591
Pro forma provision for
income
taxes (3).............. 243 221 1,130
------- ------- --------
Pro forma net in-
come (3)............... $ 86 $ 172 $ 1,461
======= ======= ========
Pro forma net income per
share (3).............. $ 0.01 $ 0.02 $ 0.18
======= ======= ========
Weighted average common
and common equivalent
shares
outstanding (4)........ 8,173 8,173 8,173
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
-------------------------- JUNE 24, MARCH 30,
1991 1992 1993 1994 1995 1996 (5)
----- ----- ----- ------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... -- -- -- -- -- --
Working capital................. $ (2) $ 409 $(138) $ (364) $ (576) $ (748)
Total assets.................... 2,758 5,556 9,477 15,530 28,643 34,884
Total debt...................... 1,426 3,756 6,147 9,361 20,438 25,053
Stockholder's equity............ 531 1,123 1,596 2,136 2,284 2,045
</TABLE>
12
<PAGE>
(1) The Company changed its fiscal year end from May 31 to the last Saturday
in June, effective with the fiscal year ended June 24, 1995. Accordingly,
the June 1994 results are not included in the data presented above. See
Note 2 to Consolidated Financial Statements.
(2) For the nine months ended March 30, 1996, includes $862,000 distributed to
the Selling Stockholder on the common stock of ARI and $649,000
distributed by the Realty Trust to the Selling Stockholder upon
refinancing of the Realty Trust's mortgage. See Note 5 below.
(3) The Company effected the Merger on January 1, 1996. The pro forma data
have been computed as if ARI, which was an S corporation for federal and
state income tax purposes, were subject to federal and all applicable
state corporate income taxes since February 1991, based on the statutory
tax rates and the tax laws then in effect. See Notes 2, 8 and 14 to
Consolidated Financial Statements.
(4) Weighted average common and common equivalent shares outstanding consists
of 8,000,000 shares of Common Stock after giving effect to the Merger and
stock split described under "Prospectus Summary" and 173,308 shares
related to the dilution attributable to options granted in the twelve
months prior to the offering using the treasury stock method.
(5) In conjunction with the renegotiation of the Company's lease with the
Realty Trust, the accounts of the Realty Trust have been consolidated with
those of the Company, commencing September 19, 1995. See Note 13 to
Consolidated Financial Statements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Registry, Inc. provides information technology (IT) consultants on a
contract basis to organizations with complex IT operations. These consultants,
billed primarily on an hourly basis, typically work on engagements lasting
from six to twelve months. The Registry has grown from four offices and $16.9
million of revenue in fiscal 1991 to 23 offices and $98.7 million of revenue
in fiscal 1995.
Revenue growth is derived primarily from increases in the number of IT
consultants placed with existing clients and the addition of new clients. In
recent years, the Company has also been able to increase the average billing
rates for its IT consultants as economic conditions have improved and the
demand for skilled and experienced professionals has increased. Revenue is
recognized as services are provided and the majority of clients are billed on
a weekly basis. In fiscal 1995, approximately 36.5% of the Company's revenue
was derived from its top 10 clients, with no client accounting for more than
6.0%.
Because the Company only derives revenue when its consultants are actually
working, its operating results are adversely affected when client facilities
are closed due to holidays or inclement weather. In particular, the Company
experiences a certain amount of seasonality in its second fiscal quarter
because of the number of holidays falling in such quarter. In addition, the
Company generally experiences lower operating margins in its third fiscal
quarter due in part to the timing of unemployment tax accruals.
Since its founding in 1986, the Company has had an aggressive expansion plan
and growth strategy. The Company opened six offices between fiscal 1986 and
1992; three in fiscal 1993; seven in fiscal 1994 and five in fiscal 1995. The
increase in the number of offices has resulted in an increase in revenue for
each year, but has in some cases adversely impacted net income. In most
instances, new offices have experienced either losses or marginal
profitability for approximately 12 to 18 months after opening. In certain
cases, branches that have achieved profitability have not remained profitable
on a consistent basis.
Beginning in fiscal 1996, the Company implemented tighter cost controls and
a compensation program based on operating profitability rather than revenue
growth. Further, the Company has sought to improve profitability by increasing
the number of full-time, salaried staff consultants, who generally produce
higher margins than the Company's hourly IT consultants. Apart from its core
IT professional services and in response to market opportunities, the Company
has introduced new service offerings, including the Network Systems Consulting
Practice (NSCP) and the Documentation Services Practice (DSP), both of which
are established practices, as well as a recently introduced Help Desk
Practice.
Through December 31, 1995, ARI was an S corporation for federal and state
income tax purposes and, accordingly, was not subject to corporate income
taxes. As a result, the Company believes that direct comparisons of historical
provisions for income taxes are not meaningful.
In conjunction with the renegotiation of the Company's leases with the
Realty Trust, the accounts of the Realty Trust have been consolidated with
those of the Company, commencing September 19, 1995. The effect of this
consolidation was to increase fixed assets by approximately $1.7 million and
long-term debt by approximately $2.1 million at March 30, 1996. The
consolidation of the Realty Trust did not have a significant effect on the
Company's results of operations, nor is it expected to have a significant
effect in the future. See Note 13 to Consolidated Financial Statements.
14
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes the Company's significant operating results
as a percentage of revenue for each of the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------------------ --------------------
MAY 31, MAY 31, JUNE 24, MAR.25, MAR. 30,
1993 1994 1995 1995 1996
------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 76.9 76.7 75.3 75.5 73.7
----- ----- ----- -------- --------
Gross profit................... 23.1 23.3 24.7 24.5 26.3
Selling, general and adminis-
trative expenses.............. 20.9 21.2 23.2 22.9 22.3
----- ----- ----- -------- --------
Income from operations......... 2.2 2.1 1.5 1.6 4.0
Interest and other expense,
net........................... 0.7 0.8 1.2 1.0 1.5
----- ----- ----- -------- --------
Income before taxes............ 1.5% 1.3% 0.3% 0.6% 2.5%
===== ===== ===== ======== ========
</TABLE>
NINE MONTHS ENDED MARCH 30, 1996 AND MARCH 25, 1995
Revenue. Revenue increased 45.2% to $102.1 million for the first nine months
of fiscal 1996 from $70.3 million in the first nine months of fiscal 1995.
This increase was attributable primarily to an increase in revenue from
professional services and to a lesser extent from additional service offerings
provided by the Company's practices. The increase in revenue from professional
services was primarily due to the growth in sales within existing offices and
the continued maturation of newer branch offices resulting in a greater number
of IT consultants placed with the Company's clients during the period. To a
lesser extent, the increase in revenue resulted from an increase in average
hourly billing rates charged for the Company's IT consultants.
Gross Profit. Gross profit increased 56.4% to $26.9 million for the first
nine months of fiscal 1996 from $17.2 million in the comparable prior period.
As a percentage of revenue, gross profit increased to 26.3% for the period
compared to 24.5% for the comparable prior period. This increase was
attributable primarily to a higher average hourly billing rate charged for the
Company's IT consultants during this period. In addition, the increase in
gross profit as a percentage of revenue was favorably impacted by the growth
in relatively higher margin new service offerings and an increase in staff IT
consultants.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by 41.6% to $22.8 million for the first nine
months of fiscal 1996 from $16.1 million in the comparable prior period. As a
percentage of revenue, selling, general and administrative expenses decreased
to 22.3% for the period compared to 22.9% for the comparable prior period.
This decrease was attributable primarily to the growth in revenue during a
period in which there was limited expansion into new markets and a relative
slowing in the hiring of additional Resource Managers, Account Managers and
corporate staff.
Interest and Other Expense, Net. Interest and other expense, net, increased
to $1.5 million for the first nine months of fiscal 1996 from $741,000 in the
comparable prior period. This increase was attributable primarily to the
increased borrowings under the Company's line of credit resulting from the
increase in working capital requirements associated with the Company's sales
growth.
FISCAL YEARS ENDED JUNE 24, 1995 AND MAY 31, 1994
Revenue. Revenue increased 63.4% to $98.7 million for fiscal 1995 from $60.4
million for fiscal 1994. Of this increase, $30.7 million was derived from
existing branch offices with the remaining $7.6 million derived from new
branch offices opened during the year. Approximately half of the increase
attributable to new branch offices was derived from one of the Company's key
clients. Overall, most existing branch offices exhibited significant sales
increases as demand for IT professional services increased. In addition, the
increase in revenue resulted to a lesser extent from an increase in the
average hourly billing rates charged for the Company's IT consultants.
15
<PAGE>
Gross Profit. Gross profit increased 73.0% to $24.4 million for fiscal 1995
from $14.1 million for fiscal 1994. As a percentage of revenue, gross profit
increased to 24.7% for fiscal 1995 from 23.3% for fiscal 1994. This increase
was attributable primarily to a higher average hourly billing rate charged for
the Company's IT consultants during the period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 78.9% to $22.9 million for fiscal 1995 from
$12.8 million for fiscal 1994. As a percentage of revenue, selling, general
and administrative expenses increased to 23.2% for fiscal 1995 from 21.2% for
fiscal 1994. This increase was attributable primarily to the opening of five
branch offices during the year and the staffing of those offices. To a lesser
extent, the increase in selling, general and administrative expenses resulted
from an increase in corporate staff needed to support an increased number of
branches.
Interest and Other Expense, Net. Interest and other expense, net, increased
to $1.1 million for fiscal 1995 from $459,000 for fiscal 1994. This increase
was attributable to the increased borrowings under the Company's line of
credit resulting from the increase in working capital requirements associated
with the Company's sales growth. In addition, the increase in interest expense
resulted in part from a nominal increase in interest rates.
MONTH ENDED JUNE 25, 1994
During the month of June 1994, the Company sustained a loss of $177,000.
This loss was due primarily to the opening of five branch offices during the
previous quarter, all of which sustained operating losses during the month,
and the staffing of those offices. In addition, four previously opened offices
were still operating at a loss during the month. Thus, nine of eighteen branch
offices incurred losses during the month.
FISCAL YEARS ENDED MAY 31, 1994 AND MAY 31, 1993
Revenue. Revenue increased 51.8% to $60.4 million for fiscal 1994 from $39.8
million for fiscal 1993. Of this increase, approximately $19.2 million or
93.2% was derived from existing branch offices, with the remaining $1.4
million derived from new branch offices. The increase was attributable
primarily to an increase in the number of IT consultants placed with the
Company's clients during the period and, to a lesser extent, higher average
hourly billing rates charged for the Company's IT consultants during this
period.
Gross Profit. Gross profit increased 53.3% to $14.1 million for fiscal 1994
from $9.2 million for fiscal 1994. As a percentage of revenue, gross profit
increased to 23.3% for fiscal 1994 from 23.1% for fiscal 1993 as average
hourly billing rates remained relatively stable during the period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 54.2% to $12.8 million for fiscal 1994 from
$8.3 million for fiscal 1993. As a percentage of revenue, selling, general and
administrative expenses increased to 21.2% for fiscal 1994 from 20.9% for
fiscal 1993. This increase resulted primarily from the opening of seven branch
offices during the year and the staffing of those offices.
Interest and Other Expense, Net. Interest and other expense, net, increased
to $459,000 for fiscal 1994 from $292,000 for fiscal 1993. This increase was
attributable to the increased borrowings under the Company's line of credit
resulting from the increase in working capital requirements associated with
the Company's sales growth.
16
<PAGE>
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the seven quarters ending with the quarter ended March
30, 1996, both in dollars and as a percentage of revenue. This data has been
prepared on the same basis as the audited financial statements contained
elsewhere in this Prospectus and includes all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
information for the periods presented, when read in conjunction with the
Company's Consolidated Financial Statements and related Notes thereto. Results
for any previous fiscal quarter are not necessarily indicative of results for
the full year or for any future quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPT. 1994 DEC. 1994 MAR. 1995 JUNE 1995 SEPT. 1995 DEC. 1995 MAR. 1996
---------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue................. $21,171 $24,607 $24,480 $28,429 $31,682 $32,077 $38,335
Cost of revenue......... 15,993 18,632 18,408 21,255 23,360 23,487 28,363
------- ------- ------- ------- ------- ------- -------
Gross profit............ 5,178 5,975 6,072 7,174 8,322 8,590 9,972
Selling, general and
administrative
expenses............... 4,600 5,496 5,995 6,834 7,186 7,397 8,185
------- ------- ------- ------- ------- ------- -------
Income from operations.. 578 479 77 340 1,136 1,193 1,787
Interest and other
expense, net........... 204 256 281 404 470 443 612
------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. $ 374 $ 223 $ (204) $ (64) $ 666 $ 750 $ 1,175
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF
REVENUE:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 75.6 75.7 75.2 74.8 73.7 73.2 74.0
------- ------- ------- ------- ------- ------- -------
Gross profit............ 24.4 24.3 24.8 25.2 26.3 26.8 26.0
Selling, general and
administrative
expenses............... 21.7 22.3 24.5 24.0 22.7 23.1 21.3
------- ------- ------- ------- ------- ------- -------
Income from operations.. 2.7 2.0 0.3 1.2 3.6 3.7 4.7
Interest and other
expense, net........... 0.9 1.1 1.1 1.4 1.5 1.4 1.6
------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. 1.8% 0.9% (0.8)% (0.2)% 2.1% 2.3% 3.1%
======= ======= ======= ======= ======= ======= =======
SELECTED OPERATING DATA:
Average number of IT
consultants working
during period.......... 884 956 1,033 1,076 1,092 1,181 1,334
</TABLE>
The above quarterly data reflects the results of operations for 13 weeks,
except for the September 1995 quarter which includes 14 weeks. The March 1995
and 1996 revenue reflects in some part the seasonality of the business and the
impact of the additional employment taxes on profitability.
During the October to December quarter, the number of holidays and vacation
days marginally reduces revenue. Some clients also close operations completely
during the last week of the year. The Company also experiences a lower
operating profit margin in its third fiscal quarter, the January to March
quarter, in part as a result of higher unemployment tax accruals and, to a
lesser extent, FICA taxes which are expensed as incurred. During this quarter,
the unemployment tax, which is based on the first $7,000-$20,000 of wages for
each employee, depending on the state, is significantly higher than other
quarters.
The increase in the average number of IT consultants working during each
period reflected in the quarterly data shown above was the primary factor in
revenue growth for the periods shown.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirement is to fund working capital to
support its growth. The Company utilizes an asset-based loan to fund all of
its working capital requirements. All receipts are collected by the bank and
used to reduce the amount of the loan. All disbursements are posted by the
bank against the loan, increasing the amount of the loan. Thus, the Company
does not maintain a cash balance. As of March 1, 1996, the Company entered
into a $25 million revolving advance facility with BNY Financial Corporation
(the "Line of Credit"). This facility allows the Company to borrow the lesser
of the sum of 85% of eligible receivables (approximately $20 million as of
March 30, 1996) or $25 million. The Line of Credit is secured by all of the
Company's assets and contains certain restrictive covenants, including
limitations on amounts of loans the Company may extend to officers and
employees, the incurrence of additional debt and the payment of dividends on
the Company's common or preferred stock. Additionally, the agreement requires
the maintenance of certain financial ratios, including minimum tangible net
worth and a limit on the ratio of total liabilities to total tangible net
worth. The Company was on March 30, 1996 and is currently in compliance with
these financial covenants.
As of March 30, 1996, the principal amount outstanding under the Line of
Credit, excluding outstanding checks and deposits that have been included in
the line of credit balance in the Company's Consolidated Financial Statements,
was $18.9 million, and approximately $1 million remained available for
borrowing. The Line of Credit bears an interest rate of LIBOR plus 2.5% or the
Bank of New York alternate base rate plus 0.5% at the Company's option. As of
March 30, 1996, the Company had borrowed $16.1 million under the LIBOR rate
and had $2.8 million outstanding under the alternate base rate. The Company
intends to repay all of the borrowings under the Line of Credit with a portion
of the proceeds from the offering. Following such repayment, the Company will
maintain the Line of Credit for future financing requirements.
The Company had negative cash flow from operations of $1.2 million for the
nine-month period ended March 30, 1996. The Company had negative cash flow
from operations of $2.9 million and $7.1 million for fiscal 1994 and fiscal
1995, respectively. The primary sources of cash from operations during the
nine-month period ended March 30, 1996 were: $1.4 million in net income, net
of $633,000 in non-cash depreciation and amortization expenses; an increase of
$1.1 million in income taxes payable as a result of the conversion of ARI to a
C corporation effective January 1, 1996; and an increase of $1.4 million in
accrued salaries, wages and expenses. The primary use of cash in operations
was an increase of $4.7 million in accounts receivable resulting from the
Company's sales growth. The primary sources of cash from operations in fiscal
1995 were $325,000 in net income, net of $517,000 in non-cash depreciation and
amortization expenses, and an increase of $910,000 in accounts payable. The
primary use of cash from operations was an increase of $9.7 million in
accounts receivable. The primary sources of cash from operations in fiscal
1994 were $385,000 in net income, net of $196,000 in non-cash depreciation
expense, and an increase of $1.7 million in accrued salaries, wages and
expenses. The primary use of cash from operations in fiscal 1994 was an
increase of $5.7 million in accounts receivable.
The Company used $278,000 of cash for investing activities for the nine-
month period ended March 30, 1996. The primary use of cash from investing
activities during this period was the purchase of $973,000 in fixed assets.
The primary source of cash was the net repayment of $695,000 in notes
receivable from officers. The Company used $2.6 million of cash in investing
activities in fiscal 1995. The primary use of cash in investing activities in
such period was the purchase of fixed assets of $1.9 million and an increase
in notes receivable from officers of $406,000. The Company used $465,000 of
cash in investing activities in fiscal 1994. The primary use of cash in
investing activities in such period was the purchase of fixed assets of
$578,000.
For the nine months ended March 30, 1996 the Company generated $1.4 million
in cash from financing activities. The primary source of cash during this
period was provided by net borrowings of $2.7 million on the Line of Credit.
The Company also borrowed $745,000 from a leasing company, and the Realty
Trust received $1.4 million in proceeds from the refinancing of its existing
mortgage loan. The
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<PAGE>
primary uses of cash in this period were the repayment of $1.9 million of the
Company's long-term debt and capital leases and the distribution of $1.5
million to the Selling Stockholder, including $649,000 distributed to the
Selling Stockholder as the sole beneficiary of the Realty Trust. During fiscal
1995, the Company was provided $9.7 million in cash by financing activities.
The primary source of cash was provided by the Company's line of credit in the
amount of $8.0 million. The Company was also provided $2.1 million in cash
through a leasing company. This financing was used to fund the acquisition of
fixed assets. During fiscal 1994, the Company was provided $3.4 million in
cash from financing activities. The primary source of cash was provided by the
Company's line of credit in the amount of $3.3 million.
The Company anticipates that its primary uses of working capital in future
periods will be for funding growth, either through acquisitions, the internal
development of new branches or the development of new service offerings. The
Company also anticipates making approximately $2.5 million in capital
expenditures in the next 12 months principally to upgrade its computer system.
In connection with a 1994 acquisition, the Company may be obligated to make
certain contingent payments during the next several years. See "Certain
Transactions" and Note 3 to Consolidated Financial Statements. The Company
does not believe that such payments would have a material impact on the
Company's liquidity, results of operations or capital requirements. The
Company's principal capital requirement is working capital to support the
accounts receivable associated with its revenue growth. The Company believes
that the proceeds from the offering, together with cash flow from operations
and borrowings under the Line of Credit, will be sufficient to meet the
Company's presently anticipated working capital needs for at least the next 12
months. See "Use of Proceeds."
RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions no later
than fiscal years beginning after December 15, 1995 and adoption of the
recognition and measurement provisions for nonemployee transactions no later
than December 15, 1995. The new standard defines a fair value method of
accounting for stock options and other equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-
based transactions. Companies are also permitted to continue to account for
such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose
in a note to the financial statements pro forma net income and, if presented,
earnings per share as if the Company had applied the new method of accounting.
The accounting requirements of the new method are effective for all employee
awards granted after the beginning of the fiscal year of adoption. The Company
has not yet determined if it will adopt the fair value method of accounting
for employee stock-based compensation, nor has it determined the effect the
new standard will have on net income and earnings per share should it elect to
make such a change. Adoption of the new standard will have no effect on the
Company's cash flows.
19
<PAGE>
BUSINESS
The Registry, Inc. ("The Registry" or the "Company") provides information
technology (IT) consultants on a contract basis to organizations with complex
IT operations. The Company currently has more than 1,400 IT consultants placed
with its clients to assist them in implementing solutions for systems and
applications development, in such areas as distributed network design,
database design and development and client/server migration. These
consultants, billed primarily on an hourly basis, typically work on
engagements lasting from six to twelve months. In 1995, the Company provided
IT consultants to approximately 350 clients in a diverse range of industries,
including MCI Telecommunications Corporation, Putnam Investments, Inc.,
Digital Equipment Corp., Pepsi Cola International and Pfizer Inc. The Registry
has grown from four offices and $16.9 million in revenue in fiscal 1991 to 23
offices and $130.5 million of revenue for the twelve months ended March 30,
1996.
INDUSTRY OVERVIEW
In recent years, the growth of the information services industry has been
driven by companies' increasing reliance on information technology as a
strategic tool, the shift to distributed computing and the proliferation of
multi-vendor computing environments. As companies struggle to integrate
multiple processing platforms and applications which serve an increasing
number of end-users, systems and applications development has become
increasingly challenging. As organizations continue to focus on their core
competencies and strive to operate more efficiently with fewer people,
managing and planning staffing requirements to meet their IT needs becomes
more difficult.
Confronted with the challenge of designing, implementing and operating more
complex information systems without enlarging corporate staff, businesses are
increasingly turning to IT service providers to augment their in-house IT
operations. Using the services of IT consultants allows companies to: (i)
focus on their core business; (ii) access specialized technical skills; (iii)
implement flexible staffing, providing a variable cost solution to a fixed
cost problem; and (iv) reduce the cost of recruiting, training and terminating
employees as IT requirements change.
There are a number of competitive factors within the highly fragmented IT
services industry. These factors include, among others, IT services providers'
ability to: (i) identify, recruit and retain highly qualified software
engineers; (ii) provide software application and development services across a
broad range of platforms and technologies; and (iii) serve clients across
multiple locations.
In recent years, the IT services industry has grown significantly. According
to a 1996 study by Dataquest, Inc., the U.S. market for IT
implementation/integration and development services was estimated at $13.4
billion in 1994 and is projected to grow to $24.2 billion in 1999.
BUSINESS STRATEGY
The Registry's goal is to be a leading nationwide provider of IT
professional services for organizations with complex IT operations. The
Company's business strategy encompasses the following elements:
. Emphasize Resource Management. The Company believes that its ability to
provide the highest quality, most professional IT consultants is
critical to its success. The Company's Delivery Management System is
designed to effectively identify, qualify, place and retain IT
consultants. Each of the Company's 103 Resource Managers recruits in one
of five specific technology sectors, enabling the Company to more
effectively match the skills of its IT consultants with the needs of its
clients. To attract and retain IT consultants, the Company offers them a
comprehensive benefits package and actively remarkets them before their
engagement ends. In addition, the Company's National Resource Delivery
Team (NRDT), a group of Resource Managers based at the Company's
headquarters, helps coordinate recruiting efforts with the local branch
offices to provide access to consultants from across the nation when
local resources for
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<PAGE>
a particular skill set are scarce. The NRDT, along with local Resource
Managers, utilize the Company's database that contains the resumes of
approximately 100,000 IT consultants that have been submitted to the
Company. Although only certain of the individuals whose resumes are
included in the Company's database are available for placement at any
particular time, the database facilitates the identification of
qualified IT consultants to the extent of their availability. The
Company believes that its resource management methodologies have been
and will continue to be a significant factor in its ability to grow.
. Focus on Application Development and Software Engineering. Many of the
Company's clients are leaders in adopting emerging computing
technologies. The Company provides IT consultants for application
development and software engineering in areas such as networking and
communications, migration from legacy systems, workgroup/desktop
applications, database design and development and Internet. In addition
to differentiating the Company's service offerings from those of other
IT service providers, this focus on application development and software
engineering provides the Company an opportunity to enhance margins by
moving away from the commodity pricing more typical for IT consultants
providing routine operations and maintenance services. In addition, this
focus enables the Company to offer its IT consultants the opportunity to
work on challenging projects, which the Company believes is a
significant advantage in attracting and retaining highly skilled
professionals.
. Build Client Relationships. The Registry's goal is to become an
extension of its clients' IT departments. The Company seeks long-term
relationships as a primary IT service provider for companies which have
complex IT operations and for which IT development is a strategic tool
and not merely a support function. The Company believes that this
relationship-oriented approach results in greater client satisfaction
and reduces business development expense. By helping its clients assess
their future staffing needs in their IT planning process, the Company is
better able to anticipate opportunities to provide additional services.
Of the Company's top 10 clients in calendar 1993, seven were among the
Company's top 10 clients in calendar 1995.
. Maintain and Expand National Presence. The Company believes that larger
organizations with multiple locations prefer to deal with IT service
providers that can provide consistent and high quality services on a
nationwide basis. The Company has focused from its inception on
establishing a nationwide presence to take advantage of the enhanced
delivery capabilities resulting from a nationwide resource pool as well
as to focus on and serve national accounts. The Registry has 23 offices
across the country allowing national coverage for larger accounts and
mobility for IT consultants. In the future, the Company's decision to
establish a new office will be influenced, in part, by the extent to
which it can help increase the Company's national presence and assist in
serving national accounts.
GROWTH STRATEGY
The Company's growth has been achieved primarily through branch expansion
and, to a lesser extent, the development of new service offerings, rather than
through acquisitions. The Company believes, however, that a balance of
internal growth and selective acquisitions will best position the Company to
capitalize on opportunities in the IT professional services industry. The
Company's growth strategy consists of five primary components:
. Concentrate on Existing Branch Development. The Company believes that
there are substantial opportunities for increasing revenue in existing
branches, 17 of which have been open for less than four years. The
Company's strategy is to increase sales to existing clients by
increasing the number of IT consultants placed with these clients and by
offering them additional services. As a result of its involvement in the
IT planning process of many of its clients, the Company is often
afforded an opportunity to anticipate clients' needs for additional IT
consultants and services. In addition, the Company seeks to selectively
expand its client base within existing markets.
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<PAGE>
. Expand National Accounts. The Company is currently focusing on national
account development and has identified certain systems integrators,
computer manufacturers and telecommunications firms as potential
national accounts. These accounts present an array of unique operational
challenges, such as coordinating service delivery across divisional
lines and providing centralized invoicing. The Company believes that its
national presence and national resource management capabilities will
enable it to meet these challenges.
. Implement Satellite Branch Expansion. The Company believes that
opportunities exist for additional satellite expansion. From existing
branch offices, the Company has successfully developed satellite offices
in certain regions. This method of developing opportunities in given
geographic areas allows the Company to expand its client and consultant
base while leveraging existing infrastructure and reducing start-up
costs. For example, the Durham, North Carolina office served as a hub
for the opening of satellite offices in Charlotte and Greensboro, North
Carolina.
. Acquire Complementary Businesses. The Company may seek to acquire
companies in the IT professional services industry to facilitate its
expansion into new geographic areas or to acquire technology businesses
that offer complementary services. The Company believes that the
fragmented nature of the IT professional services industry presents a
number of opportunities for growth through acquisition.
. Develop New Service Offerings. The Company intends to continue its
practice of encouraging individual branches to develop complementary
services, such as the Documentation Services Practice and the recently
introduced Help Desk Practice. These services can then be expanded on a
national level after their viability and profitability is demonstrated
at a local level.
THE REGISTRY'S SERVICES
The Registry provides IT professional services on a contract basis for
application development and software engineering. In addition, the Company has
recently introduced service offerings in three specialized practice areas:
network systems consulting, documentation services and help desk services.
IT Professional Services
The Company organizes its IT professional services in five sectors: networks
and communications; legacy systems; workgroup/desktop; database design and
development; and Internet. Networks and communications engagements generally
involve distributed network design and implementation or optimization and
connectivity services in both local area networks (LANs) and wide area
networks (WANs). Legacy system engagements address challenges in the migration
of legacy applications to a client/server environment, large systems
development and general legacy (primarily IBM and Digital VAX/VMS) support.
Workgroup/desktop engagements involve front-end graphical user interface (GUI)
development, rapid application prototyping and development, object-oriented
development and workgroup application services. Database design and
development assignments involve design, development and implementation of
relational database applications and systems. Internet engagements include Web
Page design, Internet security design issues and intranetworking systems
development.
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<PAGE>
The following table sets forth examples of assignments the Company's IT
consultants have completed within each of these five sectors and examples of
the skill sets typically required of consultants working on these assignments.
Most projects are performed jointly with clients' internal IT personnel.
THE REGISTRY'S PROFESSIONAL SERVICES
TECHNOLOGY SECTORS EXAMPLES GENERAL SKILLS REQUIRED
Networks and
Communications........... Integration of Network . UNIX/TCP-IP/IPX
Protocols for a Systems Development
Integrator . SNMP Network
Management Development
Development of an . LAN/WAN Architecture
Object-Oriented
Front-End of a Network
Management System for a
Software Manufacturer
Legacy Systems........... Development of an On- . IBM/COBOL/CICS
Line Portfolio . VAX/VMS Application
Accounting System for a Development and
Mutual Fund Systems Administration
Development of a Billing . IMS Systems
System for a Long Programming
Distance
Telecommunications
Company
Workgroup/Desktop........ Migration to New . NT/C++/GUI Development
Operating System for a . MS Windows/Windows 95/
Software Developer Windows NT
Architecture and
Development
Development of an . Visual Basic
Investment Management Design/OBDC
Reporting System for a
Financial Services
Company
Database Design and
Development ............. Design and Development . Sybase/UNIX/C++/Tuxedo
of a Reporting and . Oracle DBA
Switching System for a . Powerbuilder/Sybase
Telecommunications Client Server
Company Development
Design and Development
of a Loan Processing
System for a Bank
Internet................. Web Site Development for . HTML/WWW Design &
a Telecommunications Development
Company . UNIX/Systems
Engineer/CGI/Fire Wall
Design and Implementation Development
of an Internet Firewall . JAVA Development
Security System for a
Mutual Fund
Practices
Network Systems Consulting Practice (NSCP). In November 1994, the Company
acquired the business that formed the basis for its Network Systems Consulting
Practice. Based in New England and operating from locations in New York City
and Chicago, the NSCP is staffed by 19 salaried employees. The NSCP provides
an extensive suite of management consulting services, addressing issues such
as network strategy, systems architecture and implementation. Most projects
are performed on a time and materials basis, with engagements generally
lasting approximately two to three months. The clients of the NSCP include
systems integrators, hardware manufacturers and pharmaceutical companies.
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<PAGE>
Documentation Services Practice (DSP). In 1994, the Company initiated its
Documentation Services Practice in its Chicago branch office. The DSP assists
hardware and software vendors and other organizations in developing
documentation, instruction and accompanying related materials associated with
introducing new or upgrading existing products. As product development cycles
continue to shorten, these services, including documentation needs analysis,
design and development, project management, technical writing and graphic
design and illustrations, are designed to help clients produce high-quality,
cost-effective documentation under heightened scheduling constraints. In
addition, the DSP provides systems documentation and process consulting
services to other organizations. The DSP is composed of 35 professionals
including project managers, technical writers, principal consultants, a
quality manager and a practice manager, of whom approximately half are
salaried employees and half are hourly IT consultants. Most projects are
performed on a time and materials basis, with engagements generally lasting
approximately three to four months.
Help Desk Practice. The Company is currently developing a Help Desk Practice
to assist clients in identifying their help desk requirements and implementing
and operating their help desk services. These services may range from
providing consulting services to providing a complete outsourcing solution for
a client's help desk needs.
THE REGISTRY'S DELIVERY MANAGEMENT SYSTEM
IT Consultants
A major challenge facing IT professional services companies is the
identification and retention of highly qualified software engineers and
computer programmers. The Company's typical IT consultant has an average of
six to eight years of experience in application development and software
engineering. The Company believes that it is able to attract and retain the
highest quality IT consultants by offering the following advantages:
. Consultants work with a Resource Manager with a single technology sector
focus who understands the consultants' skills and professional interests.
. The Company provides exposure to a variety of challenging assignments
that help consultants increase their skill sets and business expertise.
. The Company actively remarkets its consultants, allowing them to
concentrate on completing their current assignment.
. The Company offers a comprehensive benefits package comparable in
coverage to those offered in many permanent employment positions.
Resource Management
Resource Managers are responsible for soliciting, recruiting and assessing
IT consultants, developing and maintaining consultant relationships and
maintaining and updating the Company's database. Although Resource Managers
recruit most of the Company's IT consultants through referrals from existing
IT consultants, they utilize several additional recruiting methods, including
local and national print advertising, participation in technical job fairs
across the nation and listing a variety of current openings on the Company's
home page on the World Wide Web. The Company currently has the resumes of over
100,000 IT consultants in its database.
As of March 30, 1996, the Company employed 103 Resource Managers located in
its branch offices nationwide. This number exceeds the number of Account
Managers by a ratio of 1.7 to 1 and reflects the Company's commitment to
resource development. Resource Managers are typically college-educated
individuals with experience in customer service, telemarketing and
relationship management. They are compensated through a combination of base
salary and bonus incentives based on consultant placements and gross profit
margins.
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<PAGE>
Account Management
The Company's Account Managers manage its client relationships. Each Account
Manager is responsible for approximately four to seven accounts, some of which
may involve multiple operating units of a particular organization. The Account
Manager's primary responsibility is to develop and implement a specific
account plan for each assigned client. Each plan addresses the following
areas: building and serving the client relationship; identifying and
understanding the client's current and anticipated requirements; and expanding
services to additional areas within the client's organization. The Company's
Account Managers work closely with the Resource Managers to identify new
assignments at existing client sites, staff assignments appropriately and
market IT consultants to existing clients. As of March 30, 1996, the Company
employed 61 Account Managers who are compensated through a combination of base
salary and commission.
The Registry's Methodology
The Company has developed a system designed to identify, qualify, place and
retain IT consultants. This system includes the following:
Technology Sector Recruiting. Resource Management teams in each branch
office recruit IT consultants who specialize in one of the five technology
sectors that the Company serves. Each Resource Manager is assigned to one
specific sector and is accountable for continually developing consultant
relationships within, and an understanding of, that sector. This approach
helps a Resource Manager stay current in a particular sector and reduce a
field of potential consultants to a select list of experts particularly
qualified for current openings.
National Resource Delivery Team. The Company has established a National
Resource Delivery Team (NRDT), a group of 14 Resource Managers located at
the Company's corporate headquarters. Communicating daily with the Resource
Managers in the Company's 23 branch offices, the NRDT helps coordinate
recruiting efforts with the local branch offices to provide access to
consultants from across the nation when local resources for a particular
skill set are scarce. The NRDT also supports local branches with on-site
auxiliary recruiters to provide added support and expertise for new office
openings or the rapid growth of existing offices.
Continuous Support and Quality. The Company believes that consultant
quality is of primary importance to its clients and that clients prefer to
work with vendors that have substantial quality programs in place. The
Company has always maintained a proactive approach to quality initiatives,
and its quality programs include a consultant orientation and a review of
client satisfaction 30 days after the beginning of each engagement and at
the end of each engagement. The Company actively solicits feedback from
clients and IT consultants in the areas of productivity, technical
performance and compatibility, as well as overall quality of the service
provided, which then forms the basis for the Company's statistical analysis
for quality improvement programs.
Consultant Retention and Benefits. Clients spend valuable time and effort
in the training and orientation of consultants, and, accordingly, retention
until project completion is extremely important. Before completion of a
project, the Company actively remarkets its consultants, which helps the
Company minimize turnover. This approach allows consultants to focus on
completing their current project -- often when it is in the most critical
phase. The Company has recently developed a benefits package offered to its
hourly IT consultants which includes comprehensive medical insurance, a
prescription drug card, term life insurance, individual long-term
disability insurance and a 401(k) retirement plan. These benefits
underscore the Company's commitment to its consultants and further
consultant loyalty and retention efforts.
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<PAGE>
OPERATIONS AND SUPPORT SERVICES
Branch Management
The Company's Branch Managers are accountable for branch profitability and
are responsible for day-to-day branch operations, as well as business and
staff development. To date, most Branch Managers have been promoted from
within and thus bring with them an appreciation for the Company's culture.
Management believes that this approach has allowed the Company to maintain
consistent standards during a period of rapid growth. Branch Managers are
compensated through a combination of base salary and bonus incentives based on
branch profitability.
Staffing levels of branch offices vary depending on the maturity of an
office and range from two Resource Managers, one Account Manager, one
administrative staff and a Branch Manager for a recently opened office to nine
Resource Managers, six Account Managers, three administrative staff and a
Branch Manager for a larger, more established office. Satellite offices
benefit from sharing certain staff resources with neighboring branches.
The following chart lists the Company's 23 branch offices and the fiscal
year in which they opened:
<TABLE>
<CAPTION>
FISCAL
LOCATION YEAR OPENED
- -------- -----------
<S> <C>
Newton, Massachusetts.... 1987
McLean, Virginia......... 1987
Durham, North Carolina... 1990
Atlanta, Georgia......... 1991
Chicago, Illinois........ 1992
Richmond, Virginia....... 1992
Cleveland, Ohio.......... 1993
Rye Brook, New York...... 1993
Boston, Massachusetts.... 1993
Ft. Lauderdale, Florida.. 1994
Rosemont, Illinois....... 1994
Dallas, Texas............ 1994
</TABLE>
<TABLE>
<CAPTION>
FISCAL
LOCATION YEAR OPENED
- -------- -----------
<S> <C>
Denver, Colorado............ 1994
Greensboro, North Carolina.. 1994
New York, New York.......... 1994
Santa Clara, California..... 1994
Seattle, Washington......... 1995
Columbus, Ohio.............. 1995
Stratham, New Hampshire..... 1995
Charlotte, North Carolina... 1995
Rolling Meadows, Illinois
(DSP)...................... 1995
New York, New York (NSCP)... 1996
Walnut Creek, California.... 1996
</TABLE>
Regional Management
The Company has a Regional Vice President for each of the New England, Mid-
Atlantic, Midwest, Southeast, Southwest and Western Regions. The Regional Vice
President is responsible for supervising Branch Managers and for developing a
financial plan for the region, implementing staff development and training and
coordinating marketing strategy. Each Regional Vice President serves on the
Company's Executive Committee. Compensation of Regional Vice Presidents
consists of a base salary plus bonus incentives relating to regional
profitability.
Corporate Services
From its headquarters in Newton, Massachusetts, the Company provides its
branch offices with centralized support services, including marketing,
financial and accounting, legal support and purchasing. In addition, the
Company has committed and expects to continue to commit substantial resources
to the following areas:
Training. The Company provides a number of training programs for its
staff employees to help them stay current with emerging issues in the
information technology industry. These programs include "Registry
University," a four-day training and orientation workshop for new Account
Managers and Resource Managers and the "Branch Manager's Workshop," an
annual series of four three-day workshops that focus on operations,
business development and staff development. Drawing on the experience of
the Company's most successful Resource Managers, the training department
has also developed a "Best Practices" program in resource management.
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<PAGE>
Information Services. The Company believes that its own information
technology system is an important tool for enhancing productivity,
promoting efficiency and improving communications within the organization.
The Company also believes that its database is one of its most important
assets. The Company is currently committing significant resources to
improving the database search capabilities through centralization and
development of a nationwide communications network.
Human Resources. The Company believes that extending a benefits program
to its IT consultants provides it with a competitive edge by promoting
consultants' loyalty to the Company and enhancing its retention efforts. In
this regard, the Company has recently begun to offer a benefits package to
the Company's IT consultants nationwide. This program includes
comprehensive medical insurance, a prescription drug card, term life
insurance, individual long-term disability insurance and a 401(k)
retirement plan.
CLIENT BASE
The Company focuses its sales efforts primarily on organizations with
complex IT needs and currently provides IT consultants to approximately 350
clients. In fiscal 1995, approximately 36.5% of the Company's revenue was
derived from its top 10 customers, none of which accounted for more than 6.0%
of revenue. The primary industries served by the Company are: financial
services, manufacturing, communications, systems integration and
pharmaceutical. The following table shows selected clients, categorized by
industry group, for which the Company provided services in fiscal 1995:
FINANCIAL SERVICES SYSTEMS INTEGRATION
First Union National Bank Cambridge Technology
Fleet Services Corporation Partners, Inc.
G.E. Capital Corporation Digital Equipment Corp.
John Hancock Mutual Life Insurance Co. International Business
Putnam Investments, Inc. Machines Corp.
Planning Research
Corporation International,
Ltd.
Sun Microsystems Inc.
MANUFACTURING
Lockheed Martin Corp.
Silicon Graphics Inc. PHARMACEUTICAL
Bristol-Myers Squibb Company
COMMUNICATIONS Pfizer Inc.
AT&T HRISO
Hitachi Telecom USA, Inc.
MCI Telecommunications Corporation OTHER
NYNEX Science and Technology, Inc.
Carolina Power & Light Co.
Pepsi Cola International
Philip Morris USA
Prodigy Services Company
Ryder Systems, Inc.
Sara Lee Hosiery, Inc.
Virginia Electric & Power
Co.
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<PAGE>
COMPETITION
The market for IT professional services is intensely competitive on both
local and national levels. The market is served by numerous IT professional
services companies, many of which have greater financial, technical and other
resources than the Company. Some of these competitors have a nationwide
presence equivalent to, or greater than, that of the Company. Within any given
market, the Company and its competitors frequently compete for the same
highly-skilled IT consultants and clients.
The Company competes for IT consultants with other IT professional services
providers, outsourcing and consulting companies, systems integrators,
temporary personnel agencies and client companies. IT consultants, including
those who work with The Registry, often seek assignments from more than one
staffing company. Primary competitive factors for recruiting and retaining
such professionals include: compensation, including timeliness of payment;
availability of benefits; consistent flow of high quality, varied assignments;
schedule flexibility; and an understanding of consultant skills and work
preferences.
The Company competes for clients with other IT professional services
providers, outsourcing and consulting companies, systems integrators and, to a
lesser extent, temporary personnel agencies. The Company considers large
organizations with complex IT needs to be among its prime clients. Within a
given market, there are a limited number of such potential clients, some of
which have designated only certain IT professional services companies as
approved providers of IT professional services. Primary competitive factors
for obtaining and retaining clients include: careful matching of consultant
skills with the client's requirements; selectivity in referral of consultant
candidates; nationwide presence; consultant technical expertise; price of
services; monitoring of client satisfaction during and after a placement; and
general responsiveness to client needs.
Although the Company believes that it competes favorably both in recruiting
IT consultants and obtaining clients, there is no assurance that it will
continue to be successful in doing so.
EMPLOYEES
As of March 30, 1996, the Company had 390 employees, of which 110 were staff
IT consultants, 103 were Resource Managers, 61 were Account Managers, 60 were
either Branch, Regional or corporate managers and 56 served in various
administrative and accounting capacities. On that date, there were also
approximately 1,400 IT consultants (including the 110 staff IT consultants)
working on full-time assignments for the Company's clients. The Company is not
a party to any collective bargaining agreements and considers its
relationships with its employees to be satisfactory.
Approximately 91.4% of the Company's non-staff IT consultants during fiscal
1995 were treated as employees of the Company for federal and state tax
purposes. For such employees, the Company pays social security taxes (FICA),
federal and state unemployment taxes and workers' compensation insurance
premiums. The remainder of the IT consultants worked for the Company on a
subcontract basis, and the Company is not responsible for such taxes under
these arrangements. The Company believes that such arrangements meet the
requirements of applicable law.
PROPERTIES
The Company's executive offices are located in Newton, Massachusetts, in
approximately 18,800 square feet of leased office space, under leases that
expire on September 30, 2010, from the Realty Trust. See Note 5 to "Selected
Consolidated Financial Data," "Certain Transactions" and Note 13 to
Consolidated Financial Statements. The Company also maintains offices and
leases office space occupying between 475 and 5,875 square feet under leases
terminating from December 31, 1996 to July 21, 2001 in the locations in which
it maintains a branch office noted under "-- Branch Management." The Company
believes that its facilities are adequate for its current operations.
28
<PAGE>
LEGAL PROCEEDINGS
On April 21, 1995, Ralph Kirkley Associates, Inc. ("Kirkley"), an IT
services provider, filed suit against the Company in the District Court of
Travis County, Texas, 353rd Judicial District, alleging that the Company
breached a mixed oral and written contract with Kirkley to enter into an
agreement to purchase substantially all of the assets comprising Kirkley's
business. Kirkley's complaint seeks a declaratory judgment that a valid
contract existed between Kirkley and the Company to enter into a purchase and
sale agreement for Kirkley's assets, as well as actual damages of not less
than $500,000, recovery of lost profits, exemplary damages of three times all
actual damages awarded and attorney's fees and costs. The Company has filed a
general denial of Kirkley's complaint and a counterclaim seeking return of the
$100,000 deposit paid to Kirkley's escrow agent and other legal and equitable
relief. No further actions have been taken with respect to this suit. On May
31, 1995, Kirkley filed a voluntary petition for bankruptcy under Chapter 11
in the United States Bankruptcy Court for the Western District of Texas. In
the event Kirkley or the trustee in bankruptcy proceeds with the case, the
Company intends to defend vigorously. The Company does not believe that the
resolution of this matter will have a material adverse effect on its business,
financial condition or results of operations.
29
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
G. Drew Conway.......... 38 President, Chief Executive Officer and Director
Robert E. Foley......... 47 Chief Financial Officer and Treasurer
Mark W. Biscoe.......... 35 Vice President, New England Region
Christopher T. Cain..... 32 Vice President, Southwest Region
Anthony F. Carusone..... 48 Vice President, Southeast Region
Christopher B. Egizi.... 40 Vice President, Midwest Region
James F.J. McKee........ 30 Vice President, Western Region
Martin E. Goober........ 31 Vice President, Operations
David E. Jackson........ 44 Vice President, Network Systems Consulting Practice
James H. Anderson....... 41 Denver Branch Manager
Susan E. Hovdesven...... 33 New York Branch Manager
Robert P. Badavas....... 43 Director
Paul C. O'Brien......... 56 Director
</TABLE>
Mr. Conway, the founder of the Company, has served as President, Chief
Executive Officer and Director of the Company since its incorporation in May
1986 and as Treasurer from such date until March 1996. From 1983 until 1986,
Mr. Conway was a founder and principal of The Experts, a technical staffing
company. Mr. Conway previously served as an Account Manager with EDP Temps, a
technical staffing company.
Mr. Foley has served as Chief Financial Officer since joining the Company in
July 1990 and as Treasurer since March 1996. Mr. Foley has more than 22 years
of experience in finance and accounting and is also an Adjunct Professor of
Finance at Northeastern University.
Mr. Biscoe has served as Vice President, New England Region, since November
1995. Mr. Biscoe joined the Company in March 1992 and has served as Branch
Manager of the Newton office and Manager of the NRDT. From 1990 until 1992,
Mr. Biscoe served as Branch Manager of Triple T, Inc., a technical staffing
company.
Mr. Cain has served as Vice President, Southwest Region, since January 1995.
Mr. Cain joined the Company in 1990 as an Account Manager and opened the
Dallas office as Branch Manager.
Mr. Carusone has served as Vice President, Southeast Region, since February
1994. Mr. Carusone joined the Company in February 1992 and has served as
Branch Manager of the Atlanta office. From July 1990 to February 1992, Mr.
Carusone was employed by Status, Inc., a personnel recruiting company.
Mr. Egizi has served as Vice President, Midwest Region, since January 1994.
Mr. Egizi was a founding staff member of the Company in 1986 and has served as
Vice President, Strategic Corporate Services, Branch Manager of the Newton
office and Manager of the NRDT.
Mr. McKee has served as Vice President, Western Region, since January 1996.
Mr. McKee joined the Company in November 1991 as an Account Manager and
subsequently opened the Santa Clara office in June 1994 as Branch Manager and
the Walnut Creek, California office in August 1995. Before joining the
Company, Mr. McKee was employed as an Account Executive with Spectator
Publications.
Mr. Goober has served as Vice President, Operations, since September 1995.
Mr. Goober joined the Company in January 1991 as an Account Manager, and
before serving as a Director of Training, served as Branch Manager of the
Newton office, and opened the Boston office. From April 1988 until December
1990, Mr. Goober served as Senior Account Manager with Sullivan & Cogliano, a
technical staffing company.
30
<PAGE>
Mr. Jackson has served as Vice President, Network Systems Consulting
Practice since November 1994. Mr. Jackson joined the Company when Axiom
Consulting Group, Inc., the network implementation consulting firm he founded
in December 1991, was acquired by the Company. From 1989 to 1991, Mr. Jackson
served as Vice President of Sales and Marketing of The DMW Group, Inc., a
network management consulting firm. Mr. Jackson has 22 years of experience in
the networking and communications industry.
Mr. Anderson has served as Branch Manager of the Denver office since August
1994. Mr. Anderson joined the Company in November 1986 and has served as
Director of Training and Development and Manager of the NRDT. From August 1985
through October 1986, Mr. Anderson served as Recruiting Manager with The
Experts, a technical staffing company.
Ms. Hovdesven has served as New York Branch Manager since November 1993. Ms.
Hovdesven joined the Company in March 1988 as an Account Manager and opened
the Durham, Atlanta, Rye Brook and New York City offices.
Mr. Badavas became a director of the Company in May 1996. Mr. Badavas has
been President and Chief Executive Officer of Cerulean Technology, Inc., a
provider of mobile information systems applications, since December 1995. From
October 1986 through October 1995, Mr. Badavas was employed by Chipcom
Corporation, a manufacturer of computer networking intelligent switching
systems, where he served as Senior Vice President, Finance, from July 1994 to
October 1995, Vice President, Finance, from October 1986 to July 1994 and
Chief Financial Officer and Treasurer.
Mr. O'Brien became a director of the Company in April 1996. Mr. O'Brien is
the President of The O'Brien Group, Inc., a consulting firm in the areas of
community relations and external affairs that he founded in January 1995.
Before founding The O'Brien Group, Mr. O'Brien was employed by New England
Telephone and Telegraph Company, most recently as Chairman of the Board from
1993 to December 1994 and as President and Chief Executive Officer from 1988
to 1993. Mr. O'Brien is also a director of Bank of Boston Corporation,
Cambridge NeuroScience, Inc., First Pacific Networks Inc. and Shiva
Corporation.
Each officer serves at the discretion of the Board of Directors. There are
no family relationships among any of the directors and executive officers of
the Company.
The Company intends to add two more outside directors to the Board of
Directors following the offering. Following the completion of this offering,
the Board of Directors will have an Audit Committee and a Compensation
Committee. The Audit Committee will review the Company's accounting practices,
internal accounting controls and financial results and oversee the engagement
of the Company's independent auditors. The Compensation Committee will review
and recommend to the Board of Directors the salaries, bonuses and other forms
of compensation for executive officers of the Company and administer various
compensation and benefit plans, including the 1996 Stock Plan and the 1996
Employee Stock Purchase Plan. The initial members of the Audit Committee and
the Compensation Committee will be Messrs. O'Brien and Badavas, neither of
whom is a past or current officer or employee of the Company. The Board of
Directors does not maintain a nominating committee or a committee performing
similar functions.
The Company's Restated Articles of Organization provide that the Board of
Directors is classified into three classes, with the members of the respective
classes serving for staggered three-year terms. The first class consists of
Mr. Badavas, the second class consists of Mr. O'Brien and the third of Mr.
Conway, with the initial terms of the directors comprising the classes
expiring upon the election and qualification of directors at the annual
meetings of stockholders to be held following the fiscal years of the Company
ending June 29, 1996, June 28, 1997 and June 27, 1998, respectively. At each
annual meeting of stockholders, nominees for director will be eligible for re-
election or election for full three-year terms. See "Description of Capital
Stock -- Massachusetts Law and Certain Provisions of the Company's Articles of
Organization and By-Laws."
31
<PAGE>
DIRECTOR COMPENSATION
In connection with this offering, the Company has determined to pay its
directors who are not officers or employees of the Company $1,000 for each
Board meeting attended and an annual fee of $1,000 for each membership on a
committee of the Board. In addition, each non-employee director is granted
stock options pursuant to the Company's 1996 Eligible Directors Stock Plan
described under "Stock Awards."
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding all
compensation received by the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers during fiscal 1995 (the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- -------------------
<S> <C> <C>
G. Drew Conway............................................. $ 537,500 $ --
President and Chief Executive Officer
Christopher B. Egizi....................................... 201,400 12,500
Vice President, Midwest Region
Anthony F. Carusone........................................ 75,260 120,231
Vice President, Southeast Region
Susan E. Hovdesven......................................... 53,000 135,003
New York Branch Manager
Martin E. Goober........................................... 109,132 47,500
Vice President, Operations
</TABLE>
In connection with this offering, the Company entered into an employment
agreement (the "Employment Agreement") with Mr. Conway pursuant to which Mr.
Conway will be employed as President and Chief Executive Officer of the
Company. The Employment Agreement provides for a term of four years and an
annual base salary of $400,000, $425,000, $475,000 and $525,000 in the first
through fourth years of the term. Mr. Conway is also eligible for a bonus
based on performance criteria pre-established by the Compensation Committee
for each year and subject to a maximum limitation of $160,000 in the first
year. The Employment Agreement provides that if Mr. Conway's employment is
terminated without "cause" (as defined in the Agreement) or if Mr. Conway
terminates his employment for "good reason" (as defined in the Agreement), the
Company will pay Mr. Conway severance equal to two years of base compensation
plus a portion of the bonus paid or payable with respect to the immediately
preceding full employment year based on days of service in the year of
termination. In addition, if Mr. Conway's employment is terminated at the end
of the term of the Employment Agreement, he will be entitled to severance
equal to one year of base compensation. The agreement also contains non-
competition and non-solicitation covenants during the employment term and for
a two-year period thereafter. Mr. Conway is also provided with certain
registration rights with respect to his Common Stock, described under
"Description of Capital Stock."
No stock options or stock appreciation rights ("SARs") were granted to the
Named Executive Officers during fiscal 1995. On March 6, 1996, the Company
granted options to each of Messrs. Egizi, Carusone and Goober, Ms. Hovdesven
and to all executive officers as a group exercisable for 60,000, 50,000,
50,000, 55,000 and 475,000 shares, respectively, at an option exercise price
of $11.00 per share, the fair market value on the date of grant. All such
options vest in five equal installments commencing on the earlier of the six-
month anniversary of the completion of this offering or March 6, 1997 and
thereafter on December 15 in each of 1997 through 2000.
32
<PAGE>
No stock options were exercised by the Named Executive Officers during
fiscal 1995. There were no SARs outstanding during fiscal 1995. No unexercised
options were held by any of the Named Executive Officers as of June 24, 1995.
STOCK AWARDS
1996 Stock Plan. The Company's 1996 Stock Plan was approved by the Board of
Directors on March 6, 1996 and by the sole stockholder on March 22, 1996. The
1996 Stock Plan provides for the grant or award of stock options, restricted
stock and stock bonus awards (collectively, the "Awards"). Stock options
granted under the 1996 Stock Plan may be either incentive stock options or
non-qualified stock options. The purpose of the 1996 Stock Plan is to attract
and retain outstanding employees through stock incentives. Regular full-time
employees of the Company, including officers but excluding directors who are
not officers, are eligible to receive Awards.
The 1996 Stock Plan will be administered by the Compensation Committee after
the offering. Subject to the provisions of the 1996 Stock Plan, the Committee
has the authority to designate participants, determine the types of Awards to
be granted, the number of shares to be covered by each Award, the time at
which each Award is exercisable or may be settled, the method of payment and
any other terms and conditions of the Awards. All Awards shall be evidenced by
an Award agreement between the Company and the participant.
Although the Committee determines the prices at which options and other
Awards may be exercised under the 1996 Stock Plan, the exercise price of an
incentive stock option shall be at least 100% of the fair market value (as
determined under the terms of the 1996 Stock Plan) of a share of Common Stock
on the date of grant. The aggregate number of shares of Common Stock available
for awards under the Plan is 1,600,000. No Awards may be made under the 1996
Stock Plan after March 6, 2006.
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the "1996 Purchase Plan") was adopted by the Board of Directors
and approved by the sole stockholder on March 29, 1996. A total of 300,000
shares of Common Stock has been reserved for issuance under the 1996 Purchase
Plan. The 1996 Purchase Plan, which is intended to qualify under Section 423
of the Code, will be implemented by one offering during each six-month period
and is administered by the Board of Directors of the Company or by the
Compensation Committee. Employees are eligible to participate if they have
been employed by the Company for at least 18 months. The 1996 Purchase Plan
permits eligible employees to purchase up to 200 shares of Common Stock in any
six-month offering period through payroll deductions, which may not exceed 10%
of an employee's compensation, at a price equal to 85% of the lower of the
fair market value of the Common Stock at the beginning or at the end of each
six-month offering period. Employees may end their participation in the
offering at any time during the offering period, and participation ends
automatically on termination of employment with the Company. The first stock
offering period under the 1996 Purchase Plan will commence upon the effective
date of the registration statement of which this Prospectus is a part. The
1996 Purchase Plan will terminate on March 29, 2006.
1996 Eligible Directors Stock Plan. The Company's 1996 Eligible Directors
Stock Plan (the "Directors Stock Plan") was approved by the Board of Directors
and by the Company's sole stockholder on March 29, 1996. Under the Directors
Stock Plan, each director who is not an officer, employee or consultant of the
Company or any subsidiary of the Company (an "outside director") will be
granted, upon first being elected to the Board of Directors, an option to
purchase 20,000 shares of Common Stock at an exercise price equal to the fair
market value on the date of the grant. A total of 100,000 shares of Common
Stock are available for awards under the Directors Stock Plan. The options
granted under the Directors Stock Plan will vest in four equal annual
installments commencing one year after the date of grant. No options may be
granted under the Directors Stock Plan after March 29, 2006. In connection
with their initial election to the Board of Directors, each of Messrs. O'Brien
and Badavas has been granted an option to purchase 20,000 shares at an
exercise price of $11.00 per share in the case of
33
<PAGE>
Mr. O'Brien and $13.00 per share in the case of Mr. Badavas, the fair market
value of the Common Stock on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, Mr. Conway, the President, Chief Executive Officer and
sole stockholder of the Company, together with Mr. Foley, the Chief Financial
Officer of the Company, established levels of compensation for the Company's
executive officers. The Company intends to establish a Compensation Committee
after completion of this offering consisting of Messrs. O'Brien and Badavas,
neither of whom is or has ever been an officer, employee or consultant of the
Company.
CERTAIN TRANSACTIONS
On September 19, 1995, the Company entered into four lease agreements, each
with a term ending on September 30, 2010, with the Realty Trust for a total of
approximately 18,800 square feet of office space located at 189 Wells Avenue,
Newton, Massachusetts. The Company's executive offices are located in these
spaces. Mr. Conway is the sole beneficiary of the Realty Trust and Mr. Foley
is the trustee of the Realty Trust. Management believes that the terms of each
lease agreement are no less favorable to the Company than could be obtained in
a transaction with an unrelated third party.
Beginning in May 1990, the Company has made certain loans ("Loans") to Mr.
Conway. The largest amount outstanding under all such Loans was $1,108,982 on
September 25, 1995. The proceeds of such Loans were applied as follows:
$300,000 was used for capital contributions to ARI and the balance was used
for personal purposes. Mr. Conway has repaid most of such indebtedness, in
part from distributions to him from ARI. The amount outstanding under the
Loans as of April 30, 1996 was $660,740. The outstanding balances under the
Loans accrue interest at the rate of 10% per annum.
Beginning on August 25, 1992, the Company made certain loans to the Realty
Trust, used to purchase the office building at 189 Wells Avenue, Newton,
Massachusetts, in which the Company's executive offices are located. The
largest amount outstanding under such loans was $419,333 as of April 30, 1996.
The outstanding balances under such loans accrue interest at a rate equal to
5.43% per annum, compounded semi-annually.
Mr. Conway has agreed to repay both of these loans with proceeds from the
offering.
In December 1995, ARI paid dividends to Mr. Conway totaling $861,500, of
which amount Mr. Conway used $645,000 to repay principal and accrued interest
on the Loans and $61,000 to pay estimated state tax payments in 1995. See
"Dividend Policy." In connection with the refinancing of the Realty Trust's
mortgage in September 1995, the Realty Trust distributed $649,000 to Mr.
Conway. See Note 13 to Consolidated Financial Statements.
In November 1994, the Company acquired Axiom Consulting Group, Inc.
("Axiom") (currently doing business as "Network Systems Consulting Practice")
("NSCP") pursuant to a Stock Purchase Agreement dated as of November 30, 1994
by and among the Company, Axiom and each of the stockholders of Axiom (the
"Purchase Agreement"). Mr. Jackson was President and a principal stockholder
of Axiom and, in exchange for his stock, received $97,500 at the closing of
the acquisition and a subordinated, non-negotiable promissory note in the
principal amount of $292,500, with interest at the prime rate as recalculated
on each anniversary of the note, payable in six equal semi-annual installments
commencing May 30, 1996. In addition, Mr. Jackson is eligible to receive
certain additional payments for his stock equal to 39% (representing his
equity interest in Axiom) of an amount equal to (i) 30% of the net profits, if
any, of NSCP (determined in accordance with the Purchase Agreement) for the 12
months ended November 30, 1996, plus (ii) 25% of the net profits, if any, of
NSCP for the 12 months ended November 30, 1997, plus (iii) 20% of the net
profits, if any, of NSCP for the 12 months ended November 30, 1998, provided
that if the actual total revenue for NSCP (determined in accordance with the
Purchase Agreement) for the 12 months ended November 30, 1998 exceeds the
revenue targeted for such period in NSCP's strategic plan, then the payment
shall equal the greater of 20% of the net profit, if any, of NSCP for the 12
months ended November 30, 1998 or $3 million less the aggregate amount of
contingent payments previously paid under clauses (i) and (ii) above.
34
<PAGE>
Mr. O'Brien, a director of the Company, is a director of Bank of Boston
Corporation. The First National Bank of Boston, a subsidiary of Bank of Boston
Corporation, will serve as the Company's Transfer Agent and Registrar.
The Company has adopted a policy, effective following the consummation of
this offering, that all material transactions between the Company and its
officers, directors and other affiliates must (i) be approved by a majority of
the members of the Company's Board of Directors and by a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
no less favorable to the Company than could be obtained from unaffiliated
third parties.
PRINCIPAL AND SELLING STOCKHOLDER
The following table sets forth as of March 30, 1996, and as adjusted to
reflect the sale by the Company of 1,900,000 shares of Common Stock in this
offering, certain information with respect to the beneficial ownership of the
Common Stock by: (i) each person known by the Company to beneficially own more
than 5% of the Common Stock; (ii) each director of the Company; (iii) each of
the Named Executive Officers; and (iv) all directors and executive officers of
the Company as a group. Other than Mr. Conway, none of the Company's directors
or Named Executive Officers beneficially owned any shares of Common Stock as
of March 30, 1996, although each of the Company's outside directors and the
Named Executive Officers own options to purchase shares of Common Stock that
are not exercisable within six months following the date of this offering. The
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING (1) NUMBER OFFERING (1)(2)
NAME OF DIRECTORS, NAMED EXECUTIVE ----------------------OF SHARES -----------------------
OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------- ----------- ------------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
G. Drew Conway.......... 8,000,000 100.0% 300,000 7,700,000 77.8%
c/o The Registry, Inc.
189 Wells Avenue
Newton, MA 02159
All directors and execu-
tive officers as a
group
(13 persons)........... 8,000,000 100.0 300,000 7,700,000 77.8
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to the shares. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days following March 30,
1996, are deemed outstanding for computing the share ownership and
percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 330,000 shares of Common Stock. If the over-
allotment option is exercised in full, Mr. Conway will own 75.3% of the
total Common Stock issued and outstanding.
35
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Before the effectiveness of the Registration Statement of which this
Prospectus is a part, the authorized capital stock of the Company will consist
of 30,000,000 shares, of which 29,000,000 shares will be designated Common
Stock, no par value per share, and 1,000,000 shares will be designated
Preferred Stock, par value $0.10 per share. The following summary description
of the capital stock of the Company is qualified in its entirety by reference
to the Company's restated articles of organization ("Articles of
Organization") and amended and restated by-laws ("By-laws"), copies of which
are filed as exhibits to the Registration Statement of which this Prospectus
is a part.
COMMON STOCK
As of March 30, 1996, there were 8,000,000 shares of Common Stock
outstanding, held of record by one stockholder. Holders of Common Stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders and to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor, subject to
preferences that may be applicable to any outstanding Preferred Stock. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference of any outstanding
shares of Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. All of the outstanding shares
of Common Stock are, and all shares of Common Stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable. The rights,
privileges and preferences of Common Stock are subject to, and could be
adversely affected by, the issuance of Preferred Stock.
PREFERRED STOCK
Pursuant to the Company's Articles of Organization, upon the closing of this
offering, the Board of Directors will have the authority to issue 1,000,000
shares of Preferred Stock. Within the limitations established by law, the
Board of Directors is authorized to fix or alter the dividend rights, dividend
rates, rights and terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preference, conversion rights, voting
rights and other rights of any unissued shares of Preferred Stock, and to fix
and amend the number of shares constituting any issued or unissued series and
the designation thereof, or any of the foregoing. The issuance of Preferred
Stock in certain circumstances may have the effect of delaying, deterring or
preventing a change in control of the Company, may discourage bids for the
Company's Common Stock at a premium over the market price of the Common Stock
and may adversely affect the market price of, and the voting and other rights
of the holders of, the Common Stock. Upon the completion of this offering, the
Company will have no shares of Preferred Stock outstanding. At present the
Company has no plans to issue any shares of Preferred Stock.
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
ORGANIZATION AND BY-LAWS
The Company has elected to be governed by Chapter 110F of the Massachusetts
General Laws, an anti-takeover law. In general, this statute prohibits a
publicly-held Massachusetts corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
board of directors before becoming an interested stockholder, (ii) the
interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation)
at the time it becomes an interested stockholder, or (iii) the business
combination is approved by both the board of directors and the holders of two-
thirds of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder). An "interested stockholder" is a person
who, together with affiliates and associates, owns (or at any time within the
prior three years did own) 5% or more of the outstanding voting stock of the
corporation. A "business combination" includes a merger, a stock or asset
sale, and
36
<PAGE>
certain other transactions resulting in a financial benefit to the interested
stockholder. The Company may at any time elect not to be governed by Chapter
110F by vote of a majority of its stockholders, but such an election would not
be effective for 12 months and would not apply to a business combination with
any person who became an interested stockholder before such election.
Massachusetts General Laws Chapter 156B, Section 50A, generally requires
that publicly-held Massachusetts corporations have a classified board of
directors consisting of three classes as nearly equal in size as possible,
with one class to be elected each year to a three-year term. This statute also
provides that directors of publicly-held Massachusetts corporations may only
be removed for "cause." "Cause" includes (i) a felony conviction, (ii)
declaration of an unsound mind, or (iii) intentional misconduct or a knowing
violation of law, if the director derives an improper and substantial personal
benefit from his actions and his actions materially injure the Company. This
statute further provides that (a) vacancies and newly-created directorships
may be filled solely by a majority of directors remaining in office, (b)
directors elected to fill any vacancy hold office for the remainder of the
full term of the class to which they are elected, (c) no decrease in the
number of directors shortens the term of any incumbent director, and (d) the
number of directors is to be fixed only by vote of the board. The Company has
elected not to be governed by Chapter 156B, Section 50A, but has included
provisions substantially similar to those of Section 50A in its Articles of
Organization and By-laws. The classification of Directors may have the effect
of making it more difficult for stockholders to change the composition of the
Board of Directors in a relatively short period of time. At least two annual
meetings of stockholders, instead of one, will generally be required to effect
a change in a majority of the Board of Directors. This delay will provide the
Board of Directors with additional time to evaluate proposed takeover efforts
and other extraordinary corporate transactions, to consider appropriate
alternatives to such proposals and to act in what it believes to be the best
interest of the stockholders. The classified Board of Directors provision may
only be amended, altered, changed or repealed, and any inconsistent provision
may only be adopted, by a vote of holders of 75% of the shares entitled to
vote at an election of directors.
The Company's Articles of Organization include a provision that excludes the
Company from the applicability of Massachusetts General Laws Chapter 110D,
entitled "Regulation of Control Share Acquisitions." In general, this statute
provides that any stockholder of a corporation subject to this statute who
acquires beneficial ownership of 20% or more or the outstanding voting stock
of a corporation may not vote such stock unless the stockholders of the
corporation so authorize. (For purposes of the statute, a person is not deemed
to be a beneficial owner of shares as to which such person may exercise voting
power solely by virtue of a revocable proxy conferring the right to vote.) The
Board of Directors may amend the Company's By-laws at any time to subject the
Company to this statute prospectively.
The Company's By-laws require that nominations for the Board of Directors
made by a stockholder comply with certain notice procedures. In the case of an
annual meeting or a special meeting in lieu of an annual meeting, a notice by
a stockholder of a planned nomination must be given not more than 90 days and
not less than 60 days before the first anniversary of the preceding year's
annual meeting, provided that if the date of the annual meeting or special
meeting in lieu of an annual meeting is more than 30 days before or more than
60 days after such anniversary date, notice by a stockholder must be given not
more than 90 days before the meeting and not less than the later of 60 days
before the meeting or 10 days after the date on which public announcement of
the date of the meeting is first made by the Company. In the case of a special
meeting (other than a special meeting in lieu of an annual meeting), notice by
a stockholder must be given not more than 90 days before such meeting and not
less than the later of 60 days before such meeting or 10 days after the date
on which public announcement of the date of the meeting is first made by the
Company. The stockholder's notice of nomination must include particular
information about the stockholder, the nominee and any beneficial owner on
whose behalf the nomination is made. The Company may require any proposed
nominee to provide such additional information as is reasonably required to
determine the eligibility of the proposed nominee.
37
<PAGE>
The By-laws require that a stockholder seeking to have any business
conducted at a meeting of stockholders give notice to the Company in
accordance with certain procedures specified in the By-Laws, including a
timetable for notification identical to the timetable for nominating members
of the Board of Directors described in the preceding paragraph. The notice
from the stockholder must describe the proposed business to be brought before
the meeting and include information about the stockholder making the proposal,
any beneficial owner on whose behalf the proposal is made, and any other
stockholder known to be supporting the proposal.
The By-laws require the Company to call a special meeting of stockholders at
the request of stockholders holding at least 40% of the voting power of the
Company, the minimum threshold for publicly-held Massachusetts corporations
required by Massachusetts General Laws, Chapter 156B, Section 34. Upon
adoption, certain provisions in the Company's By-laws pertaining to
stockholders and directors (including the provisions described above
pertaining to nominations and the presentation of business before a meeting of
the stockholders) may not be amended and no provision inconsistent therewith
may be adopted without the approval of either the Board of Directors or the
holders of at least 75% of the voting power of the Company.
The Company's Articles of Organization include provisions eliminating the
personal liability of the Company's directors for monetary damages resulting
from breaches in their fiduciary duty to the extent permitted by the
Massachusetts Business Corporation Law. Additionally, the Company's Articles
of Organization provide that the Company shall indemnify each person who is or
was a director, officer, employee or other agent of the Company, and each
person who is or was serving at the request of the Company as a director,
trustee, officer, employee or other agent of another organization in which it
directly or indirectly owns shares or of which it is directly or indirectly a
creditor, against all liabilities, costs and expenses reasonably incurred by
any such person in connection with the defense or disposition of or otherwise
in connection with or resulting from any action, suit or other proceeding in
which they may be involved by reason of being or having been such a director,
officer, employee, agent or trustee, or by reason of any action taken or not
taken in such capacity, except with respect to any matter as to which such
person shall have been finally adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that his
or her action was in the best interest of the Company and provided that
indemnification for matters that are settled requires approval by (i) a
majority of disinterested directors, or if there are not at least two such
directors, a majority of the directors based upon a finding by independent
legal counsel that the statutory standard appears to have been met; (ii) the
holders of a majority of the shares of stock entitled to vote for directors of
the Company, exclusive of shares held by interested directors and officers; or
(iii) a court of competent jurisdiction.
The Articles of Organization provide that certain transactions, such as the
sale, lease or exchange of all or substantially all of the Company's property
and assets and the merger or consolidation of the Company into or with a 10%
or greater stockholder or its affiliates must be authorized by the approval of
the holders of 75% of the shares of each class of stock entitled to vote
thereon, rather than by two-thirds as otherwise provided by statute, provided
that such transactions may be approved by the holders of a majority of the
shares of each class of stock entitled to vote thereon if (i) they have been
authorized by a majority of the members of the Board of Directors who are not
affiliates of the 10% stockholder and were directors before the 10%
stockholder acquired his interest or who are successors to such directors,
having been recommended to succeed such directors by a majority of the
continuing directors; and (ii) the requirements of any other applicable
provision of the Articles of Organization have been met.
Subject to the above limitations, the Articles of Organization provide that
certain transactions, including the sale, lease or exchange of all or
substantially all of the property or assets of the Company, or the merger or
consolidation of the Company, which would otherwise require approval by the
affirmative vote of two-thirds of the shares of each class of stock entitled
to vote thereon, may be approved by the vote of a majority of such
stockholders, provided that a majority of the Board of Directors has
recommended approval of the transaction to the stockholders.
38
<PAGE>
Certain of the provisions of the Articles of Organization and By-Laws
discussed above would make more difficult or discourage a proxy contest or the
assumption of control by a holder of a substantial block of the Company's
stock. Such provisions could also have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
the Company, even though such an attempt might be beneficial to the Company
and its stockholders. In addition, since the Articles of Organization and By-
Laws are designed to discourage accumulations of large blocks of the Company's
stock by purchasers whose objective is to have such stock repurchased by the
Company at a premium, such provisions could tend to reduce the temporary
fluctuations in the market price of the Company's stock which are caused by
such accumulations. Accordingly, stockholders could be deprived of certain
opportunities to sell their stock at a potentially higher market price.
REGISTRATION RIGHTS
In connection with his Employment Agreement with the Company, Mr. Conway has
been provided with registration rights that entitle him to notice of, and
inclusion of shares of Common Stock in, any registration of shares of Common
Stock by the Company for its account or otherwise (other than certain
registrations relating solely to employee benefit plans or certain business
combinations), provided that in any underwritten offering, the number of
shares of Common Stock that Mr. Conway may include in such offering will be
subject to reduction before any reduction of shares of Common Stock by the
Company if the underwriters determine that marketing factors require a
limitation on the number of shares to be included in the offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is The First
National Bank of Boston.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for the Common Stock.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.
Upon completion of this offering, the Company will have 9,900,000 shares of
Common Stock outstanding (assuming no exercise of the Underwriters' over-
allotment option or exercise of outstanding stock options). Of these shares,
the 2,200,000 shares sold in this offering will be freely transferable without
restriction, except for any shares purchased by an "affiliate" of the Company,
as that term is defined in Rule 144 promulgated under the Securities Act, or
by an individual or entity subject to a contractual restriction on resale. The
remaining 7,700,000 shares (the "Restricted Shares") were issued and sold by
the Company in private placement transactions.
The Selling Stockholder, who holds all of the Restricted Shares, has agreed
(the "Lock-Up Agreement") not to offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of Common Stock during the 180-day
period following the date of this Prospectus, without the prior written
consent of the Representatives of the Underwriters. The Company has also
agreed not to offer, sell, contract to sell or otherwise dispose of any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any rights to acquire Common Stock, except
issuances under the Company's outstanding stock option and benefit plans and
in connection with certain possible acquisitions of products, technologies and
businesses (provided that the terms of such issuances in connection with any
such possible acquisitions provide that such shares of Common Stock shall not
be resold for a period of 180 days after the date of this Prospectus), or to
accelerate the vesting schedule of any outstanding stock options, for a period
of 180 days after the date of this Prospectus, without the prior written
consent of the Representatives of the Underwriters.
39
<PAGE>
All of the Restricted Shares will become eligible for sale under Rule 144
upon the expiration of the Lock-Up Agreement beginning 180 days after the
effective date of this offering.
In general, under Rule 144 as currently in effect, beginning 90 days after
the offering a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities within the meaning of Rule 144 for at
least two years is permitted to sell within any three-month period a number of
shares that does not exceed the greater of: (i) 1% of the then outstanding
shares of the Company's Common Stock (99,000 shares immediately after the
offering); or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks preceding
the date on which notice of the sale is filed with the Commission, or if no
notice is required, the date of receipt of the order to execute the
transaction. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who owns Restricted Shares that
were purchased from the Company (or any affiliate) at least three years
previously, will be entitled to sell such shares under Rule 144(k) immediately
after the offering (subject to the foregoing Lock-Up Agreement, if applicable)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.
Securities issued in reliance on Rule 701 are also restricted securities
and, beginning 90 days after the effective date of the Registration Statement
of which this Prospectus is a part, may be sold by stockholders other than
affiliates of the Company subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its two-year
holding period requirement.
The Company intends to file registration statements on Form S-8 under the
Securities Act covering approximately 2,000,000 shares of Common Stock
reserved for issuance under the 1996 Stock Plan, the 1996 Purchase Plan and
the Directors Stock Plan. See "Management -- Stock Awards." Such registration
statements are expected to be filed 180 days after the date of this Prospectus
and will automatically become effective upon filing. Accordingly, shares
registered under such registration statements will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions or the contractual restrictions described above. As of March 30,
1996, options to purchase 1,106,500 shares were granted and outstanding.
There has been no public market for the Common Stock and no prediction can
be made as to the effect, if any, that market sales of Common Stock or the
availability of such shares for sale will have on the market price of the
Common Stock.
40
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholder have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Adams,
Harkness & Hill, Inc. and A.G. Edwards & Sons, Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Stockholder, the respective numbers of shares of
Common Stock set forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ----------- ------------
<S> <C>
Adams, Harkness & Hill, Inc........................................
A.G. Edwards & Sons, Inc...........................................
---------
Total............................................................ 2,200,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all shares offered hereby, if
any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession not in excess of $ per share. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 330,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 2,200,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 2,200,000 shares of Common
Stock offered hereby.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of the Representatives,
except for the shares of Common Stock offered hereby and except that the
Company may issue securities pursuant to the Company's stock plans and in
connection with certain acquisitions, subject to certain restrictions. The
Selling Stockholder, who will hold in aggregate 7,700,000 shares of Common
Stock following the offering, has agreed with the Underwriters not to offer to
sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of Common Stock owned beneficially by
him, other than as a bona fide gift or gifts to or in trust for a person or
entity who or which agrees in writing to be bound by the foregoing
restrictions for a period of 180 days after the date of this Prospectus,
without the prior written consent of the Representatives.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
41
<PAGE>
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company
and the Representatives. Among the factors to be considered in determining the
initial public offering price of the Common Stock, in addition to prevailing
market conditions, are the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
The Common Stock has been approved for listing, subject to official notice
of issuance, on the Nasdaq National Market under the symbol "REGI."
The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon
for the Company and the Selling Stockholder by Hill & Barlow, a Professional
Corporation, Boston, Massachusetts. Certain legal matters in connection with
this offering will be passed upon for the Underwriters by Ropes & Gray,
Boston, Massachusetts.
EXPERTS
The financial statements as of March 30, 1996, June 24, 1995 and May 31,
1994 and for the nine months ended March 30, 1996, for the year ended June 24,
1995 and for each of the two years in the period ended May 31, 1994 included
in this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
REPORTS TO STOCKHOLDERS
The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by an independent accounting firm.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Common Stock offered hereby. This Prospectus, which
constitutes part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission pursuant to the Securities Act
and the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits and schedules thereto, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, DC 20549, and at the Commission's
regional offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
copies may be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office in Washington, D.C. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
42
<PAGE>
THE REGISTRY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Price Waterhouse LLP............................................ F-2
Consolidated Balance Sheet as of May 31, 1994, June 24, 1995 and March 30,
1996..................................................................... F-3
Consolidated Statement of Income for the Years Ended May 31, 1993, May 31,
1994 and June 24, 1995, and for the Nine Months Ended March 25, 1995 (un-
audited) and March 30, 1996.............................................. F-4
Consolidated Statement of Changes in Stockholder's Equity for the Years
Ended May 31, 1993, May 31, 1994 and June 24, 1995, and for the Nine
Months Ended March 25, 1995 (unaudited) and March 30, 1996............... F-5
Consolidated Statement of Cash Flows for the Years Ended May 31, 1993, May
31, 1994 and June 24, 1995, and for the Nine Months Ended March 25, 1995
(unaudited) and March 30, 1996........................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of The Registry, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
The Registry, Inc. and its subsidiaries (the "Company") at March 30, 1996,
June 24, 1995 and May 31, 1994, and the results of their operations and their
cash flows for the nine months ended March 30, 1996, for the year ended June
24, 1995, for the one month ended June 25, 1994 (not presented separately
herein) and for each of the two years in the period ended May 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
May 8, 1996
F-2
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
------- -------- ---------
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable, net of allowance for doubtful
accounts of $192, $317 and $351 at May 31, 1994,
June 24, 1995 and
March 30, 1996, respectively..................... $12,356 $ 22,448 $ 27,115
Notes receivable from related parties............. 365 422 57
Deferred income taxes............................. -- -- 174
Other current assets.............................. 259 420 509
------- -------- --------
Total current assets.......................... 12,980 23,290 27,855
Fixed assets, net................................... 1,262 2,758 5,111
Notes receivable from officers...................... 670 1,121 426
Other assets........................................ 225 1,294 1,332
Deferred income taxes............................... 393 180 160
------- -------- --------
$15,530 $ 28,643 $ 34,884
======= ======== ========
Liabilities and Stockholder's Equity
Current liabilities:
Line of credit.................................... $ 9,234 $ 17,938 $ 20,613
Current portion of capital lease obligations...... -- -- 81
Current portion of long-term debt................. 77 946 1,173
Accounts payable.................................. 274 1,252 553
Accrued salaries and wages........................ 897 1,359 1,807
Other accrued expenses............................ 1,208 1,903 2,964
Income taxes payable.............................. -- 99 1,185
Deferred income taxes............................. 1,654 369 227
------- -------- --------
Total current liabilities..................... 13,344 23,866 28,603
------- -------- --------
Deferred income taxes............................... -- 939 1,050
------- -------- --------
Capital lease obligations........................... -- -- 76
------- -------- --------
Long-term debt...................................... 50 1,554 3,110
------- -------- --------
Commitments and contingencies (Notes 3 and 11)
Stockholder's equity:
Preferred stock, $.10 par value (Note 15)
Common stock, no par value:
Authorized--12,000,000 shares; issued and out-
standing--2,666,667 shares at May 31, 1994 and
June 24, 1995, and 8,000,000 shares at March
30, 1996....................................... 10 10 10
Common stock, $.01 par value:
Authorized, issued and outstanding--200,000
shares at May 31, 1995 and June 24, 1995, and
no shares at March 30, 1996.................... 2 2 --
Additional paid-in capital........................ 453 453 344
Retained earnings................................. 1,671 1,819 1,691
------- -------- --------
Total stockholder's equity...................... 2,136 2,284 2,045
------- -------- --------
$15,530 $ 28,643 $ 34,884
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
---------------- YEAR ENDED ---------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
------- ------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................... $39,845 $60,367 $98,687 $70,258 $102,094
Cost of revenue............. 30,630 46,262 74,288 53,033 75,210
------- ------- ------- ------- --------
9,215 14,105 24,399 17,225 26,884
Selling, general and
administrative expenses.... 8,319 12,831 22,925 16,091 22,768
------- ------- ------- ------- --------
Income from operations...... 896 1,274 1,474 1,134 4,116
Interest expense............ (340) (512) (1,201) (783) (1,669)
Interest and other income... 48 53 56 42 144
------- ------- ------- ------- --------
Income before taxes......... 604 815 329 393 2,591
Income tax provision........ 281 430 4 113 1,208
------- ------- ------- ------- --------
Net income.................. $ 323 $ 385 $ 325 $ 280 $ 1,383
======= ======= ======= ======= ========
Unaudited pro forma
information
(Note 14):
Pro forma income before
taxes.................... $ 329 $ 393 $ 2,591
Pro forma income tax
provision................ 243 221 1,130
------- ------- --------
Pro forma net income...... $ 86 $ 172 $ 1,461
======= ======= ========
Pro forma net income per
share.................... $ .01 $ .02 $ .18
======= ======= ========
Weighted average common
and common equivalent
shares................... 8,173 8,173 8,173
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK ADDI- TOTAL
NO PAR $.01 PAR TIONAL STOCK-
--------------- --------------- PAID-IN RETAINED HOLDER'S
SHARES VALUE SHARES VALUE CAPITAL EARNINGS EQUITY
--------- ----- -------- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31,
1992................... 2,666,667 $ 10 100,000 $ 1 $ 99 $1,013 $ 1,123
Distribution............ -- -- -- -- -- (50) (50)
Proceeds from issuance
of common stock........ -- -- 100,000 1 199 -- 200
Net income for the
year................... -- -- -- -- -- 323 323
--------- ---- -------- ----- ---- ------ -------
Balance at May 31,
1993................... 2,666,667 10 200,000 2 298 1,286 1,596
Capital contribution.... -- -- -- -- 155 -- 155
Net income for the
year................... -- -- -- -- -- 385 385
--------- ---- -------- ----- ---- ------ -------
Balance at May 31,
1994................... 2,666,667 10 200,000 2 453 1,671 2,136
Net loss for the month.. -- -- -- -- -- (177) (177)
--------- ---- -------- ----- ---- ------ -------
Balance at June 25,
1994................... 2,666,667 10 200,000 2 453 1,494 1,959
Net income for the
year................... -- -- -- -- -- 325 325
--------- ---- -------- ----- ---- ------ -------
Balance at June 24,
1995................... 2,666,667 10 200,000 2 453 1,819 2,284
Consolidation of real
estate trust
(Note 13).............. -- -- -- -- (111) -- (111)
Distributions........... -- -- -- -- -- (1,511) (1,511)
Acquisition of ARI by
TRI (Note 2)........... 5,333,333 -- (200,000) (2) 2 -- --
Net income for the nine
months................. -- -- -- -- -- 1,383 1,383
--------- ---- -------- ----- ---- ------ -------
Balance at March 30,
1996................... 8,000,000 $ 10 -- $ -- $344 $1,691 $ 2,045
========= ==== ======== ===== ==== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
THE REGISTRY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
---------------- YEAR ENDED ---------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
------- ------- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................. $ 323 $ 385 $ 325 $ 280 $ 1,383
Adjustments to reconcile
net income to net cash
used for operating
activities:
Depreciation and
amortization............. 96 196 517 396 633
Provision for losses on
accounts receivable...... (38) 147 125 138 34
Deferred income taxes..... 266 430 (88) (66) (185)
Increase in accounts
receivable............... (2,156) (5,660) (9,688) (6,250) (4,701)
(Increase) decrease in
other current assets..... 12 (102) (143) (139) (40)
Increase in other assets.. (32) (174) (190) (134) (107)
Increase (decrease) in
accounts payable......... 71 159 910 507 (699)
Increase in accrued
expenses................. 322 818 690 598 977
Increase in accrued
salaries and wages....... -- 897 396 289 448
Increase in income taxes
payable.................. -- -- 92 179 1,086
------- ------- ------- ------- -------
Net cash used for
operating activities..... (1,136) (2,904) (7,054) (4,202) (1,171)
------- ------- ------- ------- -------
Cash flows from investing
activities:
Cash disbursed for
acquisition............... -- -- (250) (250) --
Increase in notes
receivable from officers.. (152) (82) (406) (284) (365)
Repayment of notes
receivable from officers.. -- -- -- -- 1,060
Decrease (increase) in
notes receivable from
related parties........... (560) 195 (57) (57) --
Purchases of fixed assets.. (693) (578) (1,885) (1,545) (973)
------- ------- ------- ------- -------
Net cash used for
investing activities..... (1,405) (465) (2,598) (2,136) (278)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Net borrowings on line of
credit.................... 2,229 3,294 8,023 5,160 2,675
Principal payments on long-
term debt and capital
lease obligations......... (38) (80) (451) (902) (1,875)
Proceeds from issuance of
long-term debt............ 200 -- 2,080 2,080 2,160
Capital contribution....... -- 155 -- -- --
Proceeds from issuance of
common stock.............. 200 -- -- -- --
Distributions.............. (50) -- -- -- (1,511)
------- ------- ------- ------- -------
Net cash provided by
financing activities..... 2,541 3,369 9,652 6,338 1,449
------- ------- ------- ------- -------
Net change in cash.......... 0 0 0 0 0
Cash, beginning of period... 0 0 0 0 0
------- ------- ------- ------- -------
Cash, end of period......... $ 0 $ 0 $ 0 $ 0 $ 0
======= ======= ======= ======= =======
Supplemental disclosure of
cash flow information:
Cash paid for interest..... $ 340 $ 512 $ 1,201 $ 783 $ 1,669
Cash paid for income
taxes..................... $ -- $ 15 $ -- $ -- $ 307
</TABLE>
See additional disclosure of non-cash investing and financing activity in Notes
3, 4 and 13.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
The Registry, Inc. ("TRI" or "the Company") is an information technology
("IT") professional services firm providing IT consultants on a contract basis
to organizations nationwide with complex IT operations. Offices are maintained
in 13 states.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying financial statements include the accounts of TRI and
America's Registry, Inc. ("ARI") which, prior to January 1, 1996, were owned
and controlled by a common sole stockholder who serves as an officer of the
Company. Effective January 1, 1996, TRI, through a wholly-owned subsidiary,
acquired all of the outstanding shares of common stock of ARI and the
stockholder of ARI received an additional 5,333,333 shares of the common stock
of TRI. The accompanying financial statements also include the accounts of
TRI's wholly-owned subsidiary, The Registry, Inc. Network Consulting Practice
(formerly Axiom Consulting Group, Inc.), subsequent to its acquisition on
November 30, 1994 (see Note 3), as well as the accounts of a real estate trust
which is substantially controlled by the Company, subsequent to the
renegotiation of certain lease terms on September 19, 1995 (see Note 13). All
intercompany balances and transactions have been eliminated.
Stock Split
On March 22, 1996, the Company's sole stockholder approved a 177.77778-for-1
stock split on the common stock of TRI. At that time, the Company's
stockholder also approved an increase to 12,000,000 in the number of
authorized shares of the common stock of TRI, no par value. On April 10, 1996,
the Company's stockholder approved an additional increase to 29,000,000 in the
number of authorized shares of the common stock of TRI. All shares and per
share amounts included in the consolidated financial statements have been
adjusted to give retroactive effect to the stock split for all periods
presented.
Fiscal Year
The Company changed its fiscal year end from May 31 to the last Saturday in
June effective with the fiscal year ended June 24, 1995. The consolidated
statements of income, of changes in stockholder's equity and of cash flows are
presented for each of the two years in the period ended May 31, 1994, the year
ended June 24, 1995 and for the nine months ended March 30, 1996.
The Company's results of operations for the month ended June 25, 1994
reflected revenue of $5,812,000, cost of revenue of $4,468,000, expenses of
$1,588,000, an income tax benefit of $67,000 and net loss of $177,000. During
the month ended June 25, 1994, net cash of $585,000 and $90,000 was used for
operating and investing activities, respectively, and net cash of $675,000 was
provided by financing activities.
Revenue Recognition, Accounts Receivable and Concentration of Credit Risk
Revenue is recognized as services are performed. Ongoing credit evaluations
of customers' financial condition are performed and collateral is not
required. Concentration of credit risk with respect to accounts receivable is
limited due to the number and diversity of customers comprising the Company's
customer base. At March 30, 1996, one customer comprised approximately 13% of
the Company's accounts receivable. No single customer accounted for more than
10% of accounts receivable at May 31, 1994 or June 24, 1995. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
F-7
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Additions, renewals and betterments of
fixed assets are capitalized. Repair and maintenance expenditures for minor
items are generally expensed as incurred. Depreciation of fixed assets is
provided using the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Building and improve-
ments.................. 31 1/2 years
Computer equipment...... 5 years
Furniture and equip-
ment................... 5 to 7 years
Motor vehicles.......... 5 years
Leasehold improvements.. lesser of estimated useful life or remaining lease term
</TABLE>
Advertising Costs
Advertising costs are recorded as expense when incurred. There were no
advertising costs recorded as assets at May 31, 1994, June 24, 1995 or March
30, 1996. Total advertising expenses for the years ended May 31, 1993, May 31,
1994 and June 24, 1995 and the nine months ended March 25, 1995 and March 30,
1996 were $158,000, $446,000, $627,000, $461,000 (unaudited) and $231,000,
respectively.
Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial statement and tax
bases of assets and liabilities, utilizing currently enacted tax rates. The
effect of any future change in tax rates is recognized in the period in which
the change occurs. Through May 31, 1994, TRI had used the cash method of
accounting for income tax reporting purposes. Effective June 1, 1994, TRI
converted to the accrual method of accounting for income tax reporting
purposes.
As described in Note 8, ARI had previously elected to be treated as a small
business corporation for income tax purposes with income or loss and credits
passed through to the stockholder. Concurrent with the acquisition of ARI by
TRI described above, ARI's election to be treated as an S corporation
terminated (see Note 8). The companies will continue to file separate tax
returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at May 31, 1994, June 24, 1995 and March 30, 1996,
and the reported amounts of revenues and expenses during the periods then
ended. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to the current period presentation.
Recently Enacted Accounting Standards
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for
F-8
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Lived Assets to be Disposed Of." In October 1995, the FASB issued SFAS
No. 123, "Accounting for Stock-Based Compensation." Both SFAS No. 121 and No.
123 are effective for fiscal years beginning after December 15, 1995. The
Company will adopt these standards as required and their future adoption is
not expected to have a material effect on the Company's financial position or
results of operations or cash flows.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation of the results of operations and cash flows of the Company for
the nine months ended March 25, 1995, as presented in the accompanying
consolidated financial statements. Results of operations for the interim
period are not necessarily indicative of the results of operations for the
full fiscal year.
3. ACQUISITION OF SUBSIDIARY
On November 30, 1994, TRI acquired all of the common stock of Axiom
Consulting Group, Inc., an information technology consulting firm providing
services similar to those of the Company. The acquired entity retained its
separate corporate form and was subsequently renamed The Registry, Inc.
Network Consulting Practice ("NCP"). The purchase price was $1,000,000, of
which $250,000 was paid in cash at the closing and $750,000 is in the form of
promissory notes which will be paid in installments through November 1998 (see
Note 7).
The acquisition has been accounted for as a purchase and, accordingly, the
purchase price, including an additional $12,000 of related costs which were
incurred by TRI, has been allocated to the assets acquired and the liabilities
assumed based on their estimated fair values at the date of acquisition, as
follows:
<TABLE>
<S> <C>
Accounts receivable............................................... $64,000
Fixed assets...................................................... 81,000
Other assets...................................................... 9,000
Accounts payable.................................................. 3,000
Other liabilities................................................. 57,000
</TABLE>
Goodwill of $918,000, representing the excess of the purchase price over the
fair value of the assets acquired and liabilities assumed, is included in
other assets in the accompanying balance sheet and is being amortized on a
straight-line basis over 10 years. Accumulated amortization at June 24, 1995
and March 30, 1996 was $53,000 and $122,000, respectively.
The pro forma results of operations, assuming that the acquisition of NCP
occurred at the beginning of the years ended May 31, 1994 and June 24, 1995,
would not materially differ from TRI's reported results of operations.
TRI is required to make additional payments up to $3,000,000 to the selling
stockholders of the former Axiom Consulting Group, Inc., contingent upon the
revenue and profits of the subsidiary for the four years subsequent to the
acquisition. Such payments are determined as a stated percentage of net income
of the subsidiary, as defined in the purchase agreement, with a provision that
all $3,000,000 would be payable to the selling stockholders in the event that
the subsidiary's revenue exceeds a stated amount in the 12 month period ending
November 30, 1998. Such amounts, if paid, will be recorded as additional
purchase price. No amounts have been accrued for these contingent payments at
June 24, 1995 or March 30, 1996. In the opinion of management, based upon
NCP's results of operations to date and future projections, the probability of
payment of contingent consideration in excess of $2 million is considered to
be remote as of March 30, 1996.
F-9
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. CONSOLIDATED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Other Current Assets:
Prepaid expenses............................ $ 135,000 $ 263,000 $ 388,000
Advances to officer......................... 74,000 74,000 --
Advances to employees....................... 50,000 83,000 121,000
---------- ---------- ----------
$ 259,000 $ 420,000 $ 509,000
========== ========== ==========
Fixed Assets:
Land........................................ $ -- $ -- $ 360,000
Building.................................... -- -- 1,439,000
Computer equipment.......................... 688,000 2,066,000 2,892,000
Furniture and equipment..................... 593,000 1,263,000 1,451,000
Motor vehicles.............................. 19,000 19,000 19,000
Leasehold and building improvements......... 376,000 395,000 642,000
---------- ---------- ----------
Total fixed assets........................ 1,676,000 3,743,000 6,803,000
Less: accumulated depreciation and amortiza-
tion....................................... 414,000 985,000 1,692,000
---------- ---------- ----------
$1,262,000 $2,758,000 $5,111,000
========== ========== ==========
</TABLE>
Computer equipment recorded under capital leases amounted to approximately
$194,000 at March 30, 1996 ($0 at May 31, 1994 and June 24, 1995). Total
accumulated amortization related to these leases is approximately $30,000 at
March 30, 1996. Amortization expense for the period is included in
depreciation and amortization in the accompanying consolidated statement of
cash flows.
5. RELATED PARTY TRANSACTIONS
Notes receivable from officers in the accompanying consolidated balance
sheet primarily represent promissory notes from the Company's sole
stockholder. The promissory notes bear interest at an annual interest rate of
10%. Related interest income for the years ended May 31, 1993, May 31, 1994
and June 24, 1995 and the nine months ended March 25, 1995 and March 30, 1996
was $48,000, $53,000, $56,000, $42,000 (unaudited) and $50,000, respectively.
On April 15, 1996, the stockholder borrowed an additional $275,000 from the
Company.
Notes receivable from related parties at May 31, 1994 and June 24, 1995
include promissory notes totalling $365,000 from a real estate trust, of which
the sole stockholder of the Company is the sole beneficiary (the "Trust").
These notes are payable on demand and bear interest at a variable rate (5.7%
and 5.6% at May 31, 1994 and June 24, 1995, respectively). Commencing on
September 19, 1995, the accounts of the Trust have been consolidated with
those of the Company (see Note 13), and these promissory notes have been
eliminated in consolidation. At June 24, 1995 and March 30, 1996, notes
receivable from related parties also include promissory notes totaling $57,000
from certain of the former stockholders of NCP. These notes bear interest at
the prime rate published in The Wall Street Journal (9% at June 24, 1995 and
8.25% at March 30, 1996) and are payable in installments at various dates
through November 30, 1996.
F-10
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LINE OF CREDIT
On March 31, 1993, TRI and ARI combined their separate lines of credit into
a single line of credit with the bank; this agreement was amended on June 7,
1995 to allow a maximum borrowing of $17,000,000 and again on October 4, 1995
to allow a maximum borrowing of $18,000,000, payable on demand. The agreement
provided a borrowing base of 80% of eligible accounts receivable, as defined,
less the aggregate amount of issued and undrawn letters of credit. The line of
credit was collateralized by all the assets of the Company and the personal
guarantee of the Company's stockholder. Interest was paid monthly in arrears
at the bank's prime rate plus 0.75% (8% and 9.75% at May 31, 1994 and June 24,
1995, respectively). There were no letters of credit outstanding at May 31,
1994 or June 24, 1995.
In March 1996, the Company terminated its existing line of credit and
replaced it with a line of credit from a different bank. The new line of
credit provides a borrowing base of 85% of eligible accounts receivable, as
defined, up to a maximum borrowing of $25,000,000, payable on demand. Interest
is payable monthly in arrears at the bank's prime rate plus .5% (8.75% at
March 30, 1996) or the LIBOR rate plus 2.5% (7.97% at March 30, 1996) at the
option of the Company. The new line of credit is collateralized by all of the
assets of the Company, contains certain restrictions, including limitations on
the amount of distributions which can be made to the stockholder, purchases of
fixed assets and loans which can be made to officers, and requires the
maintenance of certain financial covenants. The line of credit agreement
expires in February 1999.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
12.5% note payable due on demand................ $ 10,000 $ -- $ --
Note payable due January 1, 1996................ 117,000 59,000 --
Term loan due December 1, 1996.................. -- 563,000 --
10.7% term loan due September 30, 1997.......... -- 502,000 369,000
11% term loan due March 13, 1998................ -- 626,000 474,000
10% term loan due July 4, 1998.................. -- -- 592,000
Notes payable due November 30, 1998............. -- 750,000 750,000
9.375% term loan due August 27, 2010............ -- -- 1,408,000
6.75% term loan due April 1, 2013............... -- -- 690,000
-------- ---------- ----------
127,000 2,500,000 4,283,000
Less: current portion........................... 77,000 946,000 1,173,000
-------- ---------- ----------
$ 50,000 $1,554,000 $3,110,000
======== ========== ==========
</TABLE>
The note payable due January 1, 1996 was payable to a bank in monthly
installments, including interest at the bank's prime rate plus 1.5% (8.75 and
10.5% at May 31, 1994 and June 24, 1995, respectively).
The term loan due December 1, 1996, payable to a bank in monthly
installments of $31,000 plus interest at the bank's prime rate plus 1.25%
(10.25% at June 24, 1995), was repaid in March 1996.
The term loans due September 30, 1997, March 13, 1998 and July 4, 1998 are
payable in monthly installments of $21,000, $22,000 and $24,000, respectively,
including interest.
F-11
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The notes payable due November 30, 1998 resulted from TRI's acquisition of
the former Axiom Consulting Group, Inc. in November 1994 (see Note 3). The
notes are unsecured and are payable to the former stockholders of Axiom
Consulting Group, Inc. in semi-annual installments of $125,000, plus interest
at the prime rate published in The Wall Street Journal, beginning in May 1996.
The term loan due August 27, 2010 is payable to a bank in monthly
installments of $12,000, including interest.
The term loan due April 1, 2013 is payable in semi-annual installments of
$34,000, including interest.
The term loans due September 30, 1997, March 13, 1998 and July 4, 1998 are
collateralized by certain of the Company's assets.
The term loan due August 27, 2010 is collateralized by certain property of
the Trust and the personal guarantee of the Company's sole stockholder. The
term loan due April 1, 2013 is secured by a mortgage on the land and building
of the Trust and the assignment of a life insurance policy on the Company's
sole stockholder.
Aggregate maturities of long-term debt are as follows at March 30, 1996:
<TABLE>
<S> <C>
Remainder of fiscal 1996...................................... $ 323,000
1997.......................................................... 994,000
1998.......................................................... 810,000
1999.......................................................... 192,000
2000.......................................................... 47,000
Thereafter.................................................... 1,917,000
----------
$4,283,000
==========
</TABLE>
8. INCOME TAXES
Prior to January 1, 1996, ARI had elected to be an S corporation for federal
income tax purposes as provided in Section 1362(a) of the Internal Revenue
Code. As such, the corporate income or loss and credits were passed through to
the stockholder and reported on his personal tax return.
In conjunction with the acquisition of all of the common stock of ARI by TRI
(see Note 2), ARI's election to be treated as an S corporation terminated,
effective January 1, 1996. As a result, the income or loss of ARI subsequent
to January 1, 1996 will be subject to corporate income tax. The income tax
provision (benefit) described below for the nine months ended March 30, 1996
includes the income taxes related to ARI since January 1, 1996. The unaudited
pro forma provision for income taxes and pro forma net income on the
accompanying consolidated statement of income (see Note 14) reflects the
estimated results of operations if ARI had been subject to corporate income
taxes during the year ended June 24, 1995 and the nine months ended March 25,
1995 and March 30, 1996.
At the time of conversion of ARI from an S corporation to a C corporation, a
net deferred tax liability of $642,000 was recorded through the income tax
provision on January 1, 1996. This deferred tax liability was comprised
principally of the remaining effects of ARI converting from the cash basis to
the accrual basis for tax reporting purposes on January 1, 1994, offset by
deferred tax assets for certain accrued expenses which are recognized in
different periods for financial and tax reporting.
F-12
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision (benefit) for federal and state income taxes
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
----------------- YEAR ENDED ----------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
-------- -------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal................ $ 15,000 $ -- $ 54,000 $137,000 $1,049,000
State.................. -- -- 38,000 42,000 344,000
-------- -------- -------- -------- ----------
15,000 -- 92,000 179,000 1,393,000
-------- -------- -------- -------- ----------
Deferred:
Federal................ 213,000 344,000 (64,000) (50,000) (632,000)
State.................. 53,000 86,000 (24,000) (16,000) (195,000)
-------- -------- -------- -------- ----------
266,000 430,000 (88,000) (66,000) (827,000)
-------- -------- -------- -------- ----------
Change in tax status of
ARI..................... -- -- -- -- 642,000
-------- -------- -------- -------- ----------
$281,000 $430,000 $ 4,000 $113,000 $1,208,000
======== ======== ======== ======== ==========
</TABLE>
Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. Under SFAS 109, the
benefit associated with future deductible temporary differences and operating
loss or credit carryforwards is recognized if it is more likely than not that
a benefit will be realized. Deferred tax expense (benefit) represents the
change in the net deferred tax asset or liability balance. Deferred tax assets
and liabilities are comprised of the following at May 31, 1994, June 24, 1995,
and March 30, 1996:
<TABLE>
<CAPTION>
MAY 31, JUNE 24, MARCH 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss and credit
carryforwards.............................. $ 413,000 $ 214,000 $ 202,000
Allowance for doubtful accounts............. -- -- 90,000
Accounts payable and accrued expenses....... 351,000 27,000 162,000
Other....................................... 14,000 51,000 --
---------- ---------- ----------
Total gross deferred tax assets......... 778,000 292,000 454,000
---------- ---------- ----------
Deferred tax liabilities:
Conversion from cash to accrual basis....... -- 1,103,000 1,121,000
Accounts receivable......................... 1,887,000 170,000 --
Prepaid expenses............................ 82,000 55,000 --
Fixed assets................................ 20,000 42,000 226,000
Other....................................... 50,000 50,000 50,000
---------- ---------- ----------
Total gross deferred tax liabilities.... 2,039,000 1,420,000 1,397,000
---------- ---------- ----------
Net deferred tax liability.............. $1,261,000 $1,128,000 $ 943,000
========== ========== ==========
</TABLE>
F-13
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes computed using the federal statutory income tax rate differs
from the Company's effective tax rate primarily due to the following:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, NINE MONTHS ENDED
------------ YEAR ENDED ---------------------
JUNE 24, MARCH 25, MARCH 30,
1993 1994 1995 1995 1996
----- ----- ---------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory U.S. federal tax
rate.......................... 34.0% 34.0% 34.0 % 34.0 % 34.0 %
State taxes, net of federal tax
benefit....................... 5.9% 7.0% 2.8 % 4.6 % 3.8 %
(Income) loss from ARI not
(taxable) deductible for
corporate income tax
purposes...................... 4.6% 2.0% (47.1)% (18.4)% (16.2)%
Non-deductible expenses........ 1.0% 3.5% 7.2 % 3.3 % 1.7 %
Amortization of goodwill not
deductible for corporate
income tax purposes........... -- -- 5.5 % 2.6 % 0.9 %
Change in tax status of ARI.... -- -- -- -- 24.8 %
Other.......................... 1.0% 6.3% (1.2)% 2.7 % (2.4)%
----- ----- ----- ----- -----
Effective tax rate............. 46.5% 52.8% 1.2 % 28.8 % 46.6 %
===== ===== ===== ===== =====
</TABLE>
At March 30, 1996, the Company has available for federal income tax purposes
unused operating losses of $399,000 to offset future taxable income, expiring
in various years through 2011. Additionally, the Company has available for
federal income tax purposes unused tax credits of $42,000 at March 30, 1996 to
offset future tax liabilities, which may be carried forward indefinitely.
9. STOCK PLANS
In March 1996, the Company's stockholder approved the formation of the 1996
Stock Plan, the 1996 Employee Stock Purchase Plan and the 1996 Eligible
Directors Stock Plan.
1996 Stock Plan
This plan authorizes the grant of incentive stock options, non-qualified
stock options, stock purchase authorizations or stock bonus awards to key
employees, including officers, employee directors and consultants, to purchase
up to 1,600,000 shares of common stock. Incentive stock options cannot be
granted to consultants. For incentive options, the purchase price is equal to
the fair market value on the date of grant (110% of fair market value for
stockholders who hold greater than 10% of the Company's stock at the time of
grant). For non-qualified options and stock purchase authorizations, the
purchase price is determined by the Board of Directors within limits as set
forth in the plan, but shall not be less than 85% of the fair market value of
the common stock on the date of grant. The periods over which options are
exercisable are determined by the Board of Directors. If permitted by the
Board of Directors, employees may use previously acquired shares of the
Company's common stock (provided that such shares tendered have been held for
at least six months) or may borrow money from the Company on a recourse basis
(for a period of time not to exceed five years) to pay the exercise price of
shares purchased. Options may expire up to 10 years after the date of grant
(five years for incentive options granted to 10% stockholders). The Board of
Directors has the discretion to designate non-qualified options as
transferable. The plan will terminate in March 2006.
Prior to the effective date of the Company's initial public offering, the
Company has the right to repurchase shares obtained through exercise of stock
options, upon the employee's termination of employment or proposed sale of
such shares.
In March 1996, options to purchase 1,106,500 shares of common stock at an
exercise price of $11.00 were granted to employees.
F-14
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996 Employee Stock Purchase Plan
This plan, which is intended to qualify under Section 423 of the Internal
Revenue Code, authorizes the grant of options to eligible employees on a semi-
annual basis to purchase shares of the Company's common stock. An aggregate of
300,000 shares of common stock has been reserved for issuance under this plan.
The plan permits eligible employees to purchase up to 200 shares of common
stock in any six month offering period through the accumulation of payroll
deductions, which may not exceed 10% of the employee's compensation. Employees
are eligible to participate if they have been employed by the Company for at
least 18 months. Shares are purchased at 85% of the lower of the fair market
value of the Company's common stock at the beginning or end of each six-month
offering period. Employees may end their participation in the offering at any
time during the offering period, and participation ends automatically on
termination of employment. The first stock offering period under the plan will
commence upon the effective date of the registration statement covering the
Company's initial public offering. The plan will terminate in March 2006.
1996 Eligible Directors Stock Plan
This plan authorizes the grant of an option to purchase 20,000 shares of
common stock to each non-employee director on the date of the director's
initial election to the Board of Directors. The exercise price of options
granted is 100% of the closing price per share of common stock on the date of
grant. Directors may use previously acquired shares of the Company's common
stock to pay the exercise price of shares purchased, provided that such shares
tendered have been held for at least six months. An aggregate of 100,000
shares of common stock may be issued under the plan. Options are exercisable
in four equal annual installments commencing on the first anniversary date of
the grant. Options expire 10 years after the date of grant. The plan will
terminate in March 2006.
In April 1996, options to purchase 20,000 shares of common stock at an
exercise price of $11.00 per share were granted to a newly-elected director.
10. EMPLOYEE SAVINGS PLAN
The Company provides an employee retirement savings plan under Section
401(k) of the Internal Revenue Code (the "Plan") which covers substantially
all employees. Under the terms of the Plan, employees may contribute a
percentage of their salary, up to a maximum of 15%, which is then invested in
one or more of several mutual funds selected by the employee. The Company may
make contributions to the Plan at their discretion; no such contributions have
been made since inception of the Plan.
11. COMMITMENTS
In addition to leasing computer equipment under various capital leases (Note
4), the Company occupies premises under various noncancelable operating leases
which include terms requiring the Company to pay a pro-rata portion of
increased operating expenses and real estate taxes. The leases expire on
various dates through 2001, and certain of the leases contain options for
renewal or purchase of the related equipment.
In January 1993, TRI entered into a three year lease with the Trust which
required annual rental payments of $120,000, payable in equal monthly
installments of $10,000. This lease was amended in January 1994 upon expansion
of the leased area to require annual rental payments of $150,000, payable in
equal monthly installments of $12,500. This lease was further amended in
September 1995 upon expansion of the leased area to require annual payments of
$357,000, payable in equal monthly installments of $29,800. The term of the
lease was also extended through September 2010. In conjunction with the
amendment in September 1995, the Company has begun to consolidate the accounts
of the Trust on a prospective basis (see Note 13). Rent expense for the years
ended May 31, 1993, May 31, 1994, June 24, 1995 and the nine months ended
March 25, 1995 and March 30, 1996 (excluding amounts paid to the Trust after
September 19, 1995) was $366,000, $633,000, $1,188,000, $788,000 (unaudited)
and $1,267,000, respectively.
F-15
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 30, 1996, future minimum rental payments under noncancelable lease
arrangements are as follows, excluding amounts payable to the Trust:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
Remainder of fiscal 1996............................. $ 366,000 $ 25,000
1997................................................. 1,364,000 102,000
1998................................................. 1,232,000 50,000
1999................................................. 975,000 10,000
2000................................................. 607,000 --
Thereafter........................................... 252,000 --
---------- --------
Total minimum lease payments......................... $4,796,000 187,000
==========
Less--amount representing interest................... 30,000
--------
Present value of obligations under capital leases.... $157,000
========
</TABLE>
12. FINANCIAL INSTRUMENTS
The Company enters into various types of financial instruments in the normal
course of business. Fair values are estimated based on assumptions concerning
the amount and timing of estimated future cash flows and assumed discount
rates reflecting varying degrees of perceived risk. Accordingly, the fair
values may not represent actual values of the financial instruments that could
have been realized as of year end or that will be realized in the future.
The carrying amounts of the Company's financial instruments, which include
accounts receivable, notes receivable from related parties, line of credit,
accounts payable, accrued salaries and wages, other accrued expenses, income
taxes payable and long-term debt approximate their fair values at March 30,
1996.
13. CONSOLIDATION OF REAL ESTATE TRUST
As described in Note 11, the Company leases office space from the Trust, of
which the sole stockholder of the Company is the sole beneficiary and an
officer of the Company is the trustee. Effective September 19, 1995, the
Company renegotiated its lease with the Trust in conjunction with a
refinancing of the Trust's mortgage. The modified lease terms expanded the
amount of space which the Company occupies, committed the Company to rent the
facility through the maturity date of the mortgage loan, and granted the
Company a right of first refusal to lease any space in the facility currently
occupied by other tenants when the tenants' leases expire.
Accordingly, as of this date, the Company obtained significant control over
the operations of the Trust and assumed a significant portion of the Trust's
obligations. As a result, the Company has consolidated the accounts of the
Trust as of September 19, 1995 on a prospective basis. As of September 19,
1995, the Trust reported the following assets and liabilities:
<TABLE>
<S> <C>
Fixed assets, net........................................... $ 1,750,000
Other current assets........................................ 49,000
Security deposits and deferred income....................... (84,000)
Note payable to TRI......................................... (365,000)
Mortgage loans payable...................................... (1,461,000)
-----------
$ (111,000)
===========
</TABLE>
F-16
<PAGE>
THE REGISTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 1995, one of the mortgage loans payable by the Trust was
refinanced with a new mortgage loan (see Note 7). At this time, a distribution
of $649,000 was made to the beneficiary of the Trust.
Rental income from tenants during the period from September 19, 1995 through
March 30, 1996 was $94,000, which is included in interest and other income in
the accompanying consolidated statement of income. Future minimum rental
commitments from tenants are as follows at March 30, 1996:
<TABLE>
<S> <C>
Remainder of fiscal 1996........................................ $ 43,000
1997............................................................ 109,000
1998............................................................ 12,000
--------
$164,000
========
</TABLE>
14. UNAUDITED PRO FORMA INCOME INFORMATION
The following unaudited pro forma income tax information is presented as if
ARI had been a C corporation subject to federal and state income taxes
throughout the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED --------------------
JUNE 24, MARCH 25, MARCH 30,
1995 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
Income before taxes............................. $329,000 $393,000 $2,591,000
Income tax provision............................ 243,000 221,000 1,130,000
-------- -------- ----------
Pro forma net income............................ $ 86,000 $172,000 $1,461,000
======== ======== ==========
</TABLE>
From inception through the year ended May 31, 1994, ARI generated a taxable
loss for which the Company would not have received a benefit, as ARI would
have filed a separate tax return from TRI.
Net Income Per Share
Pro forma net income per share has been computed by dividing pro forma net
income by the weighted average number of common and common equivalent shares
outstanding, after considering the events described in Notes 2 and 9. Weighted
average common and common equivalent shares include common shares and common
shares which may be issuable upon exercise of outstanding stock options,
computed using the treasury stock method. Pursuant to Securities and Exchange
Commission's Staff Accounting Bulletin No. 83, stock options granted during
the twelve months prior to the date of the initial filing of the Company's
Registration Statement on Form S-1 have been included in the calculation of
common equivalent shares using the treasury stock method, as if they were
outstanding as of the beginning of each period presented.
15. PREFERRED STOCK
On April 10, 1996, the Company's sole stockholder authorized 1,000,000
shares of preferred stock, $0.10 par value. Preferred stock may be issued in
one or more series at the discretion of the Board of Directors of the Company
(without stockholder approval) with such designations, rights and preferences
as the Board of Directors may determine. The preferred stock may have
dividend, liquidation, redemption, conversion, voting or other rights which
may be more expansive than the rights of the holders of the Company's common
stock.
F-17
<PAGE>
Artwork - inside back cover
- title: "The Registry, Inc., A National Provider of IT Consultants"
- sub-title: "1,400 Consulting Professionals Nationwide"
Map of the United States showing locations of the Company's offices, divided
into the following regions: Midwest; West; Southwest; New England; Midatlantic;
and Southeast. Offices in each region are listed as follows: Midwest (Cleveland,
Columbus, Chicago, Rosemont and Rolling Meadows); West (Seattle, Santa Clara and
Walnut Creek); Southwest (Dallas and Denver); New England (Stratham, NH, Boston
and Newton); Midatlantic (Rye Brook, Manhattan and McLean); and Southeast
(Richmond, Greensboro, Durham, Charlotte, Atlanta and Ft. Lauderdale).
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 9
Dividend Policy.......................................................... 9
Capitalization........................................................... 10
Dilution................................................................. 11
Selected Consolidated Financial Data..................................... 12
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 14
Business................................................................. 20
Management............................................................... 30
Certain Transactions..................................................... 34
Principal and Selling Stockholder........................................ 35
Description of Capital Stock............................................. 36
Shares Eligible for Future Sale.......................................... 39
Underwriting............................................................. 41
Legal Matters............................................................ 42
Experts.................................................................. 42
Report to Stockholders................................................... 42
Additional Information................................................... 42
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,200,000 SHARES
THE REGISTRY, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
ADAMS, HARKNESS & HILL, INC.
A.G. EDWARDS & SONS, INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the Company
in connection with the sale of the Common Stock being registered hereby. All
the amounts shown are estimated, except the SEC registration fee, the NASD
filing fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 12,214
NASD filing fee.................................................... 4,042
Nasdaq listing fee................................................. 42,250
Blue Sky fee and expenses.......................................... 15,000
Printing and engraving expenses.................................... 100,000
Legal fees and expenses............................................ 275,000
Auditors' accounting fees and expenses............................. 260,000
Transfer Agent and Registrar fees.................................. 10,000
Miscellaneous expenses............................................. 31,494
--------
Total............................................................ $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Massachusetts General Laws, Chapter 156B, Section 67, empowers a
Massachusetts corporation to indemnify any person in connection with any
action, suit or proceeding brought or threatened by reason of the fact that
such person is or was a director, officer, employee or agent of the
corporation or was serving as such with respect to another corporation or
other entity at the request of such corporation, unless such person shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that such action was in the best interests of the Company.
The Company's Articles of Organization, as amended and restated, contains
provisions that require the Company to indemnify its directors and officers to
the fullest extent permitted by Massachusetts law.
Reference is made to the Underwriting Agreement (filed as Exhibit 1.1
hereto) which provides for indemnification arrangements by and among the
Company, its directors or officers, the Underwriters and the Selling
Stockholder in the offering of the Common Stock registered hereby, and each
person, if any, who controls the Company, the Selling Stockholder or the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since July 1, 1992, the Company has issued the following securities that
were not registered under the Securities Act:
In connection with the Merger effective on January 1, 1996, the Company
issued 5,333,333 shares of Common Stock to G. Drew Conway in exchange for
his 200,000 shares of common stock, $0.01 par value, of America's Registry,
Inc.
No underwriters were engaged in connection with the foregoing sale of
securities. Such sales were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement by and among Registrant, the Selling
Stockholder and the Underwriters.
2.1 Stock Purchase Agreement between the Registrant and Axiom Consulting
Group, Inc., dated November 30, 1994.
3.1* Articles of Organization of Registrant, as amended through April 11,
1996.
3.2 Restated Articles of Organization of Registrant, as filed on May 13,
1996.
3.3* By-Laws of Registrant, as amended through April 11, 1996.
3.4 By-Laws of Registrant, as amended and restated on May 13, 1996.
4.1 Articles 3, 4, 5, and 6 of the Articles of Organization of Registrant
(included in Exhibit 3.2).
4.2 Specimen Stock Certificate.
5.1 Opinion of Hill & Barlow, a Professional Corporation, as to the
legality of the shares being registered.
10.1* Leases dated September 19, 1995 between the 189 Wells Avenue Realty
Trust and the Company for premises located at the 189 Wells Avenue,
Newton, Massachusetts.
10.2* Registrant's 1996 Stock Plan and related form of stock option
agreement.
10.3* Registrant's 1996 Employee Stock Purchase Plan and related form of
subscription agreement.
10.4* Registrant's 1996 Eligible Directors Stock Plan and related form of
stock option agreement.
10.5* Accounts Receivable Management and Security Agreement dated as of
February 29, 1996 by and among BNY Financial Corporation and each of
The Registry, Inc., America's Registry, Inc. and The Registry, Inc.
Network Consulting Practice.
10.6 Employment Agreement dated May 1996 between the Company and G. Drew
Conway.
21.1* Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, independent accountants.
23.2 Consent of Hill & Barlow, a Professional Corporation (to be included
in Exhibit 5.1).
27.1 Financial Data Schedule.
</TABLE>
* Previously filed.
b. Financial Statement Schedules.
Schedule II, "Valuation and Qualifying Accounts."
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14 or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the
II-2
<PAGE>
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Company hereby undertakes to provide at the closing of this
offering to the Underwriters specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
COMPANY HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BOSTON, COMMONWEALTH OF MASSACHUSETTS ON THE 14TH DAY OF MAY, 1996.
The Registry, Inc.
/s/ G. Drew Conway
By: _________________________________
G. DREW CONWAY PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY AUTHORIZES AND APPOINTS G.
DREW CONWAY, ROBERT E. FOLEY, MARK W. BISCOE AND THOMAS C. CHASE, AND EACH OF
THEM, WITH FULL POWER OF SUBSTITUTION AND FULL POWER TO ACT WITHOUT THE OTHER,
AS HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT TO ACT IN HIS NAME, PLACE
AND STEAD AND TO EXECUTE IN THE NAME AND ON BEHALF OF EACH PERSON,
INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, AND TO FILE, ANY AND ALL
AMENDMENTS TO THIS REGISTRATION STATEMENT, INCLUDING ANY AND ALL POST-
EFFECTIVE AMENDMENTS AND ANY SUBSEQUENT REGISTRATION STATEMENT FOR THE SAME
OFFERING WHICH MAY BE FILED UNDER RULE 462(B).
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED BELOW ON THE 14TH DAY OF MAY, 1996.
SIGNATURE TITLE
President, Chief Executive Officer and
/s/ G. Drew Conway Director (Principal Executive Officer)
- -------------------------------------
(G. DREW CONWAY)
Chief Financial Officer and Treasurer
/s/ Robert E. Foley (Principal Financial and Accounting
- ------------------------------------- Officer)
(ROBERT E. FOLEY)
Director
/s/ Paul C. O'Brien
- -------------------------------------
(PAUL C. O'BRIEN)
/s/ Robert P. Badavas Director
- -------------------------------------
(ROBERT P. BADAVAS)
II-4
<PAGE>
SCHEDULE II
THE REGISTRY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
DEDUCTIONS-
BALANCE AT CHARGED CHARGED WRITE-OFF OF BALANCE
BEGINNING TO COSTS AND TO OTHER UNCOLLECTIBLE AT END OF
OF PERIOD EXPENSES ACCOUNTS ACCOUNTS PERIOD
---------- ------------ -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended May 31,
1993................... $ 83 $149 $0 $187 $ 45
Year ended May 31,
1994................... 45 226 0 79 192
Year ended June 24,
1995(1)................ 192 189 0 64 317
Nine months ended March
30, 1996............... 317 224 0 190 351
</TABLE>
- --------
(1) The Company changed its fiscal year end from May 31, 1994 to the last
Saturday in June, effective with the fiscal year ended June 24, 1995.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement by and among Registrant, the
Selling Stockholder and the Underwriters.
2.1 Stock Purchase Agreement between the Registrant and Axiom
Consulting Group Inc., dated November 30, 1996.
3.1* Articles of Organization of Registrant, as amended through
April 11, 1996.
3.2 Restated Articles of Organization of Registrant, as filed on
May 13, 1996.
3.3* By-Laws of Registrant, as amended through April 11, 1996.
3.4 By-Laws of Registrant, as amended and restated on May 13, 1996.
4.1 Articles 3, 4, 5, and 6 of the Articles of Organization of
Registrant (included in Exhibit 3.2).
4.2 Specimen Stock Certificate.
5.1 Opinion of Hill & Barlow, a Professional Corporation, as to the
legality of the shares being registered.
10.1* Leases dated September 19, 1995 between the 189 Wells Avenue
Realty Trust and the Company for premises located at the 189
Wells Avenue, Newton, Massachusetts.
10.2* Registrant's 1996 Stock Plan and related form of stock option
agreement.
10.3* Registrant's 1996 Employee Stock Purchase Plan and related form
of subscription agreement.
10.4* Registrant's 1996 Eligible Directors Stock Plan and related
form of stock option agreement.
10.5* Accounts Receivable Management and Security Agreement dated as
of February 29, 1996 by and among BNY Financial Corporation and
each of The Registry, Inc., America's Registry, Inc. and The
Registry, Inc. Network Consulting Practice.
10.6 Employment Agreement dated May 1996 between the Company and G.
Drew Conway.
21.1* Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, independent accountants.
23.2 Consent of Hill & Barlow, a Professional Corporation (to be
included in Exhibit 5.1).
27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
<PAGE>
THE REGISTRY, INC.
2,530,000 Shares/*/
Common Stock
(no par value per share)
______________
Underwriting Agreement
, 1996
Adams, Harkness & Hill, Inc.
A.G. Edwards & Sons, Inc.
As representatives of the several
Underwriters named in Schedule I hereto,
c/o Adams, Harkness & Hill, Inc.
60 State Street
Boston, Massachusetts 02109
Dear Sirs:
The Registry, Inc., a Massachusetts corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you and the several Underwriters named in Schedule I hereto (collectively,
the "Underwriters"), for whom you are acting as representatives (the
"Representatives") an aggregate of 1,900,000 shares (the "Company Firm Shares")
and, at the election of the Underwriters, up to 330,000 additional (the
"Optional Shares") shares of common stock of the Company, without par value per
share ("Common Stock"), and G. Andrew Conway, the sole stockholder of the
Company (the "Selling Stockholder"), proposes, subject to the terms and
conditions stated herein, to sell to
- -----------------------------
/*/ Includes 330,000 shares subject to an option to purchase additional
shares to cover over-allotments.
-1-
<PAGE>
the Underwriters an aggregate of 300,000 shares (the "Selling Stockholder Firm
Shares", and together with the Company Firm Shares, the "Firm Shares") of Common
Stock. The Firm Shares and the Optional Shares which the Underwriters elect to
purchase pursuant to Section 3 hereof are herein collectively called the
"Shares".
1. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-______) (the
"Initial Registration Statement") in respect of the Shares has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement including any pre-effective amendments thereto and any
post-effective amendments thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and no
stop order suspending the effectiveness of the Initial Registration Statement,
any post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose has been
initiated or, to the Company's knowledge, threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement and
incorporated by reference in the Rule 462(b) Registration Statement, if any,
or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 6(a) hereof and deemed by virtue of Rule 430A under
the Act to be part of the Initial Registration Statement at the time it was
declared effective or the Rule 462(b) Registration Statement, if any, at the
time it became effective, each as amended at the time such part of such
registration statement became effective, are hereinafter collectively called
the "Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
-2-
<PAGE>
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company by
an Underwriter through you expressly for use therein. The Company
acknowledges that the statements set forth in the last paragraph on the front
cover page, in the last paragraph on page 2 and under the heading
"Underwriting" in the Prospectus constitute the only information relating to
any Underwriter furnished in writing to the Company by the Representatives
specifically for inclusion in the Registration Statement;
(c) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and will not, as of
the applicable effective date as to the Registration Statement and any
amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through you expressly for use therein;
(d) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the rules and regulations thereunder which have not
been described or filed as required; the contracts so described in the
Prospectus to which the Company or any of its subsidiaries is a party have
been duly authorized, executed and delivered by the Company or its
subsidiaries, constitute valid and binding agreements of the Company or its
subsidiaries and are enforceable against and by the Company or its
subsidiaries in accordance with their respective terms, and are in full force
and effect on the date hereof; and neither the Company nor any of its
subsidiaries, nor, to the best of the Company's knowledge, any other party is
in breach of or default under any of such contracts, except to the extent that
such breach or default would not have a material adverse effect on the
business, operating results or financial condition of the Company and its
subsidiaries taken as a whole;
(e) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or
-3-
<PAGE>
not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
prospects, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole, otherwise
than as set forth or contemplated in the Prospectus;
(f) Neither the Company nor any subsidiary of the Company owns any real
property; any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries; the
Company owns or leases all such properties as are necessary to its operations
as now conducted or as proposed to be conducted, except where the failure to
so own or lease would not result in a material adverse change in or affecting
the general affairs, management, financial position, stockholders' equity or
results of operations of the Company;
(g) Each of the Company and its subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
its respective jurisdiction of organization, each with full power and
authority (corporate and otherwise) to own its properties and conduct its
business as described in the Prospectus, and each has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification, or
is subject to no material liability or disability by reason of the failure to
be so qualified in any such jurisdiction;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Common Stock contained in the
Prospectus; all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly by the Company, free and clear of
all liens, encumbrances, equities or claims; except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company,
and the related notes thereto, included in the Prospectus, neither the Company
nor any subsidiary has outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase any securities or
obligations convertible into, or any contracts or commitments
-4-
<PAGE>
to issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations; and the description of the Company's
stock option and stock purchase plans and the options or other rights granted
and exercised thereunder set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
options and rights;
(i) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Common Stock contained in the Prospectus; no preemptive
rights or other rights to subscribe for or purchase exist with respect to the
issuance and sale of the Shares by the Company pursuant to this Agreement;
except as set forth in the Prospectus, no stockholder of the Company has any
right, which has not been waived, to require the Company to register the sale
of any shares of capital stock owned by such stockholder under the Act in the
public offering contemplated by this Agreement; and no further approval or
authority of the stockholders or the Board of Directors of the Company will be
required for the issuance and sale of the Shares to be sold by the Company as
contemplated herein;
(j) The Company has full corporate power and authority to enter into this
Agreement; this Agreement has been duly authorized, executed and delivered by
the Company, constitutes a valid and binding obligation of the Company and is
enforceable against the Company in accordance with its terms;
(k) The issue and sale of the Shares by the Company and the compliance by
the Company with all of the provisions of this Agreement and the consummation
of the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
material agreement or material instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of the
provisions of the Articles of Organization or By-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its subsidiaries or any
of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Shares or the consummation
by the Company of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or
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<PAGE>
Blue Sky laws or the by-laws and rules of the NASD in connection with the
purchase and distribution of the Shares by the Underwriters;
(l) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company or any of its
subsidiaries is or may be a party or of which property owned or leased by the
Company or any of its subsidiaries is or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
are required to be described in the Registration Statement by the Act or the
rules and regulations thereunder or which might, individually or in the
aggregate, prevent or adversely affect the transactions contemplated by this
Agreement or result in a material adverse change in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company; no labor disturbance by the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the Company,
is imminent which might be expected to affect adversely such general affairs,
management, financial position, stockholders' equity or results of operations;
and neither the Company nor any of its subsidiaries is a party or subject to
the provisions of any material injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental body;
(m) The Company and its subsidiaries possess all licenses, certificates,
authorizations or permits issued by the appropriate governmental or regulatory
agencies or authorities that are necessary to enable them to own, lease and
operate their respective properties and to carry on their respective
businesses as presently conducted and which are material to the Company and
its subsidiaries, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or modification
of any such license, certificate, authority or permit which, singly or in the
aggregate, would be expected to materially and adversely affect the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries;
(n) Price Waterhouse LLP, who have certified certain financial statements
of the Company, have advised the Company that they are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(o) The financial statements and schedules of the Company, and the
related notes thereto, included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the
respective dates of such financial statements and schedules, and the results
of operations and cash flows of the Company for the respective periods covered
thereby; such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
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<PAGE>
consistent basis as certified by the independent public accountants named in
paragraph (n) above; no other financial statements or schedules are required
to be included in the Registration Statement; and the selected financial data
set forth in the Prospectus under the captions "Capitalization" and "Selected
Consolidated Financial Data" fairly present the information set forth therein
on the basis stated in the Registration Statement;
(p) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks, trade
names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their business as now conducted; the Company has no
knowledge of any material infringement by the Company of trademark, trade name
rights, patent rights, copyrights, licenses, trade secret or other similar
rights of others; and there is no claim of infringement being made against the
Company regarding trademark, trade name, patent, copyright, license, trade
secret or other similar rights which could have a material adverse effect on
the general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries;
(q) The Company and each of its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown as due thereon; and the Company has no knowledge of any tax
deficiency which has been or might be asserted or threatened against the
Company or any of its subsidiaries which could materially and adversely affect
the general affairs, management, financial position, stockholders' equity or
results of operation of the Company;
(r) The Company is not an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(s) Each of the Company and its subsidiaries maintains insurance of the
types and in the amounts which it deems adequate for its business, including,
but not limited to, insurance covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of
which insurance is in full force and effect;
(t) Neither the Company nor any of its subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation
of law, or (ii) made any payment to any foreign, federal or state governmental
officer or official, or other person charged with
-7-
<PAGE>
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof;
(u) The Company has not taken and will not take, directly or indirectly
through any of its directors, officers or controlling persons, any action
which is designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares;
and
(v) The Company has filed a registration statement pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to register the Common Stock, has filed an application to list the Common
Stock on the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") National Market System and has received notification that
the listing has been approved, subject to notice of issuance of the Shares.
2. Representations of the Selling Stockholder. The Selling Stockholder
------------------------------------------
represents and warrants to, and agrees with, each of the Underwriters that:
(a) All consents, approvals, authorizations and orders necessary for
the execution and delivery by the Selling Stockholder of this Agreement and the
Power-of-Attorney and Custody Agreement (the "Custody Agreement") hereinafter
referred to, and for the sale and delivery of the Shares to be sold by the
Selling Stockholder hereunder, have been obtained; and the Selling Stockholder
has full right, power and authority to enter into this Agreement and the Custody
Agreement and to sell, assign, transfer and deliver the Shares to be sold by the
Selling Stockholder hereunder;
(b) This Agreement and the Custody Agreement have each been duly
authorized, executed and delivered by the Selling Stockholder and each such
document constitutes a valid and binding obligation of the Selling Stockholder,
enforceable in accordance with its terms;
(c) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the sale of the Shares by the Selling Stockholder or the
consummation by the Selling Stockholder of the transactions on his part
contemplated by this Agreement and the Custody Agreement, except such as have
been obtained under the Act or the rules and regulations thereunder and such as
may be required under state securities or Blue Sky laws or the by-laws and rules
of the NASD in connection with the purchase and distribution by the Underwriters
of the Shares;
-8-
<PAGE>
(d) The sale of the Shares to be sold by the Selling Stockholder
hereunder and the performance by the Selling Stockholder of this Agreement and
the Custody Agreement and the consummation of the transactions contemplated
hereby and thereby will not result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to which the
Selling Stockholder is a party or by which the Selling Stockholder or any of his
properties is bound or affected, or violate or conflict with any judgment,
ruling, decree, order, statute, rule or regulation of any court or other
governmental agency or body applicable to the Selling Stockholder;
(e) The Selling Stockholder has, and at the First Time of Delivery (as
defined in Section 5 hereof) will have, good and valid title to the Shares to be
sold by the Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares and payment
therefor pursuant hereto, good and valid title to such Shares, free and clear of
all liens, encumbrances, equities or claims, will pass to each of the several
Underwriters who have purchased such Shares in good faith and without notice of
any such lien, encumbrance, equity or claim or any other adverse claim within
the meaning of the Uniform Commercial Code;
(f) The Selling Stockholder will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of Common Stock within 180 days after
the date of the Prospectus otherwise than hereunder, as a bona fide gift or
gifts to, or in trust for, a person or entity who or which agrees in writing to
be bound by this restriction or with your written consent;
(g) The Selling Stockholder has not taken and will not at any time
take, directly or indirectly, any action designed, or which might reasonably be
expected, to cause or result in, or which will constitute, stabilization of the
price of shares of Common Stock to facilitate the sale or resale of any of the
Shares.
(h) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by the Selling Stockholder
expressly for use therein, such Preliminary Prospectus and the Registration
Statement did, and the Prospectus and any further amendments or supplements to
the Registration Statement and the Prospectus will, when they become effective
or are filed with the Commission, as the case may be, conform in
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<PAGE>
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and
(i) The Selling Stockholder joins in and makes each of the
representations and warranties of the Company contained in Section 1 hereof.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions herein contemplated, the Selling Stockholder
agrees to deliver to you prior to or at the First Time of Delivery a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
The Selling Stockholder represents and warrants that a certificate in
negotiable form representing all of the Shares to be sold by the Selling
Stockholder has been placed in custody under the Custody Agreement, in the form
heretofore furnished to you, duly executed and delivered by the Selling
Stockholder to the Custodian (as defined in the Custody Agreement), and that the
Selling Stockholder has duly executed and delivered a power-of-attorney, in the
form heretofore furnished to you and included in the Custody Agreement (the
"Power-of-Attorney"), appointing Robert E. Foley and Andrea M. Teichman, and
each of them, as the Selling Stockholder's attorney-in-fact (the "Attorney-in-
Fact") with authority to execute and deliver this Agreement on behalf of the
Selling Stockholder, to determine (subject to the provisions of the Custody
Agreement) the purchase price to be paid by the Underwriters to the Selling
Stockholder as provided in Section 3 hereof, to authorize the delivery of the
Shares to be sold by the Selling Stockholder hereunder and otherwise to act on
behalf of the Selling Stockholder in connection with the transactions
contemplated by this Agreement and the Custody Agreement.
The Selling Stockholder specifically agrees that the Shares represented by the
certificates held in custody for the Selling Stockholder under the Custody
Agreement are subject to the interests of the Underwriters hereunder, and that
the arrangements made by the Selling Stockholder for such custody, and the
appointment by the Selling Stockholder of the Attorneys-in-Fact by the Power-of-
Attorney, are to that extent irrevocable. The Selling Stockholder specifically
agrees that the obligations of the Selling Stockholder hereunder shall not be
terminated by operation of law, whether by the death or incapacity of the
Selling Stockholder or, in the case of an estate or trust, by the death or
incapacity of any executor or trustee or the termination of such estate or
trust, or by the occurrence of any other event. If the Selling Stockholder or
any such executor or trustee should die or become incapacitated,
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<PAGE>
or if any such estate or trust should be dissolved, or if any other such event
should occur, before the delivery of the Shares hereunder, certificates
representing the Shares to be sold by the Selling Stockholder shall be delivered
by or on behalf of the Selling Stockholder in accordance with the terms and
conditions of this Agreement and of the Custody Agreement, and actions taken by
the Attorneys-in-Fact pursuant to the Powers-of-Attorney shall be as valid as if
such death, incapacity, termination or other event had not occurred, regardless
of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall
have received notice of such death, incapacity, termination or other event.
3. Shares Subject to Sale. (a) On the basis of the representations,
----------------------
warranties and agreements of the Company and the Selling Stockholder contained
herein, and subject to the terms and conditions of this Agreement, (i) the
Company agrees to issue and sell the Company Firm Shares to the several
Underwriters, (ii) the Selling Stockholder agrees to sell the Selling
Stockholder Firm Shares to the several Underwriters, and (iii) each of the
Underwriters agrees, severally and not jointly, to purchase from the Company and
the Selling Stockholder, at a purchase price per share of $ , the respective
number of Firm Shares (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying the aggregate number of Firm Shares by a
fraction, the numerator of which is the aggregate number of Firm Shares to be
purchased by such Underwriter as set forth opposite the name of such Underwriter
in Schedule I hereto and the denominator of which is the aggregate number of
Firm Shares to be purchased by all the Underwriters and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell the
Company Optional Shares to the several Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
the purchase price per share set forth in clause (a) of this Section 3, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of the Optional Shares which all of the Underwriters are entitled to
purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at their
election up to 330,000 Optional Shares at the purchase price per share set forth
in the paragraph above, for the sole purpose of covering overallotments in the
sale of the Firm Shares. Any such election to purchase Optional Shares may be
exercised by written notice from you to the Company and the Selling Stockholder,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by
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you but in no event earlier than the First Time of Delivery or, unless you and
the Company otherwise agree in writing, earlier than two or later than three
business days after the date of such notice.
4. Offering. Upon the authorization by you of the release of the Firm
--------
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
5. Closing. Certificates in definitive form for the Shares to be purchased
by each Underwriter hereunder, and in such denominations and registered
in such names as Adams, Harkness & Hill, Inc. may request upon at least
forty-eight hours' prior notice to the Company, shall be delivered by
or on behalf of the Company to you for the account of such Underwriter,
against payment by such Underwriter or on its behalf of the purchase
price therefor by certified or official bank check or checks, payable
to the order of the Company and the Selling Stockholder, respectively,
in New York Clearing House (next day) funds, all at the office of
Adams, Harkness & Hill, Inc., 60 State Street, Boston, Massachusetts
02109. The time and date of such delivery and payment shall be, with
respect to the Firm Shares, 9:30 a.m., Boston time, on , 1996
or such other time and date as you and the Company may agree upon in
writing, and, with respect to the Optional Shares, 9:30 a.m., Boston
time, on the date specified by you in the written notice given by you
of the Underwriters' election to purchase such Optional Shares, or at
such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery," such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery," and each such time and date for
delivery is herein called a "Time of Delivery." Such certificates will
be made available for checking and packaging at least twenty four hours
prior to each Time of Delivery at such location as you may specify.
6. Covenants of the Company. The Company agrees with each of the
------------------------
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when the Registration
Statement, or any amendment thereto, has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you copies thereof; to advise you, promptly after it receives
notice thereof,
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<PAGE>
of the issuance by the Commission of any stop order or of any order preventing
or suspending the use of any Preliminary Prospectus or Prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order preventing
or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws
of such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required by law at any time prior to the
expiration of nine months after the time of issuance of the Prospectus in
connection with the offering or sale of the Shares and if at such time any
events shall have occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus in
order to comply with the Act, to notify you and upon your request to prepare
and furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance, and in case any Underwriter is required
by law to deliver a prospectus in connection with sales of any of the Shares
at any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than the forty-fifth (45th) day
following the end of the full fiscal
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quarter first occurring after the first anniversary of the effective date of
the Registration Statement (as defined in Rule 158(c)), an earning statement
of the Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of any securities of the
Company which are substantially similar to the Shares, without your prior
written consent other than (i) the sale of the Shares to be sold by the
Company hereunder, (ii) the Company's issuance of options under the Company's
presently authorized 1996 Stock Plan, 1996 Employee Stock Purchase Plan and
1996 Eligible Directors Stock Plan and (iii) shares of capital stock issued in
connection with the acquisition by the Company of the assets or capital stock
of another person or entity, whether directly, through merger or consolidation
or otherwise, if the terms of such issuance provide that such shares of
capital stock shall not be resold for a period of 180 days following the date
of the Prospectus; provided, however, that the Company shall not release any
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party from such resale restriction without the prior written consent of the
Representatives.
(f) Not to grant options to purchase shares of Common Stock which would
become exercisable during a period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus;
(g) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flow of the Company and its
consolidated subsidiaries certified by independent public accountants) and to
make available (within the meaning of Rule 158(b) under the Act) as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders generally, and
deliver to you as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission, the Nasdaq
National Market or any national securities exchange on which any class of
securities of the Company is listed (such financial statements to be on a
combined or consolidated basis to the extent the accounts of the Company and
its
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<PAGE>
subsidiaries are combined or consolidated in reports furnished to its
stockholders generally or to the Commission);
(i) To use the net proceeds acquired by it from the sale of the Shares in
the manner specified in the Prospectus under the caption "Use of Proceeds" and
in a manner such that the Company will not become an "investment company" as
that term is defined in the Investment Company Act;
(j) To file with the Commission such reports on Form SR as may be required
by Rule 463 under the Act;
(k) Not to file with the Commission any registration statement on Form S-8
relating to shares of its Common Stock prior to 180 days after the effective
date of the Registration Statement; and
(l) Not to accelerate the vesting of any option issued under any stock
option plan such that any such option may be exercised within 180 days from
the date of the Prospectus.
7. Covenants of the Selling Stockholder. The Selling Stockholder agrees
------------------------------------
to pay or cause to be paid all taxes, if any, on the transfer and sale of the
Shares to be sold by the Selling Stockholder hereunder and the fees and
expenses, if any, of counsel and accountants retained by the Selling
Stockholder (except that the Company shall pay for the fees and expenses of
Hill & Barlow, a Professional Corporation, as special counsel to the Selling
Stockholder). The Company agrees with the Selling Stockholder to pay all
costs and expenses incident to the performance of the obligations of the
Selling Stockholder under this Agreement (except as set forth above),
including, but not limited to, all expenses incident to the delivery of the
certificates for the Shares to be sold by the Selling Stockholder, the costs
and expenses incident to the preparation, printing and filing of the
Registration Statement (including all exhibits thereto) and the Prospectus and
any amendments or supplements thereto, the expenses of qualifying the Shares
to be sold by the Selling Stockholder under the state securities or Blue Sky
laws, all filing fees and the reasonable fees and expenses of counsel for the
Underwriters payable in connection with the review of the offering of the
Shares by the National Association of Securities Dealers, Inc. ("NASD"), and
the cost of furnishing to the Underwriters the required copies of the
Registration Statement and Prospectus and any amendments or supplements
thereto; provided that the Selling Stockholder agrees to pay or cause to be
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paid its pro rata share (based on the percentage which the number of Shares
sold by the Selling Stockholder bears to the total number of Shares sold) of
all underwriting discounts and commissions.
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<PAGE>
8. Expenses. The Company covenants and agrees with the several Underwriters
--------
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memoranda and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) the filing fees and, subject to a maximum of $2,500, the
reasonable fees and expenses of counsel to the Underwriters incident to securing
any required review by the NASD of the terms of the sale of the Shares; (v) the
cost of preparing stock certificates; (vi) the cost and charges of any transfer
agent or registrar; and (vii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, Section 10 and Section 13 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of their
counsel, stock transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
9. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters hereunder, as to the Shares to be delivered at each Time of
Delivery, shall be subject, in their discretion, to the condition that all
representations and warranties and other statements of the Company and the
Selling Stockholder herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company and the Selling Stockholder shall each
have performed all of their respective obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) Ropes & Gray, counsel to the Underwriters, shall have furnished to you
such opinion or opinions, dated such Time of Delivery, with respect to this
Agreement, the
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Registration Statement, the Prospectus, and other related matters as you may
reasonably request;
(c) Hill & Barlow, a Professional Corporation, counsel to the Company and
special counsel to the Selling Stockholder, shall have furnished to you their
written opinion, dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is legally existing
as a corporation in good standing under the laws of the Commonwealth of
Massachusetts, with power and authority (corporate and otherwise) to own its
properties and conduct its business as described in the Registration Statement
and Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and, to the best of such counsel's knowledge, were not
issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase any securities which have not been
waived; the Shares have been duly authorized and when issued and paid for
as contemplated by this Agreement will be validly issued, fully paid and
non-assessable; and the Shares conform to the description of the Common
Stock contained in the Prospectus;
(iii) Each subsidiary of the Company has been duly incorporated
and is legally existing as a corporation in good standing under the laws
of its jurisdiction of organization; and all of the issued shares of
capital stock of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and are owned
directly by the Company, to the best of such counsel's knowledge, free
and clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(iv) Each of the Company and its subsidiaries has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it
owns or leases properties, so as to require such qualification, except
where the failure to be so qualified would
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not have a material adverse effect on the business, operating results or
financial condition of the Company and its subsidiaries taken as a whole
(such counsel being entitled to rely in respect of the opinion in this
clause upon certificates of public officials and in respect of matters of
fact upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such certificates);
(v) To the best of such counsel's knowledge and other than as
set forth in the Prospectus (based solely upon work performed by our firm
in connection with the Company in the last three years and upon inquiries
of responsible officers of the Company and our review of specified
documents supplied to us by the Company in connection with this
offering): (i) there are no legal or governmental proceedings, actions or
suits pending or threatened to which the Company or any of its
subsidiaries is or may be a party or of which property owned or leased by
the Company or any of its subsidiaries is or may be the subject, or
related to environmental or discrimination matters, which actions, suits
or proceedings, might, individually or in the aggregate, prevent or
adversely affect the transactions contemplated by this Agreement or
result in a material adverse change in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company; (ii) no labor disturbance by the employees of
the Company or any of its subsidiaries exists or is imminent which might
be expected to affect adversely such general affairs, management,
financial position, stockholders' equity or results of operations; and
(iii) neither the Company nor any of its subsidiaries is a party or
subject to the provisions of any material injunction, judgment, decree or
order of any court, regulatory body, administrative agency or
governmental body;
(vi) The Company has full corporate power and authority to enter
into this Agreement and this Agreement has been duly authorized, executed
and delivered by the Company;
(vii) The issuance and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which the Company
is a party or by which the Company or any of its subsidiaries is a party
or to which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the
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Articles of Organization or By-laws of the Company or any statute or any
order, rule or regulation known to such counsel of any Massachusetts or
federal court or governmental agency or body having jurisdiction over the
Company or any of its properties;
(viii) No consent, approval, authorization, order, registration or
qualification of or with any Massachusetts or federal court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act of
the Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws or the by-laws and rules of the NASD in connection with the purchase
and distribution of the Shares by the Underwriters;
(ix) To the best of such counsel's knowledge (based solely upon
work performed by our firm in connection with the Company in the last
three years and upon inquiries of responsible officers of the Company and
our review of specified documents supplied to us by the Company in
connection with this offering) there are no contracts or other documents
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement by the Act or by the rules and
regulations thereunder which have not been described or filed as
required;
(x) The statements under the captions "Risk Factors - Potential
Effect of Anti-Takeover Provisions", "Risk Factors - Shares Eligible for
Future Sale", "Management - Director Compensation", "Management-Executive
Compensation", "Description of Capital Stock" and "Shares Eligible for
Future Sale" in the Prospectus, insofar as such statements constitute a
summary of documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present, in all material respects, the
information called for with respect to such documents and matters
(provided, however, that such counsel may rely on representations of the
Company with respect to the factual matters contained in such statements,
and provided further that such counsel shall state that nothing has come
to the attention of such counsel which leads them to believe that such
representations are not true and correct in all material respects);
(xi) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as defined in the Investment Company Act;
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(xii) The Shares have been duly authorized for inclusion on the
Nasdaq National Market System, subject to notice of issuance;
(xiii) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of the Selling
Stockholder; the Custodian has been duly and validly authorized to act as
the custodian of the Shares to be sold by the Selling Stockholder; the
performance of this Agreement and the Custody Agreement and the
consummation of the transactions therein contemplated by the Selling
Stockholder does not conflict with, result in a breach of, or constitute
a default under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or
instrument known to us to which the Selling Stockholder is a party or by
which the Selling Stockholder or any of his properties are bound or
affected (in giving such opinion, counsel may rely solely on the
representations of the Selling Stockholder in this Agreement and in the
Custody Agreement), or violate or conflict with (i) any judgment, ruling,
decree or order known to such counsel or (ii) any statute, rule or
regulation of any Massachusetts or federal court or other governmental
agency or body applicable to the Selling Stockholder (except that such
counsel need express no opinion as to state securities or Blue Sky laws
or as to compliance with the antifraud provisions of federal and state
securities laws); and no consent, approval, authorization or order of, or
any filing or declaration with, any Massachusetts or federal court or
governmental agency or body is required for consummation by the Selling
Stockholder of the transactions on his part contemplated by this
Agreement and the Custody Agreement, except such as may be required under
state securities or Blue Sky laws or the by-laws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of the
Shares (as to which such counsel need express no opinion) and such as
have been obtained or made under the Act or the rules and regulations
thereunder;
(xiv) To our knowledge, the Selling Stockholder has the legal
capacity to enter into this Agreement and the Custody Agreement and to
sell, transfer and deliver the Shares to be sold by the Selling
Stockholder; to our knowledge, immediately prior to the date hereof, the
Selling Stockholder was the sole registered owner of the Shares to be
sold by the Selling Stockholder on the date hereof; upon registration of
the Shares to be sold by the Selling Stockholder in the names of the
Underwriters in the stock records of the Company, assuming the
Underwriters purchased such Shares in good faith and without notice of
any adverse claim within the meaning of Section 8-302 of the
Massachusetts Uniform Commercial Code, the Underwriters will have
acquired all rights of the Selling
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Stockholder in such Shares free of any adverse claim, any lien in favor
of the Company and any restrictions on transfer imposed by the Company;
(xv) Each of this Agreement and the Custody Agreement has been
duly executed and delivered and is a valid and binding agreement of the
Selling Stockholder; and the Custody Agreement is enforceable against the
Selling Stockholder in accordance with its terms; and
(xvi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements, including the
notes and schedules thereto and other financial, accounting and
statistical data included therein or in the exhibits to the Registration
Statement, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder;
Such counsel shall also state that they have participated in the
preparation of the Registration Statement and Prospectus and, although,
except for the statements in paragraph (x) of Section 9 hereof, such
counsel is not passing upon, and does not assume any responsibility for,
the accuracy, completeness or fairness of, the statements contained in
the Registration Statement or the Prospectus and have made no independent
check or verification thereof, solely on the basis of the foregoing, no
facts have come to their attention that has caused them to believe that,
as of its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of Delivery
(other than the financial statements, including the notes and schedules
thereto and other financial, accounting and statistical data included
therein or in the exhibits to the Registration Statement, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements, including the notes and schedules
thereto and other financial, accounting and statistical data included
therein or in the exhibits to the Registration Statement, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the
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financial statements, including the notes and schedules thereto and other
financial, accounting and statistical data included therein or in the
exhibits to the Registration Statement, as to which such counsel need
express no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
and they do not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or
the Prospectus which are not filed or described as required.
Such counsel shall also include a statement in such opinion as to the
matters set forth in this paragraph. The Registration Statement has become
effective under the Act. To the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued by
the Commission nor has any proceeding been instituted or contemplated for that
purpose under the Act. The Prospectus has been filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations under the Act within the
time period required thereby.
(d) At 10:00 a.m., Boston time, on the effective date of the Registration
Statement and the effective date of the most recently filed post-effective
amendment to the Registration Statement and also at each Time of Delivery,
Price Waterhouse LLP shall have furnished to you a letter or letters, dated
the respective date of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex 1 hereto;
(e) (i) Neither the Company nor any of its subsidiaries have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise than
as set forth or contemplated in the Prospectus, and (ii) since the respective
dates as of which information is given in the Prospectus there shall not have
been any change in the capital stock or long-term debt of the Company or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise than as
set forth or contemplated in the Prospectus, the effect of which, in any such
case described in clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
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(f) On or after the date hereof there shall not have occurred any of the
following: (i) additional material governmental restrictions, not in force and
effect on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally established
on the New York Stock Exchange or on the American Stock Exchange or in the
over the counter market by the NASD, or trading in securities generally shall
have been suspended on either such Exchange or in the over the counter market
by the NASD, or a general banking moratorium shall have been established by
federal or New York authorities, (ii) an outbreak of major hostilities or
other national or international calamity or any substantial change in
political, financial or economic conditions shall have occurred or shall have
accelerated or escalated to such an extent, as, in the judgment of the
Representatives, to affect adversely the marketability of the Shares, or (iii)
there shall be any action, suit or proceeding pending or threatened, or there
shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any of
its subsidiaries or the transactions contemplated by this Agreement, which, in
the judgment of the Representatives, has materially and adversely affected the
Company's business or earnings and makes it impracticable or inadvisable to
offer or sell the Shares;
(g) The Shares to be sold by the Company at such Time of Delivery shall
have been accepted for quotation, subject to notice of issuance, on the Nasdaq
National Market System; and
(h) The Company shall have furnished or caused to be furnished to you at
such Time of Delivery certificates of officers of the Company, in their
capacities as such, satisfactory to you, stating as to the best of their
knowledge after due inquiry as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to such Time of Delivery, and as to such other matters as you may
reasonably request and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (e)
of this Section, and as to such other matters as you may reasonably request.
10. Indemnification and Contribution. (a) The Company and the Selling
--------------------------------
Stockholder, jointly and severally, will indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are
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based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company and the Selling Stockholder shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through you expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or the Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through you
expressly for use therein; and will reimburse the Company and the Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or the Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; no indemnification shall be available hereunder to any
party who shall fail to give notice as provided in the preceding sentence if,
and only to the extent that, the party to whom such notice was not given was
unaware of the action, suit, investigation, inquiry or proceeding to which the
notice would have related and was prejudiced by the failure to give such notice,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than under
such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
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commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party. No Indemnifying Party shall be liable for
any settlement of any action or claim effected without its written consent,
which consent shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section 10 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholder on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (C) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholder, respectively, bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the
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table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Selling
Stockholder on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholder and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholder under this
Section 10 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriter under this Section 10
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act.
(f) Notwithstanding anything to the contrary contained herein, (i) in the
event that the offering contemplated by this Agreement does not commence as
contemplated herein, the aggregate liability of the Selling Stockholder under
this Agreement shall be limited to an amount equal to the net proceeds which the
Selling Stockholder would have received from the sale of the Selling Stockholder
Firm Shares had the offering contemplated by this Agreement commenced and (ii)
from and after the First Time of Delivery, and provided that the offering
contemplated by this Agreement has commenced, the aggregate liability of the
Selling Stockholder under this Agreement shall be limited to an amount equal to
the net
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proceeds received by the Selling Stockholder from the sale of the stock sold by
the Selling Stockholder to the Underwriters.
11. Termination. (a) If any Underwriter shall default in its obligation to
-----------
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company and the Selling Stockholder shall
be entitled to a further period of thirty-six hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company and the Selling Stockholder that you have so arranged for the
purchase of such Shares, or the Company and the Selling Stockholder notifies you
that they have so arranged for the purchase of such Shares, you or the Company
and the Selling Stockholder shall have the right to postpone such Time of
Delivery for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees to
file promptly any amendments to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to this Agreement
with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-tenth of the aggregate number of all the
Shares to be purchased at such Time of Delivery, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-tenth of the aggregate number of all the Shares
to be purchased at such Time of Delivery, or if the Company shall not exercise
the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or
-27-
<PAGE>
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of the Company to
sell the Optional Shares) shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or the Company, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 8 hereof
and the indemnity and contribution agreements in Section 10 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
12. Survival. The respective indemnities, agreements, representations,
--------
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company and
shall survive delivery of and payment for the Shares.
13. Expenses of Termination. If this Agreement shall be terminated pursuant
-----------------------
to Section 11 hereof, neither the Company nor the Selling Stockholder shall then
be under any liability to any Underwriter except as provided in Section 8 and
Section 10 hereof; but, if for any other reason this Agreement is terminated,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Section 8 and Section 10 hereof.
14. Notice. In all dealings hereunder, you shall act on behalf of each of
------
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Adams, Harkness & Hill, Inc. on behalf of you as the
Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representatives in care of Adams, Harkness
& Hill, Inc., 60 State Street, Boston, MA 02109, Attention: Joseph W. Hammer if
to the Company shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: President and if to the Selling Stockholder shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Selling Stockholder set forth in the Registration Statement; provided, however,
that any notice to an Underwriter pursuant to Section 10(d) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its Underwriter's Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
by you on
-28-
<PAGE>
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
15. Miscellaneous. (a) This Agreement shall be binding upon, and inure
-------------
solely to the benefit of, the Underwriters and the Company and, to the extent
provided in Sections 10 and 12 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
(b) Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
(c) This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
(d) This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signors thereof.
Very truly yours,
THE REGISTRY, INC.
By:_________________________
G. Drew Conway
President
-29-
<PAGE>
SELLING STOCKHOLDER
_________________________
G. Drew Conway,
in his individual capacity
Accepted as of the date
hereof at Boston, Massachusetts
ADAMS, HARKNESS & HILL, INC.
A.G. EDWARDS & SONS, INC.
By:______________________________
(Adams, Harkness & Hill, Inc.
On behalf of each of
the Underwriters)
-30-
<PAGE>
SCHEDULE I
Number of
Optional
Total Shares to be
Number of Purchased if
Firm Maximum
Shares to be Option
Purchased Exercised
--------- ---------
Adams, Harkness & Hill, Inc..............
A.G. Edwards & Sons, Inc.................
Total .............................. ========== ===========
-31-
<PAGE>
ANNEX I
Pursuant to Section 9(d) of the Underwriting Agreement, the accountants shall
furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, prospective financial
statements and/or pro forma financial information) examined by them and included
in the Prospectus or the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the Act and the
related published rules and regulations thereunder;
(iii) The unaudited selected financial information with respect to the
combined results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
combined financial statements for such five fiscal years;
(iv) On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company and
its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believed that:
(A) the unaudited combined statements of income, combined balance sheets
and combined statements of cash flows included in the Prospectus do not comply
as to form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations thereunder, or are
not in conformity with generally accepted accounting principles applied on a
basis substantially consistent with the basis for the audited combined
statements of income, combined balance sheets and combined statements of cash
flows included in the Prospectus;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in the
unaudited combined financial statements from which such data and items were
derived, and any such unaudited data and items were not
-32-
<PAGE>
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited combined financial statements included in
the Prospectus;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with the basis for the
audited combined financial statements included in the Prospectus;
(D) any unaudited pro forma combined condensed financial statements
included in the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the published rules
and regulations thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date of
such letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon conversions
of convertible securities, in each case which were outstanding on the date of
the latest financial statements included in the Prospectus) or any increase in
the combined long-term debt of the Company and its subsidiaries, or any
decreases in combined net current assets or net assets or other items specified
by the representatives, or any increases in any items specified by the
representatives, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause (E) there
were any decreases in combined net revenues or operating profit or the total or
per share amounts of combined net income or other items specified by the
representatives, or any increases in any items specified by the representatives,
in each case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the representatives,
except in each case for decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such letter; and
(v) In addition to the examination referred to in their report(s) included in
the Prospectus and the limited procedures, inspection of minute books, inquiries
and other procedures referred to in paragraphs (iii) and (iv) above, they have
carried out certain specified procedures, not constituting an examination in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the representatives,
which are derived from the general accounting records of the Company and its
subsidiaries, which appear in the
-33-
<PAGE>
Prospectus, or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the representatives, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in agreement.
-34-
<PAGE>
STOCK PURCHASE AGREEMENT
by and among
the Holders of the Capital Stock of
Axiom Consulting Group, Inc. ("Sellers")
and
Axiom Consulting Group, Inc. (the "Company")
and
The Registry, Inc. ("Purchaser")
Dated as of November 30, 1994
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. PURCHASE AND SALE OF SHARES............................................. 1
1.1 Shares Sold and Acquired........................................... 1
1.2 Consideration...................................................... 2
2. REPRESENTATIONS AND WARRANTIES OF SELLERS............................... 5
2.1 Organization of the Company........................................ 5
2.2 Capitalization of the Company...................................... 6
2.3 Subsidiaries....................................................... 6
2.4 Articles of Incorporation and Bylaws; Stock Transfer Books......... 6
2.5 Authority.......................................................... 7
2.6 Ownership of the Shares............................................ 7
2.7 No Consent......................................................... 7
2.8 No Breach.......................................................... 7
2.9 Financial Statements............................................... 8
2.10 Liabilities....................................................... 9
2.11 No Material Adverse Change........................................ 9
2.12 Accounts and Notes Receivable..................................... 10
2.13 Equipment, Inventory and Other Tangible Property.................. 10
2.14 Real Estate....................................................... 10
2.15 Trade Names, Trademarks, Service Marks and Copyrights, Patents and
Intellectual Property................................................... 11
2.16 Contracts and Other Agreements.................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
2.17 Employment Contracts and Relations................................ 13
2.18 Employee Benefit Plans............................................ 14
2.19 Insurance......................................................... 14
2.20 Accounts Payable.................................................. 15
2.21 Tax Matters....................................................... 15
2.22 Compliance with Laws.............................................. 15
2.23 Actions and Proceedings........................................... 16
2.24 Banks............................................................. 16
2.25 Powers of Attorney................................................ 16
2.26 Customers......................................................... 17
2.27 Full Disclosure................................................... 17
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................. 17
3.1 Organization....................................................... 17
3.2 Authority.......................................................... 18
3.3 Binding Obligation................................................. 18
3.4 No Conflicts....................................................... 18
3.5 Litigation and Other Proceedings................................... 18
3.6 No Consent......................................................... 19
3.7 Financial Statements............................................... 19
3.8 No Material Adverse Change......................................... 19
3.9 Full Disclosure.................................................... 20
4. CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE......................... 20
4.1 Documents, Representations and Warranties at Closing............... 20
4.2 Compliance of Sellers.............................................. 21
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4.3 No Adverse Changes................................................. 21
4.4 Sellers' Closing Certificates...................................... 21
4.5 Opinion of Counsel to sellers and the Company...................... 21
4.6 No Litigation...................................................... 21
4.7 Certificate of Authority........................................... 21
4.8 Assignments and Consents........................................... 21
4.9 Certificates of Good Standing...................................... 22
4.10 Resignations...................................................... 22
4.11 Review of Company................................................. 22
4.12 Form of Documents................................................. 22
4.13 Employee, Confidentiality and Non-Competition Agreements.......... 22
5. CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE............................ 22
5.1 Representations and Warranties at Closing.......................... 22
5.2 Compliance of Purchaser............................................ 23
5.3 Purchaser's Closing Certificate.................................... 23
5.4 Employee, Confidentiality and Non-Competition Agreements........... 23
5.5 Opinion of Counsel to Purchaser.................................... 23
5.6 Certificate of Authority........................................... 23
6. THE CLOSING............................................................. 23
6.1 The Closing Date and Place......................................... 23
6.2 Actions and Deliveries by Sellers at the Closing................... 23
6.3 Actions and Deliveries by Purchaser at the Closing................. 24
7. FURTHER ASSURANCES...................................................... 24
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
7.1 Sellers' Further Assurances........................................ 24
7.2 Purchasers' Further Assurances..................................... 24
8. INDEMNIFICATION......................................................... 24
8.1 Indemnification by Sellers......................................... 24
8.2 Indemnification by Purchaser....................................... 25
8.3 Defenses of Claim.................................................. 25
8.4 Claim and Limitations.............................................. 27
8.5 Withhold and Offset................................................ 27
8.6 Remedies........................................................... 29
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................. 29
10. NON-SOLICITATION........................................................ 29
10.1 Non-Solicitation.................................................. 29
10.2 Confidentiality................................................... 31
10.3 Remedies.......................................................... 31
11. COSTS AND BROKER'S FEES................................................. 32
11.1 Costs Borne by Parties............................................ 32
11.2 Broker's Fees Liabilities......................................... 32
12. FORM OF AGREEMENT....................................................... 32
12.1 Headings.......................................................... 32
12.2 Entire Agreement.................................................. 32
12.3 Counterparts...................................................... 33
12.4 Severability; Reformation......................................... 33
13. PARTIES................................................................. 33
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
13.1 Other Parties..................................................... 33
13.2 Assignment........................................................ 33
14. TERMINATION............................................................ 34
15. JOINT AND SEVERAL OBLIGATIONS.......................................... 34
16. NOTICES................................................................ 34
17. PUBLICITY.............................................................. 35
18. CONFIDENTIALITY AND NONDISCLOSURE...................................... 35
19. USE OF NAME "AXIOM CONSULTING GROUP, INC............................... 36
20. GOVERNING LAW.......................................................... 36
</TABLE>
<PAGE>
SCHEDULES
---------
List of Sellers Schedule 1.1
Consideration Schedule 1.2(a)
Form of Promissory Note Schedule 1.2(a)(i)
Strategic Plan Schedule 1.2(b)
Liens on Shares Schedule 2.6
Financial Statements of the Company Schedule 2.9
Real Estate Schedule 2.14
Trade Names, etc. Schedule 2.15
Contracts and Other Agreements Schedule 2.16
Employment Agreements; Directors
and Officers Schedule 2.17
Employee Benefit Plans Schedule 2.18
Insurance Schedule 2.19
Accounts payable Schedule 2.20
Bank Accounts, etc. Schedule 2.24
Powers of Attorney Schedule 2.25
Providers and Customers Schedule 2.26
Financial Statements of Purchaser Schedule 3.7
<PAGE>
Opinion of Counsel to Sellers and the Schedule 4.5
Company
Form of Employment Agreement Schedule 4.13(a)
Form of Non-Solicitation and
Confidentiality Agreement Schedule 4.13(b)
Opinion of Counsel to Purchaser Schedule 5.5
Confidentiality and Non-Disclosure Schedule 18
Agreement
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT, entered into, dated and effective as of
November 30, 1994 (the "Agreement"), by and among The Registry, Inc., a
---------
Massachusetts corporation ("Purchaser"), Axiom Consulting Group, Inc., a New
Hampshire corporation (the "Company"), and the holders, as of the Closing Date
(as defined in Section 6.1), of all the then issued and outstanding capital
stock of the Company as set forth on Schedule 1.1 hereto (collectively, the
------------
holders are referred to as "Sellers").
WITNESSETH:
WHEREAS, Sellers are, and will be as of the Closing Date, the holders of
all of the issued and outstanding capital stock of the Company and desire to
sell said stock to Purchaser,
WHEREAS, Purchaser desires to acquire said stock from Sellers, and
WHEREAS, the Sellers, as owners of the Company, will remain key employees
of the Company after such sale and shall enter into employment contracts with
Purchaser.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the mutual promises
herein set forth and subject to the terms and conditions hereof, the parties
agree as follows:
1. PURCHASE AND SALE OF SHARES
---------------------------
1.1 Shares Sold and Acquired. Subject to the terms and conditions set
------------------------
forth in this Agreement, at the Closing (as defined in Section 6.1), Sellers
will sell, transfer and deliver to Purchaser, and Purchaser will purchase,
acquire and accept from Sellers, in accordance with Schedules 1.1 and 1.2(a), an
------------------------
aggregate of One Hundred (100) shares of
-1-
<PAGE>
common stock of the Company, no par value per share, which shall then constitute
all of the issued and outstanding capital stock of the Company (the "Shares").
Each share certificate representing the Shares so delivered shall be duly
endorsed by the holder thereof in blank for transfer or accompanied by a stock
power duly executed by such holder, assigning the Shares held by such holder in
blank.
1.2 Consideration.
-------------
(a) Cash and Notes. At the Closing (or at such other time as is
--------------
specified in Schedule 1.2(a)), Purchaser will, in accordance with Schedules 1.1
-------------
and 1.2(a), deliver to Sellers as consideration for the sale, transfer and
------
delivery to Purchaser of the Shares, certified checks in Boston Clearing House
Funds and non-negotiable, subordinated promissory notes in the form of Schedule
--------
1.2(a)(i) (the "Promissory Notes"), which checks and Promissory Notes shall in
- --------- ----------------
the aggregate equal $1,000,000.
(b) Performance Contingent Consideration.
------------------------------------
(i) Payment of Performance Contingent Consideration.
-----------------------------------------------
In addition to the consideration described in Section 1.2(a), Purchaser
shall pay the following contingent consideration for the Shares (the
"Performance Contingent Consideration") to Sellers pro rata in accordance with
- -------------------------------------
each Seller's respective equity interest in the Company on the Closing Date,
calculated based on Net Profits (as defined below) of the Company during the
specified period:
(A) On last business day of the fifteenth month after the Closing or
such later date as determined by subsection 1.2(b)(v) hereof, Performance
Contingent Consideration equal to thirty-five percent (35%) of the Net Profits
for the twelve month period ending on the first anniversary of the Closing;
(B) On the last business day of the twenty-seventh month after the
Closing or such later date as determined by subsection 1.2(b)(v) hereof,
Performance Contingent Consideration equal to thirty percent (30%) of the Net
Profits for the twelve month period ending on the second anniversary of the
Closing;
-2-
<PAGE>
(C) On the last business day of the thirty-ninth month after the
Closing or such later date as determined by subsection 1.2(b)(v) hereof,
Performance Contingent Consideration equal to twenty-five percent (25%) of the
Net Profits for the twelve month period ending on the third anniversary of the
Closing; and
(D) On the last business day of the fifty-first month after the
Closing or such later date as determined by subsection 1.2(b)(v) hereof,
Performance Contingent Consideration equal to twenty percent (20%) of the Net
Profits for the twelve month period ending on the fourth anniversary of the
Closing; provided, however, that if the actual total revenues for such twelve
-------- -------
month period, as computed in accordance with generally accepted accounting
principles consistently applied ("GAAP") and with the principles set forth in
Schedule 1.2(b) hereto (the "Strategic Plan") exceed the total revenues targeted
- ---------------
for such twelve month period in the Strategic Plan, then the aggregate
Performance Contingent Consideration shall equal the greater of (x) 20% of the
Net Profits for the twelve month period ending on the fourth anniversary of the
Closing or (y) Three Million Dollars less the Performance Contingent
Consideration paid pursuant to subsection 1.2(b)(i)(A)-(C) above;
provided, further however, that if any of the Sellers shall have defaulted in
- -------------------------
any of his or her obligations under Section 10 of this Agreement, such Seller
shall not be entitled to his or her pro rata share of any Performance Contingent
Consideration with respect to the period during which such default occurred and
with respect to any subsequent period. In such event, each of the other Sellers
shall be entitled, in addition to his or her pro rata portion of Performance
Contingent Consideration, to that portion of the forfeited Performance
Contingent Consideration otherwise due to the defaulting Seller as is
represented by a fraction, the numerator of which is such non-defaulting
Seller's equity interest in the Company and the denominator of which is the
combined equity interests in the Company of all of the non-defaulting Sellers.
Each Performance Contingent Consideration payment shall be paid in cash in same
day funds.
-3-
<PAGE>
(ii) Calculation of Net Profits. For purposes of the computations
--------------------------
described in Section 1.2(b), "Net Profits" shall mean the Company's gross
-----------
profits for the relevant period less certain related expenses incurred during
such period, all determined in accordance with GAAP and with the principles set
forth in the Strategic Plan.
(iii) Operations of the Company. It is the intention of the
-------------------------
parties hereto that the Purchaser and the Sellers shall manage the Company in
accordance with the Strategic Plan during the four years for which Performance
Contingent Consideration is being calculated. If the Purchaser or the Sellers
determine that the Company should enter into lines of business different from
those established in the Strategic Plan or conduct business in a manner
different from that proposed in the Strategic Plan, such party shall propose a
modification to the Strategic Plan, which may include a modification to the
calculation of Net Profits, to the other party. The parties shall thereafter
meet within two weeks to discuss the proposed modification and, if a
modification is agreed to, then such Strategic Plan, as so modified, shall
become the Strategic Plan for the duration of the Performance Contingent
Consideration measurement period. If the parties are unable to agree on such
modification, they shall within the next ten (10) business days after the end of
the two-week period jointly appoint a consultant or other mutually agreeable
person familiar with the Company's line of business (the "Advisor") which has
not been involved in the rendering of consulting services or other advice to
either Sellers or Purchaser within a one-year period prior to the date of such
appointment to resolve the dispute. The Advisor shall complete the resolution
of the dispute within a sixty (60) day period. The fees of the Advisor shall be
divided and paid equally by Sellers and Purchaser. The Advisor's resolution of
the dispute and its adjustments shall be conclusive and binding upon the
parties. The Advisor shall provide written notice of such resolution to Sellers
and Purchaser. The date of such notice shall be deemed to be the date of final
resolution of the dispute.
(iv) Financial Reporting Obligations. The Purchaser and the Sellers
--------------------------------
shall cooperate with one another to cause the Company to prepare financial
statements in accordance with the principles and assumptions of GAAP and the
Strategic
-4-
<PAGE>
Plan within 45 days after the end of each calendar month. The Net Profits
calculation for each twelve month period ending on November 30 during the four
years for which Performance Contingent Consideration is being calculated (each
such period, a "Plan Year") shall be prepared jointly by Purchaser and the
Sellers within 60 days following the end of the Company's Plan Year. The
Performance Contingent Payment for each Plan Year shall be paid to Sellers in
accordance with Section 1.2(b)(i) hereof unless the Sellers and Purchaser are
unable to agree on the calculations of Net Profits within 90 calendar days
following the end of the Company's Plan Year.
(v) Dispute Resolution. In the event that Sellers and Purchaser are
------------------
unable to resolve the Net Profits calculation within ninety ((90) days following
the end of the Company's Plan Year, they shall, within the next ten (10)
business days after the end of such period, jointly appoint an independent
certified public accounting firm of nationally recognized standing which has not
been involved in any audit of, or the rendering of accounting or other advice
to, either Sellers or Purchaser within a one-year period prior to the date of
such appointment to resolve the dispute and make any adjustment, if required, to
the Net Profits calculation. This accounting firm shall complete the resolution
of the dispute and make appropriate adjustments to the figures within a sixty
(60) day period. The fees of this public accounting firm shall be divided and
paid equally by Sellers and Purchaser. Such firm's resolution of the dispute
and its adjustments shall be conclusive and binding upon the parties. The
public accounting firm shall provide written notice of such resolution to
Sellers and Purchaser. The date of such notice shall be deemed to be the date
of final resolution of the dispute.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
In order to induce Purchaser to enter into this Agreement, each Seller
represents and warrants to Purchaser as set forth below, which representations
and warranties are acknowledged by such Seller as material and are being relied
upon by Purchaser:
2.1 Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
New Hampshire and has full power and authority to own, lease and operate its
properties and
-5-
<PAGE>
to carry on its business as now being and as heretofore conducted. The Company
is not required by the character of the properties it owns or leases or the
nature of the activities it conducts to be qualified or otherwise authorized as
a foreign corporation to transact business in any jurisdictions.
2.2 Capitalization of the Company.
-----------------------------
(a) Capital Stock. The authorized capitalization of the Company consists
-------------
of three hundred (300) shares of common stock, no par value per share ("Common
Stock"), and the Company has issued and outstanding one hundred (100) shares of
Common Stock. All such outstanding shares of Common Stock of the Company are
duly and validly authorized and outstanding, fully paid and non-assessable and
were issued in full compliance with all federal, state and local laws, rules,
regulations and ordinances. No other class of capital stock of the Company is
authorized, issued or outstanding. Schedule 1.1 sets forth a list of each
------------
holder of record as of the date hereof of the outstanding shares of Common
Stock, together with the number of shares owned of record by each such holder.
(b) Options and Other Rights. There exist no outstanding (i) options,
------------------------
warrants or rights to purchase from the Company or subscribe for any equity
securities or other ownership interests of the Company, (ii) options or rights
to sell any equity securities or other ownership interests of the Company, (iii)
obligations of the Company, whether absolute or contingent, to issue any shares
of equity securities or other ownership interests, or (iv) indebtedness or
securities directly or indirectly convertible into any equity securities of the
Company.
2.3 Subsidiaries. The Company does not have any subsidiaries and does not
------------
own, directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
business other than the business being conducted directly by the Company.
2.4 Articles of Incorporation and Bylaws; Stock Transfer Books. Sellers
-----------------------------------------------------------
have heretofore delivered to Purchaser true and complete copies of the Company's
Articles of Incorporation, certified by the New Hampshire Secretary of State,
and Bylaws
-6-
<PAGE>
certified by the Secretary of the Company. The stock transfer books
of the Company heretofore provided to Purchaser are true and complete.
2.5 Authority. This Agreement has been duly authorized, executed and
---------
delivered by each of the Company and Sellers, and each of the Company and
Sellers has the right, power, authority and legal capacity to enter into and
perform the obligations to be performed by it, him or her under this Agreement
and to consummate the transactions contemplated of it, him or her hereby. This
Agreement and all writings relating hereto signed by Sellers and the Company
constitute valid and legally binding obligations of Seller and the Company,
enforceable in accordance with their respective terms.
2.6 Ownership of the Shares. Sellers are the owners, beneficially and of
-----------------------
record, of the Shares, which constitute all of the issued and outstanding
capital stock of the Company. Except as specified in Schedule 2.6, the Shares
------------
are so owned free and clear of any lien, mortgage, claim, charge, security
interest or other encumbrance, restriction or limitation of any nature
whatsoever (collectively, "Liens"). By delivery of the Shares at the Closing,
in exchange for the payment described in Section 1.2(a), Sellers will convey to
Purchaser good and marketable title to the Shares, free and clear of any Lien.
There is no outstanding right, warrant, option or other agreement of any kind to
purchase or otherwise receive from any Seller any shares of capital stock or any
other security of the Company, and Sellers have no such right, warrant, option
or other agreement to acquire any such shares or other security of the Company
from the Company or any other person.
2.7 No Consent. No consent of any other party and no consent, license,
----------
approval or authorization of, or exemption by, or registration or declaration or
filing with, any governmental authority, bureau or agency is required in
connection with the execution, delivery, validity or enforceability of this
Agreement with respect to any Seller or the Company or the consummation by any
Seller or the Company of the transactions contemplated hereby.
2.8 No Breach. Neither the execution and delivery of this Agreement nor
---------
the consummation of the transactions contemplated hereby will (a) violate any
provision of the Articles of Incorporation or Bylaws of the Company; (b)
violate, conflict with or result
-7-
<PAGE>
in the breach or termination of, or otherwise give any other contracting party
the right to terminate, or constitute (or with notice or lapse of time, or both,
would constitute) a default (by way of substitution, novation or otherwise)
under the terms of any contract, mortgage, lease, bond, indenture, agreement,
franchise or other instrument or obligation, whether written or oral
(collectively, "Obligations") which, individually or in the aggregate, would
-----------
materially adversely affect the Company or any of its assets or properties; (c)
result in the creation of any Lien upon the properties or assets of the Company
pursuant to the terms of any Obligation; (d) violate any judgment, order,
injunction, decree or award of any court, arbitrator, administrative agency or
governmental or regulatory body against, or binding upon, the Company or upon
the securities, properties, assets or business of the Company; (e) constitute a
violation by the Company of any statute, law or regulation of any jurisdiction
which would materially and adversely affect the Company or any of its assets or
properties; or (f) violate any Permit (as defined in Section 2.22) which would
materially and adversely affect the Company or any of its assets or properties.
2.9 Financial Statements. Sellers have delivered to Purchaser true
--------------------
copies, reviewed by Bigelow & Company (formerly Silverman Losik & Company), the
Company's independent certified public accountants, of the Company's Balance
Sheet and related Statements of Income, Retained Earnings and Cash Flows of the
Company for the short fiscal year ended March 31, 1992 (the "Reviewed Financial
----------
Statements"), and the comparable financial data, certified by the Company's
- ----------
Chief Financial Officer, for the fiscal years ended March 31, 1993 and 1994 and
the six months ended September 30, 1994 (the "Unaudited Financial Statements"),
------------------------------
all of which Reviewed Financial Statements and Unaudited Financial Statements
are incorporated herein as Schedule 2.9 (collectively, the "Financial
------------- ---------
Statements"). The Reviewed Financial Statements, while unaudited, have been
reviewed by independent certified public accountants and prepared in conformity
with generally accepted accounting principles consistently applied, and in
accordance with past and current practices of the Company, so as to fairly and
accurately present the financial condition and results of operations of the
Company. The Unaudited Financial
-8-
<PAGE>
Statements, while unaudited, are prepared in accordance with past and current
practices of the Company so as to fairly and accurately present for the period
indicated the financial condition and results of operations of the Company.
September 30, 1994 is hereinafter sometimes referred to as the "Current Balance
Sheet Date. ---------------
- ----------
2.10 Liabilities. As of the Current Balance Sheet Date, the Company did
-----------
not have any direct or indirect indebtedness, liability, claim, loss, damage,
deficiency or obligation, known or unknown, liquidated or unliquidated, secured
or unsecured, accrued, absolute, contingent or otherwise, including without
limitation, liabilities on account of taxes, other governmental charges or
lawsuits brought, whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement (collectively,
"Liabilities"), that were not fully and adequately reflected in the Unaudited
Financial Statements for the six months ending September 30, 1994. The Company
does not have any Liabilities, other than (a) Liabilities fully and adequately
reflected in the Unaudited Financial Statements for the six months ending
September 30, 1994 and (b) Liabilities incurred since the Current Balance Sheet
Date in the ordinary course of business. Neither the Company nor any Seller has
any knowledge of any circumstance, condition, event or arrangement that is
likely hereafter to give rise to any liabilities of the Company, or any
successor to its business, except liabilities incurred in the ordinary course of
business.
2.11 No Material Adverse Change. Since the Current Balance Sheet Date,
--------------------------
there has been no material adverse change in the assets, properties, business,
operations, condition (financial or otherwise) or, in the reasonable business
judgment of Sellers, prospects of the Company or in its relationships with
providers or customers, whether or not covered by insurance. Neither Sellers
nor, to the best knowledge of Sellers, the Company knows of any such change that
is threatened. Since the Current Balance Sheet Date, (i) the Company has been
operated only in the ordinary and usual course of business, (ii) the properties
of the Company have been maintained in good repair, working order and condition,
(iii) the Company has not issued or sold any shares of its capital stock or paid
any dividend or other distribution on any of its shares of capital stock, and
(iv) all
-9-
<PAGE>
insurance coverage has been maintained in full force and effect by the
Company. Since the Current Balance Sheet Date, Sellers have used their best
efforts to preserve, and have preserved, the business organization of the
Company intact.
2.12 Accounts and Notes Receivable. All accounts and notes receivable of
-----------------------------
the Company as of the date hereof (including those reflected in the Current
Financial Data) arose in the ordinary and usual course of business of the
Company, represent valid obligations due to the Company from unaffiliated
parties, and are collectible in the aggregate record amounts thereof in
accordance with their terms in the ordinary and usual course of business of the
Company or have been written off or have had adequate reserves established
therefor.
2.13 Equipment, Inventory and Other Tangible Property. The Company has
------------------------------------------------
good and marketable title to each item of equipment, inventory, machinery,
vehicle, working stock, structure, fixture or other tangible personal property
that the Company owns as reflected on its books and records (including those
described in the Current Financial Data or acquired after the date thereof,
other than inventories or other personal property sold or otherwise disposed of
in the ordinary and usual course of business subsequent to the date thereof),
free and clear of all Liens. All leases, conditional sale contracts, franchises
or licenses pursuant to which the Company may hold or use any tangible personal
properties are valid and effective, and there is not under any of such
instruments any existing default or event of default or event which, with notice
or lapse of time or both, would constitute a default thereunder. The tangible
personal properties of the Company are in good operating condition and repair,
ordinary wear and tear excepted, and materially conform to all applicable
federal, state and local laws, regulations and ordinances, including without
limitation all environmental, zoning, building and health and safety laws,
regulations and ordinances (collectively, "Governmental Regulations"). No
------------------------
notice from any governmental body has been served upon any Seller or the Company
claiming any violation of any Governmental Regulation.
2.14 Real Estate. The Company does not own any real property. There are
-----------
no options held by the Company or any contractual obligations on its part to
purchase or
-10-
<PAGE>
acquire (including by way of lease) any interest in real property. No options
have been granted by the Company or contractual obligations entered into on its
part to sell or dispose of (including by way of lease) any interest in real
property. Schedule 2.14 sets forth true copies of all leases, subleases or other
-------------
agreements under which the Company is lessee or lessor of any real property. All
such leases, subleases and other agreements are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
thereto, enforceable in accordance with their respective terms, and grant the
leasehold estates or other interests they purport to grant, free and clear of
all Liens or other restrictions or limitations whatsoever granted by or caused
by the actions of the Company; and the Company enjoys a right of quiet
possession as against any Lien on such property. There is not under any of such
instruments any existing or claimed default, event of default or event which,
with notice or lapse of time or both, would constitute an event of default by
the Company, or, to the best knowledge of Sellers, by other parties to the
instruments. The real estate leased by the Company (including all structures,
improvements and fixtures thereon) materially conforms to all applicable
Governmental Regulations. Such real estate is zoned for the various purposes for
which it is currently being used. No notice from any governmental body has been
served upon any Seller or the Company claiming any violation of any such
Governmental Regulation, or requiring any substantial work, repairs,
construction, alterations or installation on or in connection with such real
estate which has not been complied with.
2.15 Trade Names, Trademarks, Service Marks and Copyrights, Patents and
------------------------------------------------------------------
Intellectual Property. Schedule 2.15 sets forth all trade and fictitious
- --------------------- -------------
business names, brand names, trademarks, service marks, franchises, copyrights,
patents, patent applications, and a description of trade secrets, designs,
inventions and computer software (including related documentation)
(collectively, "Intellectual Property") used by the Company that are material to
its business. The Company owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for the
operation of the business of the Company as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or used by
-11-
<PAGE>
the Company immediately prior to the Closing hereunder will be owned or
available for use by the Company on identical terms and conditions immediately
subsequent to the Closing hereunder. The Company has taken all necessary action
to maintain and protect each item of Intellectual Property that it owns or uses.
To the best knowledge of Sellers, (i) the Company has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and (ii) none of the Sellers and
the directors and officers (and employees with responsibility for Intellectual
Property matters) of the Company has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Company must
license or refrain from using any Intellectual Property rights of any third
party). To the knowledge of any of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Company.
2.16 Contracts and Other Agreements. Schedule 2.16 sets forth all of the
------------------------------ -------------
following contracts and other agreements to which the Company is a party or by
or to which it or its assets or properties are bound or subject: (a) contracts
or written agreements with any current or former officer, director, employee,
consultant, agent or other representative of the Company; (b) contracts or
written agreements for the sale of any of Seller's assets or properties,
tangible or intangible, other than in the ordinary course of business, or for
the granting to any person of any preferential rights to purchase any of the
Company's assets or properties; (c) contracts or written agreements under which
the Company agrees to indemnify any party, or to share tax liability with any
party; (d) all Obligations calling for aggregate payments in any one fiscal year
of more than $10,000 in any one case (or $50,000 in the aggregate, in the case
of any related series of contracts and other agreements), unless they can be
cancelled without liability, premium or penalty on not more than thirty days'
notice; (e) contracts and other agreements containing covenants of the Company
not to compete in any line of business or with any person in any
-12-
<PAGE>
geographical area, or covenants of any other person not to compete with the
Company in any line of business or in any geographical area; (f) contracts and
other agreements relating to the acquisition by the Company of any operating
business or the capital stock of any other person, under which the Company has
any ongoing or unsatisfied liability or obligation; (g) contracts relating to
the borrowing or lending of money; or (h) any other contracts or agreements,
whether or not made in the ordinary course of business, that are material to the
Company (other than those contracts or agreements reflected on other Schedules
hereto). There have been delivered or made available to the Purchaser true and
complete copies of all of the contracts and other written agreements set forth
in Schedule 2.16 or in any other Schedule hereto. All such contracts described
-------------
in clauses (a) through (h) above are valid, subsisting, in full force and effect
and binding upon the Company and, to the best knowledge of Sellers, on the other
parties thereto in accordance with their terms. The Company has paid in full or
accrued all amounts due by it thereunder and has satisfied in all material
respects, or provided for, all of its liabilities and obligations thereunder,
and is not in default under any such contract, nor, to the best knowledge of
Sellers, is any other party to any such contract in default thereunder, nor does
any condition exist that, with notice or lapse of time or both, would constitute
a default thereunder, which default would have a materially adverse effect on
the Company. No approval or consent of any person is needed in order that the
contract as set forth in Schedule 2.16 or on any other Schedule hereto continue
-------------
in full force and effect following the consummation of the transactions
contemplated by this Agreement.
2.17 Employment Contracts and Relations.
----------------------------------
(a) Schedule 2.17 contains a true and complete list of the names,
-------------
addresses, salaries, total compensation, title or functional position of all
directors and officers of the Company, and of all other employees, consultants,
representatives, salesmen or agents of the Company. Other than as indicated on
Schedule 2.17, the Company has not made a commitment or agreement to increase
- -------------
the wages or to modify the conditions or terms of employment of any of its
employees, consultants, representatives, salesmen or agents. Except for the
agreements listed in Schedule 2.17 or Schedule 2.18, the Company is not a
------------- -------------
-13-
<PAGE>
party to, and benefits are not provided for, any current or former directors,
officers or employees of the Company or their beneficiaries under any agency,
employment, management or consulting agreement.
(b) All reasonably anticipated obligations of the Company, whether arising
by operation of law, contract, past custom or otherwise, for unemployment
compensation benefits, pension benefits, advances, salaries, bonuses, sick leave
and other forms of compensation payable to the officers, directors and other
employees, consultants or agents of the Company in respect of the services
rendered by any of them prior to the date hereof have been paid or adequate
accruals there for have been made in the books and records of the Company and in
the Financial Statements.
2.18 Employee Benefit Plans. Schedule 2.18 sets forth all pension,
---------------------- -------------
profit-sharing, thrift or other retirement plans, employee stock ownership
plans, deferred compensation, stock ownership, stock purchase, performance share
or severance plans, welfare benefit plans or other similar plans, agreements,
arrangements or understandings (including, health, life insurance and other
benefit plans maintained for retirees), including, without limitation, any
"employee benefit plan" within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), sponsored or
maintained by the Company.
2.19 Insurance. Schedule 2.19 sets forth a list and brief description
--------- -------------
(specifying the insurer and the policy number, and setting forth the aggregate
limit, if any, of the insurer's liability thereunder) of all policies or binders
of fire, liability, product liability, workers' compensation, vehicular, "key
man" and other insurance held by the Company, and describes each pending claim
against such policies by the Company thereunder of more than $5,000. Such
policies and binders, to the best knowledge of Sellers, are valid and
enforceable in accordance with their respective terms, are in full force and
effect and insure against risks and liabilities to the extent and in the manner
deemed appropriate and sufficient by the Company. All premiums due on such
policies have been paid or accrued. The Company has not borrowed against any
such policies and has not assigned any of the proceeds of any such policies to
any other person or entity. Neither Sellers nor
-14-
<PAGE>
the Company is in default with respect to any provision contained in any such
policy or binder, the effect of which default could impair the ability of the
Company to avail itself of the coverage provided by such policy or binder, or
has failed to give any notice or present any claim under any such policy or
binder in due and timely fashion. There are no outstanding unpaid claims against
the Company which are covered by any such policy or binder. Sellers have no
knowledge of any state of facts or of the occurrence of any event that is
reasonably likely to form the basis for any material claim against the Company
not fully covered by the policies or binders referred to in Schedule 2.19
--------------
(subject to the deductibility provisions, if any, of such policies or binders).
2.20 Accounts Payable. Schedule 2.20 sets forth a true and correct aged
----------------- -------------
list of all accounts payable of the Company as of the Current Balance Sheet
Date.
2.21 Tax Matters. The Company has timely filed or caused to be filed, all
-----------
federal income, state and other tax returns, forms and information which it is
required to file. All of the information in such filings is accurate and such
filings accurately reflect in all respects the tax liabilities of the filing
entity. All taxes, sales taxes, assessments and other governmental charges
imposed upon the Company or upon any of the assets, income or franchises of the
Company, or sales by the Company, other than any of such charges which are
currently payable without penalty or interest, have been paid or accrued on the
books of the Company. The Company has withheld and paid all taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
Sellers do not know of any actual or proposed tax assessment or adjustment with
respect to any item which has to do with the Company for any fiscal period. The
Company has not waived or extended any applicable statute of limitations
relating to the assessment of state or other taxes. No examination of the state
or other tax returns, forms or information of the Company is currently in
progress or, to the best knowledge or Sellers, threatened.
2.22 Compliance with Laws. The Company is not in violation of any
--------------------
applicable judgment, order, injunction, award or decree. The Company is not in
violation of any Governmental Regulations, the violation of which would
materially and
-15-
<PAGE>
adversely affect the assets, properties, business, operations or condition
(financial or otherwise) or, in the reasonable business judgment of Sellers, the
prospects of the Company. The Company (including each of its professional
employees) has all permits, licenses, orders or approvals of any federal, state
or local governmental or regulatory body (collectively, "Permits") that are
-------
material to or necessary in the conduct of the business of the Company. All such
Permits are in full force and effect, no violations are or have been received
by, or are known to, the Company or Sellers in respect of any such Permit, and
no proceeding is pending or threatened to revoke or limit any such Permit.
2.23 Actions and Proceedings. There are no suits, actions, claims or
-----------------------
legal, administrative or arbitration proceedings or investigations
(collectively, "Actions") (whether or not the defense thereof or liabilities in
-------
respect thereof are covered by policies of insurance) pending or, to the best
knowledge of Sellers, threatened against, involving or affecting the Company,
or, to the best knowledge of Sellers, any employee of the Company, or any of the
Company's properties or assets, which, individually or in the aggregate, might
have a material adverse effect on the transactions contemplated hereby or upon
the assets, properties, business, operations or condition (financial or
otherwise) or, in the reasonable business judgment of Sellers, the prospects of
the Company, and there are no outstanding orders, writs, injunctions, awards,
sentences or decrees of any court, governmental agency, regulatory body or
arbitration tribunal against, or, to the best knowledge of Sellers, involving or
materially affecting the Company (exclusive of any statute or regulation of
general applicability).
2.24 Banks. Schedule 2.24 sets forth (a) the name of each bank, trust
----- -------------
company and stock or other broker which has maintained an account, credit line
or safe deposit box or vault for the Company, or otherwise maintains relations
with the Company, (b) the names of all persons authorized to draw on any such
account or credit line or to have access to any such safe deposit box or vault
and (c) the purpose of each such account, credit line, safe deposit box or
vault.
2.25 Powers of Attorney. Schedule 2.25 sets forth the names of all
------------------ -------------
persons authorized by proxies, powers of attorney or other like instruments to
act on behalf of the
-16-
<PAGE>
Company in matters concerning any of its business or affairs. No such proxies,
powers of attorney or other like instruments are irrevocable.
2.26 Customers.
---------
(a) Largest Customers. Schedule 2.26 sets forth (i) the Company's five
----------------- -------------
largest customers (in dollar volume) during the most recent fiscal year and for
the six month period ending on the Current Balance Sheet Date and (ii) each
provider and each other customer, if any, of material importance to the business
of the Company.
(b) Continuing Relationships. Sellers have no knowledge that (other than
------------------------
upon contract completion) any such provider or customer intends to cancel or
otherwise modify its relationship with the Company or to decrease materially or
limit its services, supplies or materials provided to the Company or its usage
or purchase of the services or products of the Company. The acquisition of the
Shares by Purchaser will not, to the best knowledge of Sellers, adversely affect
the relationship of the Company with any such provider or customer.
2.27 Full Disclosure. The representations and warranties made by the
---------------
Company and the Sellers in this Agreement and any statements made by them in any
Exhibit or Schedule to this Agreement do not, in light of the circumstances
under which they are made, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained
therein not false or misleading. There is no fact known to any Seller
pertaining to the Shares or to the business of the Company which such Seller has
not disclosed to Purchaser in writing which materially adversely affects or,
insofar as any Seller can foresee, will materially adversely affect the assets,
properties, business, operations, conditions (financial or otherwise) or, in the
reasonable business judgment of Sellers, the prospects of the Company, or the
ability of any Seller to perform his or her obligations under this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Sellers that:
3.1 Organization. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the Commonwealth of
Massachusetts, and has the
-17-
<PAGE>
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement.
3.2 Authority. The execution, delivery and performance of this Agreement
---------
has been duly and validly authorized and approved by the Board of Directors of
Purchaser, and no further corporate action is required to authorize the
execution, delivery or performance of this Agreement by Purchaser. Purchaser
has the right, power and authority to enter into and perform the obligations to
be performed by it under this Agreement and to consummate the transactions
contemplated of it hereby.
3.3 Binding Obligation. This Agreement has been duly executed by and on
------------------
behalf of Purchaser and constitutes a valid and legally binding obligation of
Purchaser.
3.4 No Conflicts. The execution, delivery and performance of this
------------
Agreement by Purchaser does not and will not:
(a) violate, conflict with or result in a breach of, or constitute a
default under, any of the terms, conditions or provisions of
(i) the Articles of Organization or Bylaws of Purchaser, or
(ii) any statute, law or regulation of any jurisdiction as such law or
jurisdiction relates to Purchaser, or any judgment, order, injunction, decree or
award of any court or arbitrator, administrative agency or governmental or
regulatory body against or binding upon Purchaser; or
(b) violate, conflict with or result in the breach or termination of, or
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time, or both, would constitute) a default (by way
of substitution, novation or otherwise) under the terms of any contract,
mortgage, lease, bond, indenture, agreement, franchise or other instrument or
obligation, whether written or oral which, individually or in the aggregate,
would materially adversely affect the Purchaser or any of its assets or
properties.
3.5 Litigation and Other Proceedings. There are no Actions pending before
--------------------------------
any court or governmental authority or, to the best knowledge of Purchaser,
threatened, which question or challenge the validity of this Agreement or any
action taken
-18-
<PAGE>
or to be taken by Purchaser in connection with the transactions contemplated
hereby or which, individually or in the aggregate, might have a material adverse
effect upon the assets, properties, business, operations or condition (financial
or otherwise) of the Purchaser or, in the reasonable business judgment of
Purchaser, the prospects of the Purchaser.
3.6 No Consent. No consent of any other party and no consent, license,
----------
approval or authorization of, or exemption by, or registration or declaration or
filing with, any governmental authority, bureau or agency is required in
connection with the execution, delivery, validity or enforceability of this
Agreement with respect to Purchaser or the consummation by the Purchaser of the
transactions contemplated hereby.
3.7 Financial Statements. Purchaser has delivered to Seller true copies,
--------------------
certified by Price Waterhouse, the Purchaser's independent certified public
accountants, of the Company's Balance Sheets and related Statements of Income,
Retained Earnings and Cash Flows of the Purchaser for the two fiscal years ended
May 31, 1993 and 1994 (the "Audited Financial Statements"), and the comparable
financial data, certified by the Purchaser's Chief Financial Officer, for the
three months ended August 31, 1994 (the "Unaudited Financial Statements"), all
of which Audited Financial Statements and Unaudited Financial Statements are
incorporated herein as Schedule 3.7 (collectively, the "Financial Statements").
------------ --------- ----------
The Audited Financial Statements are audited and prepared in conformity with
generally accepted accounting principles consistently applied, and in accordance
with past and current practices of the Purchaser, so as to fairly and accurately
present the financial condition and results of operations of the Purchaser. The
Unaudited Financial Statements, while unaudited, are prepared in accordance with
past and current practices of the Purchaser so as to fairly and accurately
present for the period indicated the financial condition and results of
operations of the Purchaser.
3.8 No Material Adverse Change. Since August 31, 1994, there has been no
--------------------------
material adverse change in the assets, properties, business, operations,
condition (financial or otherwise) or, in the reasonable business judgment of
Purchaser, prospects of the Purchaser or in its relationships with providers or
customers, whether or not covered
-19-
<PAGE>
by insurance. The Purchaser does not know of any such change that is threatened.
Since August 31, 1994, (i) the Purchaser has been operated only in the ordinary
and usual course of business, (ii) the properties of the Purchaser have been
maintained in good repair, working order and condition, and (iii) the Purchaser
has not issued or sold any shares of its capital stock or paid any dividend or
other distribution on any of its shares of capital stock.
3.9 Full Disclosure. The representations and warranties made by the
---------------
Purchaser in this Agreement and any statements made by it in any Exhibit or
Schedule to this Agreement do not, in light of the circumstances under which
they are made, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements contained therein not false
or misleading. There is no fact known to Purchaser pertaining to the business
of the Purchaser which Purchaser has not disclosed to Sellers in writing which
materially adversely affects or, insofar as any Purchaser can foresee, will
materially adversely affect the assets, properties, business, operations,
conditions (financial or otherwise) or, in the reasonable business judgment of
Purchaser, its prospects, or the ability of the Purchaser to perform its
obligations under this Agreement.
4. CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE.
------------------------------------------------
The obligations of Purchaser under this Agreement are subject to the
satisfaction, at or before the Closing, of all the conditions set out below in
this Section 4. Purchaser may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
--------- -------
condition shall constitute a waiver by Purchaser of any of its rights or
remedies, at law or in equity, if any Seller shall be in default of any of his
or her respective representations, warranties or covenants under this Agreement.
4.1 Documents, Representations and Warranties at Closing. All
----------------------------------------------------
representations and warranties by Sellers in this Agreement or in any Schedule
or Exhibit
-20-
<PAGE>
to this Agreement shall be true and correct in all material respects on and as
of the Closing Date as though made on and as of such date.
4.2 Compliance of Sellers. Sellers shall have, or shall have caused the
---------------------
Company to have, performed, satisfied and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by them or it on or before the Closing Date.
4.3 No Adverse Changes. During the period from the Current Balance Sheet
------------------
Date to the Closing Date, there shall not have been any material adverse change
in the financial condition or the results of operations of the Company, and the
Company shall not have sustained any material loss or damage to its assets,
whether or not insured, that affects its ability to conduct a material part of
its business.
4.4 Sellers' Closing Certificates. Purchaser shall have received a
-----------------------------
certificate from each Seller, dated the Closing Date, certifying in such detail
as Purchaser and its counsel may reasonably request, that the conditions
specified in Sections 4.1, 4.2 and 4.3 have been fulfilled.
4.5 Opinion of Counsel to Sellers and the Company. Purchaser shall have
---------------------------------------------
received from Hoefle & Phoenix, P.A., counsel for Sellers and the Company, an
opinion dated the Closing Date, in the form of Schedule 4.5.
-------------
4.6 No Litigation. No Action pertaining to the Company or the
-------------
transactions contemplated by this Agreement shall have been instituted or
threatened on or before the Closing Date.
4.7 Certificate of Authority. The execution and delivery of this Agreement
-------------------------
by Sellers and the Company, and the performance of the covenants and obligations
hereunder shall have been duly authorized by all necessary corporate action and
by all of the Sellers, and Purchaser shall have received copies of all
resolutions and consents pertaining to that authorization, certified by the
Secretary of the Company.
4.8 Assignments and Consents. All necessary agreements, assignments and
------------------------
consents to the consummation of the transactions contemplated by this Agreement,
or
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<PAGE>
otherwise pertaining to the matters covered by it, shall have been obtained by
the Company and delivered to Purchaser.
4.9 Certificates of Good Standing. Purchaser shall have received a
-----------------------------
certificate of legal existence for the Company, as of a date not more than
twenty (20) days before the Closing Date, from the Secretary of State of the
State of New Hampshire.
4.10 Resignations. Sellers shall have caused all of the directors of the
------------
Company to resign and shall have appointed or elected in their stead the persons
designated by Purchaser.
4.11 Review of Company. Purchaser and its agents, including its
-----------------
independent accounts and legal counsel, shall have had sufficient opportunity to
review and have access to financial records of the Company and the results of
said review shall be satisfactory to Purchaser and such agents.
4.12 Form of Documents. The form and substance of all certificates,
-----------------
instruments, opinions, schedules and other documents delivered to Purchaser
under this Agreement shall be reasonably satisfactory to Purchaser and its
counsel.
4.13 Employment Agreements; Non-Solicitation and Confidentiality
-----------------------------------------------------------
Agreements. The Company shall have entered into an Employment Agreement in
- ----------
substantially the form set forth in Schedule 4.13(a) and a Non-Solicitation and
Confidentiality Agreement in substantially the form set forth in Schedule
4.13(b) with each of the Sellers.
5. CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE.
--------------------------------------------
The obligations of Sellers to sell and transfer the Shares under this
Agreement are subject to the satisfaction by Purchaser, at or before the
Closing, of all the following conditions:
5.1 Representations and Warranties at Closing. All representations and
-----------------------------------------
warranties by Purchaser contained in this Agreement or in any written statement
delivered by Purchaser under this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representations
and warranties were made on and as of such date.
-22-
<PAGE>
5.2 Compliance of Purchaser. Purchaser shall have performed and complied
-----------------------
with all covenants and agreements, and satisfied all conditions that it is
required by this Agreement to perform, comply with, or satisfy, before or at the
Closing.
5.3 Purchaser's Closing Certificate. Sellers shall have received a
-------------------------------
certificate, dated the Closing Date, signed by Purchaser's Clerk, certifying, in
such detail as Sellers and their counsel may reasonably request, that the
conditions specified in Sections 7.1 and 7.2 have been fulfilled.
5.4 Employment Agreements; Non-Solicitation and Confidentiality
----------------------
Agreements. Each of the Sellers shall have been offered employment with the
- -----------
Company pursuant to the terms of the Employment Agreement and shall have entered
into a Non-Solicitation and Confidentiality Agreement with the Company.
5.5 Opinion of Counsel to Purchaser. Seller shall have received from Hill
---
& Barlow, A Professional Corporation, counsel for Purchaser, an opinion dated
the Closing Date, in the form of Schedule 5.5.
------------
5.6 Certificate of Authority. The execution and delivery of this
------------------------
Agreement by Purchaser, and the performance of the covenants and obligations
hereunder, shall have been duly authorized by all necessary corporate action and
Sellers shall have received copies of all resolutions and consents pertaining to
that authorization, certified by the Clerk of the Purchaser.
6. THE CLOSING
-----------
6.1 The Closing Date and Place. The transfer and delivery of the Shares
--------------------------
by Sellers and the delivery of the consideration by Purchaser (the "Closing")
-------
shall take place at the offices of Hill & Barlow, One International Place,
Boston, Massachusetts 02110, at 10:00 a.m. on November 30, 1994, or at such
other time and place as the parties may agree to in writing (the "Closing
-------
Date").
- -----
6.2 Actions and Deliveries by Sellers at the Closing. At the Closing,
------------------------------------------------
Sellers shall deliver or cause to be delivered to Purchaser, against delivery of
the certified checks and Promissory Notes specified in Section 1.2(a), the
Shares.
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<PAGE>
6.3 Actions and Deliveries by Purchaser at the Closing. At the Closing,
--------------------------------------------------
Purchaser shall deliver or cause to be delivered to Sellers, against delivery of
the Shares, the certified checks and Promissory Notes specified in Section
1.2(a).
7. FURTHER ASSURANCES.
------------------
7.1 Sellers' Further Assurances. Each Seller, at any time after the
---------------------------
Closing Date, shall execute, acknowledge and deliver any further assignments,
conveyances and other assurances, documents and instruments of transfer
requested by Purchaser and will take any other action consistent with the terms
of this Agreement that may be requested by Purchaser for the purpose of selling,
transferring, assigning, granting, conveying, delivering or confirming to
Purchaser as of the Closing Date any or all of the Shares. If requested by
Purchaser, each Seller, at Purchaser's cost, further agrees to prosecute or
otherwise enforce in his or her own name for the benefit of Purchaser any
claims, rights or benefits that are transferred to Purchaser by this Agreement
and that require prosecution or enforcement in Seller's name.
7.2 Purchasers' Further Assurances. Purchaser, at any time after the
------------------------------
Closing Date, shall execute, acknowledge and deliver any further assurances,
documents and instruments of transfer reasonably requested by Sellers and will
take any other action consistent with the terms of this Agreement that may be
reasonably requested by Sellers for the purpose of concluding the transactions
contemplated by this Agreement.
8. INDEMNIFICATION.
---------------
8.1 Indemnification by Sellers. Subject to the provisions of Section 8.3,
--------------------------
each Seller hereby agrees to indemnify and hold harmless Purchaser, its
officers, directors, partners, employees, agents and counsel, from and against
any and all damages or deficiencies resulting from (a) any misrepresentation,
breach of warranty or non-fulfillment of any covenant, indemnity, undertaking or
agreement on the part of Sellers contained in this Agreement, (b) any third
party (including employees and former employees) claims arising out of events,
facts or circumstances in existence on or prior to the Closing Date with respect
to the operations of the Company, (c) any federal, state or local taxes assessed
against the Company for any period or partial period ending on or
-24-
<PAGE>
before the Closing Date, and any interest, penalties or additions to taxes
attributable to the failure to timely pay any tax liability of Sellers and (d)
any and all actions, suits, proceedings, demands, assessments or judgments,
costs or expenses (including, but not limited to, reasonable attorneys' fees and
other costs and expenses incident to proceedings or investigations or to the
defense of any claim) relating to any of the foregoing. Purchaser shall notify
the Sellers in writing when an event giving rise to indemnity under this Section
8.1 has occurred, specifying the circumstances of the asserted right to
indemnification hereunder.
8.2 Indemnification by Purchaser. Purchaser hereby agrees to indemnify
----------------------------
and hold harmless each Seller from and against any and all damages or
deficiencies resulting from (a) any misrepresentation, breach of warranty or
non-fulfillment of any covenant, indemnity, undertaking or agreement on the part
of Purchaser contained in this Agreement, (b) any liability arising from, under
or with respect to the operation of the Company by the Purchaser after the
Closing Date, and (c) any and all actions, suits, proceedings, demands,
assessments or judgments, costs or expenses (including, but not limited to,
reasonable attorneys' fees and other costs and expenses incident to proceedings
or investigations or to the defense of any claim) related to any of the
foregoing. Sellers shall notify the Purchaser in writing when an event giving
rise to indemnity under this Section 8.2 has occurred, specifying the
circumstances of the asserted right to indemnification hereunder.
8.3 Defenses of Claim. If any party entitled to indemnification pursuant
-----------------
to Section 8.1 or 8.2 (an "Indemnified Party") asserts that any other party is
-----------------
obligated to indemnify it pursuant to either of such Sections (an "Indemnifying
------------
Party"), or in the event that any Action is begun, made or instituted as a
- -----
result of which such Indemnifying Party may become obligated to such Indemnified
Party under either such Section, such Indemnified Party shall give prompt
written notice thereof to such Indemnifying Party; provided, however, that the
-------- -------
omission so to notify such Indemnifying Party shall not relieve it from any
liability which it may have to such Indemnified Party otherwise than under
-25-
<PAGE>
such Section and shall not relieve the Indemnifying Party from liability under
such Section unless such Indemnifying Party is prejudiced by such omission.
In case any Action is brought against any Indemnified Party and it notifies
the Indemnifying Party of the commencement thereof, such Indemnifying Party
shall have the right to participate in, and, to the extent that it may wish,
jointly with any other Indemnifying Party similarly notified, to assume the
defense of, such Action, with counsel reasonably satisfactory to such
Indemnified Party. After notice from such Indemnifying Party to such
Indemnified Party of its election so to assume the defense of such Action, such
Indemnifying Party shall not be liable to such Indemnified Party pursuant to the
provisions of Sections 8.1 or 8.2 hereof for any legal or other expense
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation. No Indemnifying Party
shall be liable to any Indemnified Party for any settlement of any Action made
without the consent of such Indemnifying Party; and no Indemnifying Party may
unreasonably withhold its consent to any such settlement. No Indemnifying Party
shall consent to the entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability with respect
to such action.
Notwithstanding the right of such Indemnifying Party to assume the defense
of any action to which such Indemnified Party may become a party or a target,
such Indemnified Party shall have the right to employ separate counsel and to
participate in the defense of such action, and such Indemnifying Party shall
bear the reasonable fees, costs and expenses of such separate counsel, if (a)
the use of the counsel chosen by the Indemnifying Party to represent the
Indemnified Party would present such counsel with a conflict of interest; (b)
the defendants in, or targets of, any such action include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it or to other
indemnified parties which are different from or additional to those available to
the Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such
-26-
<PAGE>
action on behalf of the Indemnified Party); (c) in the exercise of the
Indemnified Party's reasonable judgment, the Indemnifying Party shall not have
employed satisfactory counsel to represent the Indemnified Party within a
reasonable time after notice of the institution of such Action; (d) the
Indemnifying Party shall authorize the Indemnified Party to employ separate
counsel at the expense of the Indemnifying Party; or (e) the Indemnifying Party
shall not have assumed the defense of such Action. The Indemnified Party shall
not settle any such Action without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. All actions on behalf of the Sellers
under this Section 8.3 shall be taken by, and all notices to the Sellers under
this Section 8.3 shall be provided to David Jackson, as the representative of
the Sellers, and Purchaser shall be entitled to rely on Mr. Jackson as acting
and speaking for all of the Sellers.
8.4 Claim and Limitations.
---------------------
Notwithstanding anything herein to the contrary, neither party shall
not be liable to the other party hereto for any amounts under this Section 8 in
excess of the total consideration to be paid for the Shares as determined in
Section 1.2 hereof.
8.5 Withhold and Offset.
-------------------
(a) In the event that Purchaser wishes to withhold payment of any
amounts to be delivered by Purchaser to Sellers as Performance Contingent
Consideration (to the extent of the amount so claimed by Purchaser and interest
thereon at the so-called "prime rate" of interest announced in the Wall Street
-----------
Journal as of the date the Purchaser makes such withholding request) to secure a
particular indemnification claim pursuant to this Section 8 until such claim
shall have been finally adjudicated, it shall provide Sellers with a certificate
signed by the president stating that (i) it has paid or properly accrued, or the
board of directors of Purchaser in good faith reasonably believes that it will
have to pay or accrue, damages, losses, expenses or liabilities in an aggregate
stated amount for which Purchaser is entitled to reimbursement under this
Section 8 (a "Loss") and specify in reasonable detail the individual items of
damages, loss, expense or liability included in the amount so stated, the date
each such item was paid or properly accrued or the basis for such anticipated
liability, and the nature of the misrepresentation,
-27-
<PAGE>
breach of warranty or covenant or claim to which such item is related and (ii)
it has reviewed the insurance policies of the Company covering pre-Closing
occurrences and has made a good faith determination that the Loss is not covered
by such insurance.
If Sellers agree in writing with such withholding, then Purchaser
shall be entitled to withhold an amount equal to the Loss until such claim shall
have been finally adjudicated. If Sellers do not agree with such withholding,
they shall provide Purchaser, within ten (10) days after receipt of Purchaser's
certificate, with their own certificate signed by at least two Sellers
specifically indicating the portions of Purchaser's certificate to which they
object. If the parties are thereafter unable to agree as to an amount to be
withheld within a twenty (20) day period, they shall, within the next ten (10)
days after such period, each appoint an arbitrator who shall in turn appoint a
third mutually agreeable arbitrator to make a determination as to whether any
amount may be withheld to secure the Loss. Each arbitrator shall be a
consultant or other person reasonably familiar with the Company's line of
business which has not been involved in the rendering of any services to Sellers
or the Purchaser within the one-year period prior to the date of its appointment
to resolve the dispute. The arbitrators shall make a decision within a twenty
(20) day period (a) to permit Purchaser to withhold all or any portion of such
amount; (b) to reject Purchaser's request to withhold all or any portion of such
amount or (c) to place all or any portion of the amount in controversy in an
escrow account with one of the arbitrators or a third party unaffiliated with
Purchaser or Sellers pending the final adjudication of the item giving rise to
the Loss.
(b) Notwithstanding any determination under Section 8.5(a) above, if
any adjudication shall be in favor of Purchaser, then Purchaser shall have the
right to offset against such Performance Contingent Consideration the amount to
which Purchaser is entitled under Section 8. If Sellers have not initiated an
action in a court of competent jurisdiction seeking such an adjudication within
one year next following the date of receipt of Purchaser's certificate described
in Section 8.5(a) above, then any such claim shall thereafter be deemed
adjudicated in favor of Purchaser and a permitted offset for all purposes under
this Section 8. If such adjudication is in favor of Seller and either
-28-
<PAGE>
Purchaser has withheld all or any portion of the Loss or such amounts have been
held in escrow, then such amounts and accrued interest shall be paid to Sellers
promptly in accordance with the provisions of Section 1.2 of this Agreement.
Notwithstanding anything in this Section 8.5 to the contrary, in the event that
a Seller or Sellers shall be in default of its obligations under Section 10 of
this Agreement, the Purchaser shall in no event be entitled to offset against
the Performance Contingent Consideration of the non-defaulting Seller or
Sellers.
8.6 Remedies. The indemnification rights provided in Section 10 shall be
--------
in addition to, and shall not restrict or repair in any respect, any other
rights or remedies of any party hereto at law, equity or otherwise. Each of
Sellers hereby agrees that he or it will not make any claim for indemnification
against the Company by reason of the fact that he or it was a director, officer,
employee, or agent of any such entity or was serving at the request of any such
entity as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, by-law, agreement or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by Purchaser against such Seller pursuant to this Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
The representations and warranties contained herein and in any Schedules or
Exhibits hereto and the covenants and agreements to be performed or complied
with by the respective parties before the Closing Date shall be deemed to be
continuing and shall survive the Closing for a period of five (5) years from the
Closing. All covenants contained in this Agreement to be performed, in whole or
in part, after the Closing shall survive the Closing.
10. NON-SOLICITATION
----------------
10.1 Non-Solicitation. Each Seller covenants that for a period of the
----------------
longer of five years following the Closing Date or one year after termination of
such Seller's employment with the Purchaser, Seller shall not, directly or
indirectly:
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<PAGE>
(i) Provide or offer or attempt to provide, whether as an officer,
director, employee, partner, independent contractor or otherwise, consulting
services to any person or entity who as of the date of the termination or
expiration of the Seller's employment with the Purchaser or the Company was or
had been a client (which means Past, Present, and Potential Client, as defined
below, of Purchaser or the Company);
(ii) Interfere with the Purchaser's or the Company's relations with
any person or entity who as of the date of the termination or expiration of the
Seller's employment with the Purchaser or Company was a Client (which means
Past, Present and Potential Client as defined below of Purchaser of the
Company); or
(iii) Induce or attempt to induce, directly or indirectly, any
employee of the Purchaser or Company to terminate his or her employment, or hire
or attempt to hire, directly or indirectly, any such person.
The term "Past Client" shall mean at any particular time any person or
entity who at any point prior to such time has been but at such time is not a
customer or client of Purchaser or the Company. The term "Present Client" shall
mean at any particular time any person or entity who is at such time a customer
or client of the Purchaser or the Company. The term "Potential Client" shall
mean at any particular time any person or entity to whom the Purchaser or the
Company, through any of their officers or employees, has within five years prior
to such time offered (by means of a personal meeting, telephone call, or a
letter or a written proposal specifically directed to the particular person or
entity) to serve as a consultant but who is not at such time a customer or
client of the Purchaser or the Company. The preceding sentence is meant to
exclude form letters and blanket mailings. The term "entity" when used in this
paragraph shall mean a particular division or department of a corporation (so
that, by way of example, the fact that the accounting department of Digital
Equipment Corporation is a "Present Client" would not prevent a Seller from
soliciting business from the European operations division of Digital Equipment
Corporation). At the end of the term of this Section 10, the Purchaser and the
Sellers shall jointly establish a list of persons and entities who are Past,
Present or Potential Clients.
-30-
<PAGE>
10.2 Confidentiality. Except in performance of services for the Purchaser
---------------
or the Company, none of the Sellers shall, either during the period of his or
her employment with the Purchaser or the Company or thereafter, use for his or
her own benefit or disclose to or use for the benefit of any person outside the
Purchaser or the Company any information not already lawfully available to the
public concerning any Intellectual Property (as defined below), including client
lists, whether such Seller has such information in his or her memory or embodied
in writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and any other written materials
relating to the business of the Purchaser or the Company shall be the sole
property of the Purchaser. Upon the termination of a Seller's employment by the
Purchaser in any manner or for any reason, the Seller shall promptly surrender
to the Purchaser all originals and copies of any Intellectual Property, and he
or she shall not thereafter use any Intellectual Property. For purposes hereof,
the term Intellectual Property shall mean all research, information, client
lists, and all other technical and research data made, conceived, developed
and/or acquired by a Seller solely or jointly with others during the period of
employment by the Purchaser or the Company, which related to consulting advice
as it was or is now rendered or as it may, from time to time, hereafter be
rendered or proposed to be rendered, but excluding such individual's ideas and
thought processes which are not embodied in written or machine readable form.
10.3 Remedies. Sellers acknowledge that the restrictions contained in
--------
this Section 12 are reasonable and necessary for Purchaser's protection and the
realization of Purchaser's benefit of its bargain under this Agreement and that
a violation of this Section 12 will cause damage which may be irreparable or
impossible to ascertain and, accordingly, that Purchaser shall be entitled from
a court of competent jurisdiction to specifically enforce these restrictions or
restrain a violation of this Section 12. Sellers hereby waive any requirement
of law for the posting of a bond or bonds by Purchaser in the event that
Purchaser seeks by means of an action at law or in equity to restrain or enjoin
a violation of this Section 12. Purchaser's right to such relief shall be in
addition to any other rights Purchaser may have pursuant to this Agreement or to
the Employment,
-31-
<PAGE>
Confidentiality and Non-Competition Agreement described in Section 6.14 or
otherwise, whether at law or in equity. However, Purchaser may seek damages
under this Section 12 only from a Seller or those Sellers who violate the
covenants set forth in this Section 12, and the breach of any such covenant by
one Seller shall not give rise to any remedy for such breach, for damages or
otherwise, against any other non-breaching Seller.
11. COSTS AND BROKER'S FEES
-----------------------
11.1 Costs Borne by Parties. Each party shall pay all costs and expenses
----------------------
incurred by it in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement.
11.2 Broker's Fees Liabilities. Purchaser, on the one hand, and Sellers,
-------------------------
on the other, represent and warrant to the others, that it or any of them, as
the case may be, did not deal directly or indirectly with or through any broker
or finder in connection with the transactions contemplated by this Agreement.
Each party shall indemnify and hold the other parties harmless from and against
any claim against such party by any broker or finder for any fee or payment
arising out of the negotiation or execution of this Agreement or the
consummation of the transactions contemplated hereby.
12. FORM OF AGREEMENT
-----------------
12.1 Headings. The subject headings of the Sections and subsections of
--------
this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
12.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties pertaining to the subject matter contained herein and
supersedes all prior and contemporaneous agreements, representations, and
understandings of the parties hereto. No supplement, modification, or amendment
of this Agreement shall be binding unless executed in writing by all the
parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
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<PAGE>
12.3 Counterparts. This Agreement may be executed simultaneously, in one
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.4 Severability; Reformation. In case any one or more of the
-------------------------
provisions (or parts of a provision) contained in this Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
(or part of a provision) of this Agreement; and this Agreement shall, to the
fullest extent lawful, be reformed and construed as if such invalid or illegal
or unenforceable provision (or part of a provision) had never been contained
herein, and such provision (or part) reformed so that it would be valid, legal
and enforceable to the maximum extent possible. Without limiting the foregoing,
if any provisions (or part of a provision) contained in Section 12 shall for any
reason be held to be excessively broad as to duration, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
fullest extent compatible with then existing applicable law.
13. PARTIES
-------
13.1. Other Parties. Nothing in this Agreement, whether express or
-------------
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action against any party to this Agreement.
13.2 Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither this Agreement nor any of the rights,
interests and obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of each of the other parties hereto;
provided, however, that Purchaser shall be permitted to make such assignment to
- -------- -------
any person or entity which has acquired all or substantially all of the assets
or capital stock of Purchaser.
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<PAGE>
14. TERMINATION.
-----------
In the event that (a) the Closing Date shall not have occurred on or prior
to December 31, 1994, or (b) a condition set forth in Section 4 or 5 hereto has
not been satisfied in accordance with its terms, then, in the case of clause (a)
of this sentence, at the option of the Sellers or Purchasers, or in the case of
clause (b), at the option of the party for whose benefit the condition was set
forth herein, this Agreement shall terminate upon the giving or written notice
of such termination by the party exercising such option to the other party, in
which event neither the Sellers nor Purchaser shall have any further rights or
obligations hereunder, except for (i) any claim for damages arising by virtue of
the intentional failure or refusal of a party to perform its respective
obligations hereunder or to take any other action within such party's control
provided for herein necessary to consummate the transactions contemplated hereby
or (ii) any claim based on Sections 13.2 or 20 of this Agreement.
15. JOINT AND SEVERAL OBLIGATIONS
-----------------------------
Except as otherwise stated in this Agreement, any reference herein to an
obligation, covenant, representation or warranty of Sellers shall indicate a
joint and several obligation of each of Sellers individually.
16. NOTICES
-------
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service, if served personally on the party to whom notice is to be given
or if telefaxed to such person with confirming receipt, or on the third day
after mailing, if mailed to the party to whom notice is to be given, by
registered or certified first class mail, postage prepaid, and properly
addressed as follows:
To Purchaser: The Registry, Inc.
189 Wells Avenue
Newton, Massachusetts 02159
Attention: President
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<PAGE>
With a Copy to: Hill & Barlow
One International Place
Boston, MA 02110
Attention: Andrea M. Teichman, Esq.
To Sellers: At their respective addresses set forth in
Schedule 1.1.
With a Copy to: Hoefle & Phoenix, P.C.
95 Court Street, P.O. Box 4040
Portsmouth, N.H. 03802-4040
Attention: Daniel Hoefle, Esq.
Any party may change its address for purposes of this Section 16 by giving the
other parties notice of the new address in the manner set forth above: provided,
--------
however, any notice of change of address shall not be in effect until received.
17. PUBLICITY
---------
No public announcement related to this Agreement or the transactions
contemplated hereby, nor any other announcement or disclosure to any employee,
customer or supplier of Company or to any other third party will be made by
Purchaser, Company or Sellers without the prior approval of the other parties to
this Agreement (which approval shall not be unreasonably withheld or delayed),
except as shall be required by applicable law or governmental regulations, in
which case the party making the announcement shall afford the other parties as
much advance notice as is practicable under the circumstances.
18. CONFIDENTIALITY AND NONDISCLOSURE.
---------------------------------
All confidential information which shall have been furnished or disclosed
by Sellers and the Company, on the one hand, or the Purchaser, on the other
hand, to the other party pursuant to this Agreement shall be held in confidence
pursuant to the Confidential Disclosure Agreement between Sellers and the
Purchaser dated October 7, 1994 attached hereto as Schedule 18, and shall not be
-----------
disclosed to any person other than their respective
-35-
<PAGE>
employees, directors, legal counsel, accountants or financial advisors with a
need to have access to such information.
19. USE OF NAME "AXIOM CONSULTING GROUP, INC."
------------------------------------------
Sellers and the Company acknowledge and agree that through the Share
purchase hereunder, Purchaser is acquiring an exclusive use of the name "Axiom
Consulting Group, Inc." for which the Sellers have received full and adequate
consideration, and that the Sellers will not use such name or any similar name
subsequent to the Closing except in connection with activities performed for the
Company or the Purchaser.
20. GOVERNING LAW
-------------
This Agreement shall be construed in accordance with, and governed by, the
laws of the Commonwealth of Massachusetts, without giving effect to rules
governing choice of law. The parties hereto hereby consent to the jurisdiction
of any state or federal court located within Suffolk County, Massachusetts,
waive personal service of process, and assent that service of process may be
made by registered mail to the parties' respective addresses as provided in
Section 16 above, and shall be effective in the same manner as notices are
effective under such Section 16.
-36-
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PURCHASER: THE REGISTRY, INC.
BY: /s/ George A. Conway
--------------------
Its President/CEO
SELLERS: /s/ David E. Jackson
/s/ Michelle Holzweiss by POA
-------------------------
David Jackson
/s/ Robert J. Schindelar
-------------------------
Robert Schindelar
/s/ Michelle Holzweiss
-------------------------
Michelle Holzweiss
/s/ Mitchell L. Northcutt
-------------------------
Mitchell L. Northcutt
COMPANY: AXIOM CONSULTING GROUP, INC.
BY: /s/ Robert J. Schindelar, Treasurer
-----------------------------------
-37-
<PAGE>
Schedule 1.1
------------
LIST OF SELLERS
---------------
Name and Address No of Shares to Be Sold
---------------- -----------------------
David Jackson 39
102 High Street
Stratham, NH 02885
Robert Schindelar 38
8 Oakland Road
Sharon, MA 02067
Michelle Holzweiss 14
26 Cass Street
Portsmouth, NH 03801
Mitchell L. Northcutt 9
---------------------
441 East Erie Street, Suite 4712
Chicago, IL 60611
-38-
<PAGE>
Schedule 1.2(a)
---------------
CONSIDERATION
-------------
<TABLE>
<CAPTION>
Principal Amount of
Cash Payment Promissory Notes
Name and Address Due at Closing* Issued at Closing
---------------- --------------- -------------------
<S> <C> <C>
David Jackson 97.500.00 292,500.00
102 High Street
Stratham, NH 02885
Robert Schindelar 95,000.00 285,000.00
8 Oakland Road
Sharon, MA 02067
Michelle Holzweiss 35,000.00 105,000.00
26 Cass Street
Portsmouth, NH 03801
Mitchell L. Northcutt 22,500.00 67,500.00
441 East Erie Street,
Suite 4712
Chicago, IL 60611
TOTAL $250,000.00 $750,000.00**
</TABLE>
* All sellers other than Mitchell L. Northcutt shall be paid the Cash Payment
on the first business day in January, 1995.
** The Purchaser will issue one Promissory Note to each Seller. Principal and
interest on each Promissory Note shall be due and payable in six equal
installments on the following dates: (i) 18 months from the Closing; (ii) 24
months from the Closing; (iii) 30 months from the Closing; (iv) 36 months from
the Closing; (v) 42 months from the Closing; and (vi) 48 months from the
Closing.
-39-
<PAGE>
Schedule 1.2(a)(i)
SUBORDINATED, NON-NEGOTIABLE PROMISSORY NOTE
--------------------------------------------
November, 1994 $______________
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby
acknowledged, The Registry, Inc., a Massachusetts corporation
("Purchaser"), promises to pay, by means of a check in U.S. dollars drawn
on an account of Purchaser, to _____________________ ("Seller"), at Axiom
Consulting Group, Inc, 157 Portsmouth Avenue, Stratham, NH 03885-2232, or
at such other place as Seller may direct, the principal sum of
____________ dollars ($_______), together with interest thereon from the
date hereof at the rate of interest per annum equal to the prime rate
announced in the Wall Street Journal for the date of this Promissory Note,
-------------------
which interest rate shall be recalculated on each anniversary of this
Promissory Note as the prime rate announced in the Wall Street Journal for
-------------------
each such anniversary date and which new interest rate shall be the
interest rate under this Promissory Note for the year commencing on such
anniversary date. Interest shall be computed on the basis of a 365-day per
year, pursuant to the terms and conditions set forth herein. This
----
Promissory Note is non-negotiable.
---------------------------------
This Promissory Note is one of several promissory notes issued
pursuant to the terms of a Stock Purchase Agreement dated as of November
30, 1994 by and among the Purchaser, the holder of this Promissory Note and
certain other parties (the "Agreement"). Capitalized terms not defined
herein shall have the meanings given such terms in the Agreement.
1. Principal and Interest.
----------------------
Subject to the provisions of Section 2 hereof, this Promissory Note
shall become due and payable, together with interest on the principal then
due, in six equal installments as specified in Attachment A hereto. Any
-----------
payments otherwise due on any day which is not a business day shall be due
and payable on the next day which is a business day.
<PAGE>
2. Subordination.
-------------
This Promissory Note is subordinated to all Senior Indebtedness as
defined in the accompanying Subordination Provisions attached hereto and
made a part hereof.
3. Default.
-------
Any of the following shall constitute an "Event of Default" under this
Promissory Note: (i) if any payment, or any portion of any payment, of
principal or interest is not paid when due as set forth herein and such
failure continues for ten (10) days after the same is due, (ii) insolvency
of Purchaser or the commission by Purchaser of any act of insolvency, (iii)
the making by Purchaser of a general assignment for the benefit of
creditors, (iv) the filing by Purchaser of any petition or the commencement
of any proceeding by Purchaser for any relief under any bankruptcy or
insolvency laws, or (v) the filing against Purchaser of any petition or the
commencement of any proceeding against Purchaser for any relief under any
bankruptcy or insolvency laws, which proceeding is not dismissed within
sixty (60) days. On the occurrence of an Event of Default, (a) the entire
balance of the principal amount of this Promissory Note, together with
interest thereon, shall be immediately due and payable, without further
notice or demand and (b) the Seller shall no longer be bound by its non-
solicitation obligations and non-compete obligations set forth in Section
10.1 of the Agreement and Section 3 and 4 of the Non-Solicitation Agreement
entered into by Seller, Purchaser and Axiom Consulting Group, Inc. on the
date hereof.
4. Modification or Waiver.
----------------------
(a) No delay or failure on the part of Seller in the exercise of any
right or remedy shall operate as a waiver thereof. No indulgence or
extension granted by Seller shall operate as an indulgence or extension of
any other payment or obligation placed upon Purchaser hereunder. No single
or partial exercise by Seller of any right or remedy herein shall preclude
other or further exercise of any other right or remedy contained herein or
permitted at law or in equity.
(b) Except as provided above, Purchaser hereby waives presentment,
demand for payment, notice of dishonor, protest and any and all other
notices or demands
<PAGE>
whatsoever in connection with the delivery, acceptance, performance,
default or enforcement of this Promissory Note.
5. Prepayment.
----------
Subject to Section 5 of the Subordination Provisions, this Promissory
Note may be prepaid at any time without penalty or premium.
6. Severability.
------------
If any terms or provisions of this Promissory Note shall be held to
be invalid, illegal or unenforceable, the validity of the other terms and
provisions hereof shall in no way be affected thereby.
7. Costs of Collection.
---------
Purchaser agrees to pay costs of collection, including reasonable fees
of attorneys, incurred by Seller in enforcing any of its rights or remedies
hereunder.
8. Governing Law.
-------------
This Promissory Note shall be governed by and construed in accordance
with the laws of the State of New Hampshire, without giving effect to the
rules relating to conflicts of law.
IN WITNESS WHEREOF, Purchaser has caused this Promissory Note to be
duly executed as of the day and year first above written.
THE REGISTRY, INC.
By: __________________________
Title: President
<PAGE>
SUBORDINATION PROVISIONS
------------------------
1. Note To Be Subordinated To Senior Indebtedness. Anything in this Note
----------------------------------------------
to the contrary notwithstanding, The Registry, Inc. (the "Company")
covenants and agrees, and the holder of this Note by acceptance of this
Note (whether upon original issue or upon transfer or exchange) covenants
and agrees, expressly for the benefit of the present and future holders of
Senior Indebtedness, that payment of principal and interest on this Note
shall be subordinated and subject in right of payment to the prior payment
in full of Senior Indebtedness; provided, however, that principal and
interest may be paid from time to time upon this Note in accordance with
the provisions of Section 5 below.
2. No Payment In Event of Certain Defaults. In the event (i) that the
---------------------------------------
Company shall be in default in respect of the payment of principal, premium
or interest on any Senior Indebtedness, or (ii) that any event shall have
occurred and be subsisting or any condition shall exist which entitles, or
which after notice or lapse of time or both would entitle, the holder of
any Senior Indebtedness to declare the same to be due and payable prior to
its express maturity date but, with respect to events or conditions
requiring the giving of notice by such holders, only if such notice shall
have been given, or (iii) that pursuant to any provision of this Note, it
shall have been declared or become due and payable prior to its expressed
maturity date, then, upon the occurrence of any such event or events, all
principal, premium, if any, and interest due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment thereof
effectively provided for, before the holder of this Note shall be entitled
to receive any payment on account of principal, premium or interest on this
Note. The holder of this Note by agreement hereof agrees to give written
notice to the holder of the Senior Indebtedness promptly upon the
occurrence or existence of any event or condition described in the
preceding clause (iii) of this Section 2.
3. Bankruptcy, Etc., of Company. Upon any payment or distribution of
----------------------------
assets of the Company in connection with any bankruptcy, insolvency,
arrangement, reorganization, receivership or other similar proceedings
initiated by or against the Company or in
<PAGE>
connection with any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or
involuntary, all principal, premium, if any, and interest due or to become
due upon all Senior Indebtedness shall first be paid in full, or payment
thereof effectively provided for, before the holder of this Note shall be
entitled to receive or retain any assets so paid or distributed in respect
of principal, premium or interest on this Note; and, in connection with any
such proceedings or any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets of the Company to
which the holder of this Note would be entitled, except for the terms of
these Subordinated Provisions, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distributions, or by the holder of this Note if
received by it, to the holders of Senior Indebtedness (pro rata to each
such holder on the basis of the respective amounts of Senior Indebtedness
held by such holder) or to their representatives to the extent necessary to
pay all Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the account of the holders of Senior
Indebtedness or their representatives, before any payment or distribution
is made to the holder of this Note.
4. Subrogation To Rights Of Holders Of Senior Indebtedness. Subject to
-------------------------------------------------------
the payment in full of all Senior Indebtedness, the holder of this Note
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of assets of the Company applicable to
Senior Indebtedness until the principal of and interest on this Note shall
be paid in full, and no payment or distribution to or for the account of
the holders of Senior Indebtedness which the holder of this Note would be
entitled to receive or retain except for the terms of these Subordination
Provisions shall, for the purposes of the subrogation provided for hereby,
as between the Company, its creditors (other than the holders of Senior
Indebtedness), and the holder of this Note, be deemed to be a payment by
the Company on account of Senior Indebtedness, it being understood that the
terms of these Subordination Provisions are and are intended to be solely
for the purpose of defining the relative rights of the holder of this Note
and the holders of Senior
<PAGE>
Indebtedness and that nothing contained in these Subordination Provisions
or elsewhere in this Notice is intended to or shall impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and
the holder of this Note, the obligation of the Company, which is
unconditional and absolute, to pay to the holder of this Note the principal
of and interest on this Note as and when the same shall become due and
payable in accordance with its terms, or is intended to or shall affect the
relative rights of the holder of this Note and the creditors of the Company
(other than the holders of Senior Indebtedness); nor shall anything herein
prevent the holder of this Note from exercising all rights and remedies
under this Note or otherwise permitted by applicable law in respect of this
Note, subject to the rights under these Subordination Provisions of the
holder of Senior Indebtedness to receive prior payment in full of such
Senior Indebtedness.
5. Company To Make Payments Of Principal And Interest Except As Provided.
---------------------------------------------------------------------
Except as provided in Sections 2 and 3, the Company shall make payments of
principal of and interest of this Note in accordance with its tenor,
provided, however, that this Note may not be prepaid in whole or in part
without the prior written consent of the holders of all outstanding Senior
Indebtedness. Upon any payment or distribution of assets of the Company
referred to in Section 3, the holder of this Note shall be entitled to rely
upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making any such payment or distribution for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon, and all other facts pertinent thereto or to
these Subordination Provisions.
6. Rights of Holders Of Senior Indebtedness Not To Be Prejudiced Or
----------------------------------------------------------------
Impaired. No right of any present or future holder of, or trustee for, any
--------
Senior Indebtedness of the Company to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act
or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any non-compliance by the
<PAGE>
Company with the terms, provisions and covenants of this Note, regardless
of any knowledge thereof any such holder may have or with which any such
holder may otherwise be charged.
7. Continuing Offer And Reliance. The provisions in this Note to the
-----------------------------
effect that the payment of principal and interest thereon shall be
subordinated and subject in right of payment to the prior payment in full
of Senior Indebtedness shall be deemed to constitute an offer by the holder
of this Note and by the Company to present and future holders of Senior
Indebtedness to that effect made with the intention that such holders shall
rely thereon, irrevocable so long as any principal or interest shall remain
unpaid on this Note, the acceptance thereof and reliance thereon by such
holder of Senior Indebtedness to be conclusively evidenced by the granting
or extending of credit to the Company by any such holder whether with or
without actual notice of the terms of this Note. The holder of this Note
further agrees that all such holders of Senior Indebtedness may enforce
directly against such holder of this Note all Subordination Provisions
without the necessity of joining the Company as a party.
8. Senior Indebtedness. "Senior Indebtedness" shall mean the principal
-------------------
of and interest of and other charges on (and other amounts payable in
respect of and pursuant to the terms of) any and all present and future
indebtedness of the Company for money borrowed from USTrust, a
Massachusetts trust company having a principal place of business at 30/40
Court Street, Boston, Massachusetts 02108, whether under its secured line
of credit and term loan arrangements or other financing arrangements with
such bank, and arrangements with other banks, insurance companies or other
institutional lenders whether outstanding on the date of this Note or
hereafter created or incurred, and whether or not evidenced by a note or
other instrument (as any of the same may be amended, modified, extended or
otherwise rewritten from time to time), as well as capital lease
obligations of the Company to Phoenixcor or other similar capital lease
obligations but expressly excluding, without limitation, indebtedness to
-------------------
trade creditors and to any affiliates or employees of the Company.
<PAGE>
Agreement to File Schedules Supplementally
Pursuant to Item 601(b) of Regulation S-K, The Registry, Inc. hereby
agrees to furnish supplementally to the Securities and Exchange Commission
(the "Commission") a copy of any of the following omitted schedules to the
foregoing exhibit upon the Commission's request:
1. The Registry Network Consulting Practice Business Plan dated
November 1994 (Schedule 1.2(b));
2. Description of Liens on Shares (Schedule 2.6);
3. Financial Statements of Axiom Consulting Group, Inc. ("Axiom")
for the period December 6, 1991 through March 31, 1992 (Schedule
2.9);
4. Leases, Subleases or other Agreements under which Axiom is a
Lessee or Lessor of Real Estate (Schedule 2.14);
5. Trade Names and Intellectual Property of Axiom (Schedule 2.15);
6. Description of Material Contracts and Other Agreements of Axiom
(Schedule 2.16);
7. Description of Employment Agreements by and between Axiom and its
Directors and Officers (Schedule 2.17);
8. Description of Axiom's Employee Benefit Plans (Schedule 2.18);
9. Description of Axiom's Insurance Coverage (Schedule 2.19);
10. Aged List of Accounts Payable of Axiom as of November 30, 1994
(Schedule 2.20);
11. Description of Axiom's Bank Accounts (Schedule 2.24);
12. Powers of Attorney of Axiom (Schedule 2.25);
13. List of Axiom's Material Customers and Providers (Schedule 2.26);
14. Audited Financial Statements of The Registry, Inc. for the Fiscal
Years Ended May 31, 1993 and May 31, 1994 and Unaudited Financial
Statements for the three months ended August 31, 1994 (Schedule
3.7).
15. Opinion of Counsel to Axiom and the Selling Stockholders of Axiom
dated November 30, 1994 (Schedule 4.5);
16. Form of Employment Agreement (Schedule 4.13(a));
<PAGE>
17. Form of Non-Solicitation and Confidentiality Agreement (Schedule
4.13(b));
18. Opinion of Counsel to The Registry, Inc. dated November 30, 1994
(Schedule 5.5); and
19. Confidentiality and Non-Disclosure Agreement by and between The
Registry, Inc. and Axiom dated October 7, 1994 (Schedule 18).
THE REGISTRY, INC.
Dated: May 14, 1996 /s/ G. Drew Conway
-----------------------------
By: G. Drew Conway
Title: President and Chief
Executive Officer
<PAGE>
The Commonwealth of Massachusetts
___________
Examiner
MICHAEL JOSEPH CONNOLLY
FEDERAL IDENTIFICATION
Secretary of State
ONE ASHBURTON PLACE, BOSTON, MASS: 02108 NO. 04-2920563
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 74
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles or organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to
the Commonwealth of Massachusetts.
_____________
We, G. Drew Conway , President and
Robert E. Foley , Clerk of
The Registry, Inc.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 189 Wells Avenue, Newton, Massachusetts 02159
---------------------------------------------------------------------
do hereby certify that the following restatement of the articles or organization
of the corporation was duly adopted at a meeting held on April 10, 1996,
by vote of 8,000,000 shares of Common Stock out of 8,000,000 shares outstanding.
--------- ------------ ---------
(Class of Stock)
_________ shares of ____________ out of _________ shares outstanding,
(Class of Stock)
and _________ shares of ____________ out of _________ shares outstanding.
(Class of Stock)
being at least two-thirds of each class of stock outstanding and entitled to
vote and of each class or series of stock adversely affected thereby: --
1. The name by which the corporation shall be known is:
The Registry, Inc.
2. The purposes for which the corporation is formed are as follows:
(a) to provide temporary and permanent placement of information
technology consultants in all industries; and
(b) any business or other activity which may lawfully be carried
on by a corporation organized under the Massachusetts Business
Corporation Law.
_________
P.C.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets
of paper leaving a left hand margin of at least 1 inch for binding.
Additions to more than one article may be continued on a single sheet
so long as each article requiring each such addition is clearly indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class
of stock which the corporation is authorized to issue is as follows:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
----------------- ------------------------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- ---------------- ----------------- ---------------- ---------
<S> <C> <C> <C>
Preferred 1,000,000 $0.10
Common 29,000,000
</TABLE>
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as
to each class thereof and any series now established:
See Continuation Sheet 4.
*5. The restrictions, if any, imposed by the articles of organization
upon the transfer of shares of stock of any class are as follows:
None.
*6. Other lawful provisions, if any, for the conduct and regulations
of the business and affairs of the corporation, for its voluntary
dissolution, or for limiting, defining, or regulating the powers
of the corporation, or of its directors or stockholders, or of any
class of stockholders:
See Continuation Sheet 6.
*If there are no such provisions, state "None".
<PAGE>
Continuation Sheet 4
- --------------------
Section 4A. Designation of Stock. The aggregate number of shares of
--------------------
capital stock which the Corporation has authority to issue is 30,000,000 shares,
consisting of:
(i) 1,000,000 shares of Preferred Stock, $0.10 par value per share (the
"Preferred Stock"), all of which shares shall be subject to designation by the
Board of Directors pursuant to Section 4C of this Article 4; and
(ii) 29,000,000 shares of Common Stock, no par value per share (the
"Common Stock").
Section 4B. Description of Common Stock. The description of the Common
---------------------------
Stock is as follows:
Each holder of Common Stock shall at every meeting of stockholders be
entitled to one vote in person or by proxy for each share of Common Stock held
by him on all matters submitted to such stockholder for a vote thereon. The
holders of the Common Stock shall be entitled to such dividends as may from time
to time be declared by the Board of Directors out of any funds legally available
for the declaration of dividends, subject to any provisions of these Articles of
Organization, as amended from time to time, and subject to the relative rights
and preferences of any shares of Preferred Stock authorized and issued
hereunder. Subject to the relative rights and preferences of any shares of
Preferred Stock authorized and issued hereunder, upon the dissolution or
liquidation of the Corporation, whether voluntary or involuntary, the holders of
shares of Common Stock shall be entitled to receive pro rata all assets of the
Corporation available for distribution to its stockholders.
Section 4C. Description of Preferred Stock. The description of the
------------------------------
Preferred Stock is as follows:
The Preferred Stock may consist of one or more series. The Board of
Directors may, from time to time, establish and designate the different series
and designate variations in the relative rights and preferences between the
different series as provided below, but in all other respects all shares of the
Preferred Stock shall be identical. In the event that at any time the Board of
Directors shall have established and designated one or more series of Preferred
Stock consisting of a number of shares less than all of the authorized number of
shares of Preferred Stock, the remaining authorized shares of Preferred Stock
shall be deemed to be shares of an undesignated series of Preferred Stock until
designated by the Board of
<PAGE>
Directors as being a part of a series previously established or a new series
then being established by the Board of Directors.
Subject to the provisions hereof, the Board of Directors is authorized to
establish one or more series of Preferred Stock and, to the extent now or
hereafter permitted by the laws of the Commonwealth of Massachusetts, to fix and
determine the preferences, voting powers, qualifications and special or relative
rights or privileges of each series including, but not limited to:
(a) The number of shares to constitute such series and the distinguishing
designation thereof;
(b) the dividend rate on the shares of such series and the preferences, if
any, and the special and relative rights of such shares of such series as to
dividends;
(c) whether or not the shares of such series shall be redeemable, and, if
redeemable, the price, terms and manner of redemption;
(d) the preferences, if any, and the special and relative rights of the
shares of such series upon liquidation of the Corporation;
(e) whether or not the shares of such series shall be subject to the
operation of a sinking or purchase fund and, if so, the terms and provisions of
such fund;
(f) whether or not the shares of such series shall be convertible into
shares of any other class or of any other series of the same or any other class
of stock of the Corporation and, if so, the conversion price or ratio and other
conversion rights;
(g) the conditions under which the shares of such series shall have
separate voting rights or no voting rights; and
(h) such other designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
of such series to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts.
Notwithstanding the fixing of the number of shares constituting a particular
series, the Board of Directors may at any time authorize the issuance of
additional shares of the same series.
<PAGE>
Continuation Sheet 6
- --------------------
Section 6A. Limitation of Liability of Directors. A director of the
------------------------------------
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of his or her fiduciary duty as a director except to
the extent exemption from liability is not permitted under the Massachusetts
Business Corporation law as the same now exists or may hereafter be amended. No
amendment or repeal of this provision shall have any effect on the liability of
any director with respect to any acts or omissions of such director occurring
prior to such amendment or repeal.
Section 6B. Indemnification of Directors, Officers and Others. Each
-------------------------------------------------
person who shall be, or shall have been a director or officer of the Corporation
or who shall serve, or shall have served, at its request as a director or
officer of another organization, or who shall serve at its request in any
capacity with respect to any employee benefit plan, shall be indemnified by the
Corporation, to the maximum extent legally permitted from time to time under the
laws of the Commonwealth of Massachusetts, against all liabilities, costs and
expenses, including expenses (including attorneys' fees), compromise payments,
judgments, fines, penalties and excise taxes at any time imposed upon or
reasonably incurred by him in connection with, arising out of or resulting from,
any action, suit or proceeding, civil or criminal, in which he may be involved
as a party or otherwise or with which he may be threatened by reason of his then
serving or theretofore having served as a director or officer of the Corporation
or of another organization or in any capacity with respect to any employee
benefit plan, or by reason of any alleged act or omission by him in any such
capacity, whether or not he shall be serving in such capacity at the time any or
all of such liabilities or expenses shall be imposed upon or incurred by him;
provided, however, that no person shall have any right to indemnification for
liabilities or expenses imposed or incurred in connection with any matter as to
which such person shall be finally adjudged in such action, suit or proceeding
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Corporation or, to the extent that such matter relates
to service with respect to an employee benefit plan, in the best interests of
the participants or beneficiaries of such employee benefit plan.
Notwithstanding the previous paragraph, no person shall have any right to
indemnification for any amounts paid by such person in compromise or settlement
or any expenses associated therewith unless the compromise or settlement shall
be approved as in the best interests of the Corporation:
(i) by a majority vote of a quorum consisting of disinterested
directors;
(ii) if such a quorum cannot be obtained, then by a majority vote of a
committee of the Board of Directors consisting of all the disinterested
directors;
<PAGE>
(iii) if there are not two or more disinterested directors in office, then
by a majority of the directors then in office, provided they have obtained a
written finding by special independent legal counsel appointed by a majority of
the directors to the effect that, based upon a reasonable investigation of the
relevant facts as described in such opinion, the person to be indemnified
appears to have acted in good faith in the reasonable belief that his action was
in the best interests of the Corporation (or, to the extent that such matter
relates to service with respect to an employee benefit plan, in the best
interest of the participants or beneficiaries of such employee benefit plan);
(iv) by the holders of a majority of the shares of stock entitled to vote
for the election of directors, exclusive of shares held by interested directors
and officers; or
(v) by a court of competent jurisdiction.
Each person who has been successful on the merits in respect of any action,
suit or proceeding described in the first paragraph of this Section 6B shall be
indemnified as a matter of right.
If authorized in the manner specified above for compromise payments,
expenses incurred by a director or officer of the Corporation in defending any
threatened, pending or completed civil or criminal action, suit or proceeding
described in the first paragraph of this Section 6B may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if he shall ultimately be adjudicated to be not entitled to
indemnification under this Section 6B, which undertaking may be accepted without
reference to the financial ability of such person to make repayment.
Each person who shall be or become a director, trustee or officer as
aforesaid shall be deemed to have accepted and to have continued to serve in
such office in reliance upon the indemnity herein provided. The duties of the
Corporation to indemnify and to advance expenses to a director or officer as
provided in this Section 6B shall be deemed to constitute an agreement between
the Corporation and each such director, or officer, and no amendment or repeal
of any provision of this Section 6B shall alter, to the detriment of such
director or officer, the right of such person to indemnification or to the
advancement of expenses related to a claim based on an act or a failure to act
which took place prior to such amendment, repeal or termination.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, trustee, employee or other agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or other agent of another Corporation of
which the Corporation is or was a stockholder or creditor or with respect to any
employee
<PAGE>
benefit plan, against any liability incurred by him in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability.
These indemnity provisions shall not be exclusive of any other right which
any director, trustee or officer may have or hereafter acquire, whether under
any by-law, vote of stockholders, agreement, judgment, decree, provision of law,
or otherwise; and these indemnity provisions and all other such rights shall be
cumulative.
These indemnity provisions shall not affect any rights to indemnification
to which corporate personnel other than directors and officers may be entitled
by contract or otherwise under law.
These indemnity provisions shall be separable, and if any portion thereof
shall be finally adjudged to be invalid, such invalidity shall not affect any
other portion which can be given effect.
Section 6C. Amending the Articles of Organization. Any amendment to these
-------------------------------------
Articles of Organization of the Corporation shall be approved by the affirmative
vote of (i) at least two-thirds of each class of stock outstanding and entitled
to vote on the amendment, or (ii) in the case of any such amendment that has
been approved by vote of the Board of Directors taken at a meeting held prior to
the meeting of stockholders at which such amendment is to be voted upon, a
majority of each class of stock outstanding and entitled to vote on the
amendment, provided that notice of the substance of the proposed amendment is
stated in the notice of the meeting; provided, however, that any amendment to or
-----------------
repeal of Section 6H, Section 6J, subsection (a) or (c) only, or Section 6K of
this Article 6 shall be approved by the affirmative vote of at least seventy-
five percent (75%) of each class of stock outstanding and entitled to vote on
the amendment or repeal, as the case may be, and provided, further, that any
amendment to these Articles of Organization which confers upon the holders of
any series of preferred stock the right to elect one or more directors shall not
become effective unless prior to its adoption it was approved by a vote of the
majority of the directors of the Corporation.
Section 6D. Making, Amending and Repealing the By-Laws. The By-Laws of
------------------------------------------
the Corporation may provide that the directors (as well as the stockholders) may
make, amend or repeal the By-Laws in whole or in part to the extent permitted by
law, subject to the limitations contained in such By-Laws. Notwithstanding
anything contained in these Articles of Organization or the By-Laws to the
contrary, Article I, Sections 2 and 4; Article II, Sections 2 through 8; and
Article X of the By-Laws, and this Article 6D, shall not be altered, amended or
repealed by the stockholders, and no provision inconsistent therewith or
herewith
<PAGE>
shall be adopted by the stockholders, without the affirmative vote of
the holders of at least seventy-five percent (75%) of the voting power of all
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
Section 6E. Place of Meeting of Stockholders. Meetings of stockholders
--------------------------------
may be held anywhere in the United States.
Section 6F. Partnership in a Business Enterprise. The Corporation may be
------------------------------------
a partner in any business enterprise it would have the power to conduct by
itself.
Section 6G. Intercompany Dealings. Subject to any contrary or limiting
---------------------
policies that may be adopted by the Board of Directors of the Corporation from
time to time, the Corporation may enter into contracts or transact business with
one or more of its directors, officers or stockholders or with any corporation,
organization or other concern in which any one or more of its directors,
officers or stockholders are directors, officers, stockholders or are otherwise
interested and may enter into other contracts or transactions in which any one
or more of its directors, officers or stockholders is in any way interested;
and, in the absence of fraud, no such contract or transaction shall be
invalidated or in any way affected by the fact that such directors, officers or
stockholders of the Corporation have or may have interests which are or might be
adverse to the interest of the Corporation. At any meeting of the Board of
Directors of the Corporation (or of any duly authorized committee thereof) at
which any such contract or transaction shall be authorized or ratified, any such
director or directors may, subject to any contrary or limiting policies that may
be adopted by the Board of Directors of the Corporation from time to time, vote
or act there with like force and effect as if he had no such interest, provided
in such case the nature of such interest shall be disclosed or shall have been
known to the directors of a majority thereof. A general notice that a director
or officer is interested in any corporation or other concern of any kind above
referred to shall be a sufficient disclosure as to the nature of such interest
of such director or officer with respect to all contracts and transactions with
such corporation or other concern. No director shall be disqualified from
holding office as director or officer of the Corporation by reason of any such
adverse interests, unless the Board of Directors shall determine that such
adverse interest is detrimental to the interests of the Corporation.
Section 6H. Stockholder Vote Required For Certain Business Combinations.
-----------------------------------------------------------
In addition to any affirmative vote required by the Massachusetts General Laws
or by any other provision of these Articles:
<PAGE>
(1) any merger or consolidation of the Corporation or any subsidiary
with (i) any Interested Stockholder (as defined below) or (ii) any other
corporation or entity (whether or not itself an Interested Stockholder)
which is, or after such merger or consolidation would be, an Affiliate of
an Interested Stockholder;
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of
any assets of the Corporation or any subsidiary having an aggregate fair
market value (as determined by the Board of Directors) of $1,000,000 or
more;
(3) the issuance or transfer by the Corporation or any subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate fair market
value (as determined by the Board of Directors) of $1,000,000 or more;
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder; or
(5) any reclassification of securities (including any reverse stock
split), any recapitalization of the Corporation, any merger or
consolidation of the Corporation with any of its subsidiaries or any other
transaction (whether or not with or into or otherwise involving any
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportion of the outstanding shares of any class of equity
or convertible securities of the Corporation or any subsidiary which is
directly or indirectly owned by any Interested Stockholder or any Affiliate
of any Interested Stockholder;
shall require the affirmative vote of (x) at least seventy-five percent (75%) of
each class of stock outstanding and entitled to vote on such business
combination, or (y) in the case of any such business combination that has been
approved by vote of a majority of the Continuing Directors (as defined below)
taken at a meeting held prior to the meeting of stockholders at which such
business combination is to be voted upon, the affirmative vote of a majority of
each class of stock outstanding and entitled to vote on such business
combination, provided that notice of the substance of the proposed business
combination is stated in the notice of the meeting.
For purposes of this Section 6H, "Interested Stockholder" shall mean any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, business trust, government or political subdivision,
<PAGE>
unincorporated organization or any other similar association or entity
(including any group of such associations or entities seeking to combine or pool
their voting or other interests in the securities of the Corporation for a
common purpose, pursuant to any contract, understanding, relationship, agreement
or other arrangement, whether written, oral or otherwise, or any "group of
persons" as defined under Section 13(d) of the Securities Exchange Act of 1934,
as amended) who or which:
(a) is the beneficial owner, directly or indirectly, of more than 10% of
the voting power of the then outstanding shares of voting stock of the
Corporation;
(b) is an affiliate of the Corporation and at any time within the two-year
period immediately prior to and including the date in question was the
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the then outstanding shares of voting stock of the Corporation; or
(c) is an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of voting stock of the Corporation which were at any
time within the two-year period immediately prior to and including the date in
question beneficially owned by any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended, and such assignment or succession was not
approved by a majority of the Continuing Directors then in office.
The term Interested Stockholder shall not include any person whose
ownership of shares in excess of the ten percent limitation set forth herein is
the result of action taken solely by the Corporation; provided, however, that
such person shall be an Interested Stockholder if thereafter he acquires
additional shares of voting stock of the Corporation, except as a result of
further corporate action not caused, directly or indirectly, by such person.
For purposes of this Section 6H, "Affiliate" shall have the meaning set
forth in Rule 405 under the Securities Act of 1933, as amended.
For purposes of this Section 6H, "Continuing Director" shall mean any
member of the Board of Directors of the Corporation who is not an affiliate or
associate of the Interested Stockholder and was a member of the Board prior to
the time that the Interested Stockholder became an Interested Stockholder, and
any successor of a Continuing Director who is not an affiliate or associate of
the Interested Stockholder and is recommended to succeed a Continuing Director
by a majority of Continuing Directors then in office.
Section 6I. Stockholder Vote Required for Certain Transactions. Subject
---------------------------------------------------
to the provisions of Section 6H, any (i) sale, lease or exchange of all or
<PAGE>
substantially all of the property or assets, including goodwill, of the
Corporation, or (ii) merger or consolidation of the Corporation with or into any
another corporation, shall be approved by the affirmative vote of at least two-
thirds of the total votes eligible to be cast by stockholders on such sale,
lease or exchange, or merger or consolidation, voting together as a single
class, at a duly constituted meeting of stockholders called expressly for such
purpose; provided, however, that if the Board of Directors recommends, by the
affirmative vote of a majority of the Directors then in office at a duly
constituted meeting of the Board of Directors (unless at the time of such action
there shall be an Interested Stockholder, in which case such action shall also
require the affirmative vote of a majority of the Continuing Directors then in
office at such meeting), that stockholders approve such sale, lease or exchange,
or merger or consolidation, at such meeting of stockholders, such sale, lease or
exchange, or merger or consolidation, shall be approved by the affirmative vote
on a majority of the total votes eligible to be cast by stockholders on such
transaction, voting together as a single class.
Section 6J. Applicability of Certain Laws.
-----------------------------
(a) The Corporation shall be governed by the provisions of Chapter 110F of
the Massachusetts General Laws.
(b) The Corporation shall not be governed by paragraph (a) of Section 50A
of Chapter 156B of the Massachusetts General Laws.
(c) The Corporation shall not be governed by Chapter 110D of the
Massachusetts General Laws.
Section 6K. Classified Board of Directors. The directors, other than
-----------------------------
those who may be elected by the holders of any series of preferred stock of the
Corporation, shall be classified, with respect to the term for which they
severally hold office, into three classes, as nearly equal in number as
possible, with one class to be elected annually. The initial directors of the
Corporation shall hold office as follows: the first class of directors shall
hold office initially for a term expiring at the annual meeting of stockholders
to be held in 1996, the second class of directors shall hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1997,
and the third class of directors shall hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1998. At each succeeding
annual meeting of stockholders, the successors of the class of directors whose
term expires at that meeting shall be elected by a plurality vote of all votes
cast at such meeting to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
Members of each class shall hold office until their successors are duly elected
and qualified or until their earlier death, resignation or removal.
<PAGE>
Continuation Sheet 7
- --------------------
BRIEF DESCRIPTION OF AMENDMENTS
Article 3: Article 3 has been amended to increase the authorized capital stock
of the Corporation from 12,000,000 shares of common stock, no par
value per share, to 29,000,000 shares of common stock, no par value
per share, and to authorize a class of preferred stock consisting of
1,000,000 shares, $.10 par value per share.
Article 4: Article 4 has been amended to set forth a description of each of the
Corporation's two classes of stock, including the preferences,
voting powers, qualifications and special or relative rights or
privileges of the same.
Article 6: Article 6 has been amended (1) to require certain stockholder votes
(i) to amend these Articles of Organization, (ii) to make, alter,
amend or repeal certain provisions of the By-Laws, and (iii) to
approve certain transactions; (2) to provide that the Corporation
shall be governed by the provisions of Chapter 110F of the
Massachusetts General Laws; (3) to provide that the Corporation
shall be exempt from the provisions of Chapter 110D of the
Massachusetts General Laws and Section 50A of Chapter 156B of the
Massachusetts General Laws; (4) to restate provisions regarding
limitation of the liability of directors, indemnification of
directors, officers and others, and intercompany dealings.
<PAGE>
*We further certify that the foregoing restated articles of organization
effect no amendments to the articles of organization of the corporation as
heretofore amended, except amendments to the following articles ________________
Article 3, 4 and 6
- --------------------------------------------------------------------------------
(*If there are no such amendment, state "None".)
Briefly describe amendments in space below:
See Brief Description of Amendments attached as Continuation Sheet 7.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 13th day of May in the year 1996.
/s/ G. Drew Conway
_____________________________________________________________________ President
G. Drew Conway
/s/ Robert E. Foley
_________________________________________________________________________ Clerk
Robert E. Foley
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
I hereby approve the within restated articles of
organization and, the filing fee in the amount of
$ having been paid, said articles are
deemed to have been filed with me this
day of , 19 .
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT TO:
Andrea M. Teichman, Esq.
--------------------------------------------------------------
Hill & Barlow
--------------------------------------------------------------
One International Place
--------------------------------------------------------------
Boston, Massachusetts 02110
--------------------------------------------------------------
Telephone (617) 428-3540
---------------------------------------------------
Copy mailed
<PAGE>
Amended effective May 13, 1996
THE REGISTRY, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
--------------------------
The annual meeting of stockholders shall be held within six months after
the end of the corporation's fiscal year specified in these By-Laws. The date
and hour of the annual meeting shall be fixed by the Directors. The purposes
for which the annual meeting is to be held, in addition to those prescribed by
law, by the Articles of Organization or by these By-Laws, may be specified by
the Directors or the President. In the event that no date for the annual
meeting is established or if no annual meeting is held in accordance with the
foregoing provisions, a special meeting may be held in lieu thereof, and any
action taken at such meeting shall have the same effect as if taken at the
annual meeting.
Section 2. Special Meetings.
----------------------------
So long as the corporation has a class of voting stock registered under the
Securities Exchange Act of 1934, as amended, special meetings of the
stockholders may be called by the President or by the Directors and shall be
called by the Clerk, or in case of the death, absence, incapacity or refusal of
the Clerk, by any other officer, upon written application of one or more
stockholders who hold at least 40 percent in interest of the capital stock
entitled to vote at the meeting.
Section 3. Place of Meetings.
-----------------------------
All meetings of stockholders shall be held at the principal office of the
corporation unless a different place (within the United States) is fixed by the
Board of Directors or the President and specified in the notice of the meeting.
Section 4. Notice of Business.
------------------------------
At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (a) by or at the
direction of the Board of Directors or (b) by any stockholder of the corporation
who is a stockholder of record at the time of giving of the notice provided for
in this Section, who shall be entitled to vote at such meeting and who complies
with the notice procedures set forth in this Section. For business to be
properly brought before a stockholder meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Clerk. To be timely, a
stockholder's notice shall be delivered to the Clerk at the principal executive
offices of the corporation (i) in the case of an annual meeting or a special
meeting in lieu of an annual meeting, not later than the close of business on
the 60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that in the event that the date of the annual meeting or
special meeting in lieu of an annual meeting is more than 30 days before or more
than 60
<PAGE>
days after such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the 90th day
prior to such meeting and not later than the close of business on the later of
the 60th day prior to such meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
corporation; and (ii) in the case of a special meeting (other than a special
meeting in lieu of an annual meeting), not earlier than the close of business on
the 90th day prior to such meeting and not later than the close of business on
the later of the 60th day prior to such meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made by
the corporation. In no event shall the public announcement of an adjournment of
a meeting commence a new time period for the giving of a stockholder's notice as
described above. A stockholder's notice to the Clerk shall set forth as to each
matter the stockholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the names and
addresses, as they appear on the corporation's books, of the stockholder
proposing such business and any other stockholders known by such stockholder to
be supporting such proposal, (c) the class and number of shares of the
corporation which are beneficially owned by the stockholder and any other
stockholders known by such stockholder to be supporting such proposal, and (d)
any material interest of the stockholder in such business. Notwithstanding
anything in the By-Laws to the contrary, no business shall be conducted at a
stockholder meeting except in accordance with the procedures set forth in this
Section. 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
and in accordance with the provisions of the By-Laws, 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, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Section.
For purposes of this Section, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Section 5. Notices.
-------------------
A written notice, stating the place, day and hour of all meetings of
stockholders shall be given by the Clerk or Assistant Clerk (or the person or
persons calling the meeting), at least seven days before the meeting, to each
stockholder entitled to vote thereat and to each stockholder who, by law, the
Articles of Organization, or these By-Laws, is entitled to such notice, by
leaving such notice with him or at his residence or usual place of business, or
by mailing it, postage prepaid, and addressed to such stockholder at his address
as it appears upon the books of the corporation. Such notice, if the meeting is
called otherwise than by the Clerk, may be a copy of the call of the meeting;
and if the meeting is not otherwise called, such notice given by the Clerk shall
2
<PAGE>
constitute a call of the meeting by him. Notices of all meetings of stockholders
shall state the purposes for which the meetings are called. No notice need be
given to any stockholder if a written waiver of notice, executed before or after
the meeting by the stockholder or his attorney, thereunto authorized is filed
with the records of the meeting.
Section 6. Quorum.
------------------
Unless the Articles of Organization otherwise provide, at any meeting of
stockholders a quorum for the transaction of business shall consist of one or
more individuals appearing in person and/or as proxies and owning and/or
representing a majority of the shares of the corporation then outstanding and
entitled to vote, provided that less than such quorum shall have power to
adjourn the meeting from time to time.
Section 7. Voting and Proxies.
------------------------------
Each stockholder shall have one vote for each share of stock entitled to
vote, and a proportionate vote for any fractional share entitled to vote, held
by him of record according to the records of the corporation, unless otherwise
provided by law or the Articles of Organization. Stockholders may vote either
in person or by written proxy dated not more than six months before the meeting
named therein. Proxies shall be filed with the Clerk before being voted at any
meeting or any adjournment thereof. Except as otherwise limited therein,
proxies shall entitle the persons named therein to vote at the meeting specified
therein and at any adjourned session of such meeting but shall not be valid
after final adjournment of the meeting. A proxy with respect to stock held in
the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the corporation receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a stockholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Notwithstanding the foregoing, a proxy coupled
with an interest sufficient in law to support an irrevocable power, including,
without limitation, an interest in the shares or in the corporation generally,
may be made irrevocable if it so provides, need not specify the meeting to which
it relates, and shall be valid and enforceable until the interest terminates, or
for such shorter period as may be specified in the proxy.
Section 8. Action at Meeting.
-----------------------------
Except where a different vote is required by law, the Articles of
Organization or these By-Laws, action of the stockholders on any matter properly
brought before a meeting shall require, and may be effected by, the affirmative
vote of the holders of a majority of the stock present or represented and
entitled to vote and voting on such matter, provided that such majority shall be
at least a majority of the number of shares required to constitute a quorum for
action on such matter. Except where a different vote is required by law, the
Articles of Organization or these By-Laws, any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election. No ballot shall be required for such election unless requested
by a stockholder present or represented at the meeting and entitled to vote in
the election.
Section 9. Action without Meeting by Written Consent.
-----------------------------------------------------
3
<PAGE>
Any action by stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action by a writing
filed with the records of the meetings of stockholders. Such consent shall be
treated for all purposes as a vote at a meeting.
Section 10. Record Date.
------------------------
The Directors may fix in advance a time which shall be not more than sixty
days prior to (a) the date of any meeting of stockholders, (b) the date for the
payment of any dividend or the making of any distribution to stockholders, or
(c) the last day on which the consent or dissent of stockholders may be
effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting and any
adjournment thereof, the right to receive such dividend or distribution, or the
right to give such consent or dissent. In such case only stockholders of record
on such record date shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date. Without fixing such
record date the Directors may for any of such purposes close the transfer books
for all or any part of such period.
If no record date is fixed and the transfer books are not closed
(1) the record date for determining stockholders having the right to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given.
(2) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
acts with respect thereto.
ARTICLE II
DIRECTORS
Section 1. Powers.
------------------
The business of the Corporation shall be managed by the Board of Directors,
which shall have and may exercise all the powers of the Corporation except those
powers reserved to the stockholders by these By-Laws, by law or by the Articles
of Organization. Notwithstanding the foregoing, the stockholders may take
action on any matter relating to the business of the Corporation at any
stockholders' meeting.
Section 2. Nomination; Eligibility to Serve.
--------------------------------------------
Except as otherwise provided in Section 4 of this Article concerning the
filling of vacancies on the Board of Directors, only persons who are nominated
in accordance with the procedures set forth in this Section shall be eligible to
serve as directors. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders (a) by or
at the direction of the Board of Directors or (b) by any stockholder of the
corporation who is a stockholder of record at the time of giving of notice
provided for in this Section, who shall be entitled to vote for the election of
directors at the meeting and who complies with the notice procedures set forth
in this
4
<PAGE>
Section. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing to
the Clerk. To be timely, a stockholder's notice shall be delivered to the Clerk
at the principal executive offices of the corporation (i) in the case of an
annual meeting or a special meeting in lieu of an annual meeting, not later than
the close of business on the 60th day nor earlier than the close of business on
the 90th day prior to the first anniversary of the preceding year's annual
meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later date; provided, however, that in the event that the date of
the annual meeting or special meeting in lieu of an annual meeting is more than
30 days before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such meeting and not later than the later of
the 60th day prior to such meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
corporation; and (ii) in the case of a special meeting (other than a special
meeting in lieu of an annual meeting), not earlier than the close of business on
the 90th day prior to such meeting and not later than the close of business on
the later of the 60th day prior to such meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made by
the corporation. In no event shall the public announcement of an adjournment of
a meeting commence a new time period for the giving of a stockholder's notice as
described above. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected),
and (b) as to the stockholder giving the notice, (i) the names and addresses, as
they appear on the corporation's books, of such stockholder and any other
stockholders known by such stockholder to be supporting the election of the
proposed nominee(s) and (ii) the class and number of shares of the corporation
which are beneficially owned by such stockholder and any other stockholders
known by such stockholder to be supporting the election of the proposed
nominee(s). At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Clerk
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the By-Laws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Section, a stockholder shall also comply with all applicable requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in this Section.
For purposes of this Section, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
corporation with the
5
<PAGE>
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
Section 3. Number and Election.
-------------------------------
The Board of Directors shall consist of not less than the minimum number of
individuals permitted by law and not more than nine persons. The directors,
other than those who may be elected by the holders of any series of preferred
stock of the corporation, shall be divided into three classes, such classes to
be as nearly equal in number as possible. One of such classes of directors
shall be elected annually by the stockholders. Subject to the foregoing
requirements and applicable law, the number of directors and their respective
classifications shall be fixed by the vote of a majority of the Board of
Directors, provided that any such action does not operate to remove a director
elected by the stockholders or the directors other than in the manner specified
in the Articles of Organization or these By-Laws. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director. Except as otherwise provided in the Articles of
Organization or these By-Laws, the members of each class shall be elected for a
term of three years and shall serve until their successors are elected and
qualified. Any successor to a director whose seat becomes vacant shall serve
for the remainder of the term of his predecessor and until his successor is
elected and qualified.
Section 4. Vacancies.
---------------------
Newly-created directorships resulting from an increase in the size in the
Board of Directors or any vacancy at any time existing in the Board of
Directors, whether resulting from the death, resignation, disqualification or
removal of a Director or otherwise, shall be filled solely by the affirmative
vote of a majority of the remaining Directors then in office.
Section 5. Enlargement of the Board of Directors.
-------------------------------------------------
The number of Directors may be increased by the Directors by the
affirmative vote of a majority of the Directors then in office.
Section 6. Tenure.
------------------
Except as otherwise provided by law, by the Articles of Organization or by
these By-Laws, a Director shall hold office until the annual meeting of
stockholders held in the third year following the year of his election and
thereafter until his successor is chosen and qualified.
Section 7. Resignation.
-----------------------
Any Director may resign by delivering his written resignation to the
corporation at its principal office or to the President or Clerk. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 8. Removal.
-------------------
A Director may be removed from office only for cause and by the vote of
either (a) the holders of seventy-five percent (75%) of the shares outstanding
and entitled to
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<PAGE>
vote in the election of Directors or (b) a majority of the Directors then in
office; provided, however, that a Director elected by a particular class of
-------- -------
stockholders may be removed only by the vote of holders of that class of stock
according to the vote requirement and other standards for removal applicable to
such class and specified in the Articles of Organization. "Cause" shall mean
only (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of an action involving
moral turpitude or (v) commission of an action that constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
corporation. A Director may be removed for cause only after reasonable notice
and opportunity to be heard before the body proposing to remove him.
Section 9. Annual Meeting.
--------------------------
Immediately after each annual meeting of stockholders, or the special
meeting held in lieu thereof, and at the place thereof, if a quorum of the
Directors is present, there shall be a meeting of the Directors without notice;
but if such a quorum of the Directors is not present, or if present do not
proceed immediately thereafter to hold a meeting of the Directors, the annual
meeting of the Directors shall be called in the manner hereinafter provided with
respect to the call of special meetings of Directors.
Section 10. Regular Meetings.
-----------------------------
Regular meetings of the Directors may be held at such times and places as
shall from time to time be fixed by resolution of the Board and no notice need
be given of regular meetings held at times and places so fixed, provided,
however, that any resolution relating to the holding of regular meetings shall
remain in force only until the next annual meeting of stockholders, or the
special meeting held in lieu thereof, and that if at any meeting of Directors,
at which a resolution is adopted fixing the times or place or places for any
regular meetings, any director is absent, no meeting shall be held pursuant to
such resolution until either each such absent Director has in writing or by
telegram approved the resolution or seven days have elapsed after a copy of the
resolution certified by the Clerk has been mailed, postage prepaid, addressed to
each such absent Director at his last known home or business address.
Section 11. Special Meetings.
-----------------------------
Special meetings of the Directors may be called by the President, by the
Chairman of the Board, by the Clerk, by any two Directors, or by one Director in
the event that there is only one Director, and shall be held at the place
designated in the notice or call thereof.
Section 12. Notices.
--------------------
Notices of any special meeting of the Directors shall be given to each
Director by the Clerk (a) by mailing to him, postage prepaid, and addressed to
him at his address as registered on the books of the corporation, or if not so
registered, at his last known home or business address, a written notice of such
meeting at least four days before the meeting, or (b) by delivering such notice
by hand or by telegram, telecopy or telex to him at least 48 hours before the
meeting at such address, notice of such meeting, or (c) by giving
7
<PAGE>
notice to such Director in person or by telephone at least 48 hours in advance
of the meeting. Such notice, if the meeting is called otherwise than by the
Clerk, may be a copy of the call of the meeting; and if the meeting is not so
otherwise called, such notice given by the Clerk shall constitute a call of the
meeting by him. If the Clerk refuses or neglects for more than 24 hours after
receipt of a call to give notice of such special meeting, or if the office of
Clerk is vacant or the Clerk is absent from the Commonwealth of Massachusetts or
incapacitated, such notice may be given by the officer or one of the Directors
calling the meeting. Notice need not be given to any Director if a written
waiver of notice, executed by him before or after the meeting, if filed with the
records of the meeting, or to any Director who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him. A
notice or waiver of notice of a Directors' meeting need not specify the purposes
of the meeting.
Section 13. Quorum.
-------------------
At any meeting of the Directors, a majority of the Directors then in office
shall constitute a quorum for the transaction of business; provided always that
any number of Directors (whether one or more and whether or not constituting a
quorum) present at any meeting or at any adjourned meeting may make any
reasonable adjournment thereof.
Section 14. Action at Meeting.
------------------------------
At any meeting of the Directors at which a quorum is present, the action of
the Directors on any matter brought before the meeting shall be decided by vote
of a majority of those present, unless a different vote is required by law, the
Articles of Organization or these By-Laws.
Section 15. Action by Written Consent.
--------------------------------------
Any action by the Directors may be taken without a meeting if a written
consent thereto is signed by all the Directors and filed with the records of the
Directors' meetings. Such consent shall be treated as a vote of the Directors
for all purposes.
Section 16. Chairman of the Board of Directors
-----------------------------------------------
The Board of Directors may elect from its own number a chairman. The
chairman, if one has been elected, shall preside at all meetings of the
stockholders and of the Board of Directors at which the chairman is present and
shall have such other duties and powers as the Board of Directors may decide.
Section 17. Committees.
-----------------------
The Board of Directors may elect from its own number an executive committee
and any other committees, and may delegate to the committees any or all of its
powers except the power to (a) change the principal office of the corporation;
(b) amend the By-Laws; (c) issue stock; (d) establish and designate series of
stock and fix and determine the relative rights and preferences of any series of
stock; (e) elect officers required by law to be elected by the stockholders and
directors and fill vacancies in any such offices; (f) change the number of the
Board of Directors; (g) remove any officers or directors from office; (h)
authorize the payment of any dividend or distribution to stockholders; (i)
authorize the reacquisition for value of stock of the corporation; or (j)
authorize a
8
<PAGE>
merger. The Board of Directors may decide the manner in which any such
committees shall conduct their business. The Board of Directors shall have power
to rescind any action of any committee, but such recission shall not be
retroactive.
Section 18. Telephone Conference Meetings.
------------------------------------------
One or more members of the Board of Directors or any committee thereof may
participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting.
ARTICLE III
OFFICERS
Section 1. Enumeration and Qualification.
-----------------------------------------
The officers of the corporation shall consist of a President, a Treasurer,
a Clerk, and such other officers including one or more Vice Presidents,
Assistant Treasurers and Assistant Clerks as may from time to time be determined
by the Directors. No officer need be a stockholder or a director. The Clerk
shall be a resident of Massachusetts unless the Corporation has a resident agent
appointed to accept service of process. A person may hold more than one office
at the same time. Any officer may be required by the Board of Directors to give
bond for the faithful performance of the officer's duties to the Corporation in
such amount and with such sureties as the Board of Directors may determine.
Section 2. Election and Vacancies.
----------------------------------
The President, Treasurer and Clerk shall be elected annually by the
Directors at their first meeting following the annual meeting of stockholders,
or the special meeting held in lieu thereof. Other officers may be chosen by
the Directors at such meeting or at any other meeting. Any vacancy at any time
existing in any office may be filled by the Directors at any meeting and such
successor in office shall hold office for the unexpired term of his predecessor.
Section 3. Tenure.
------------------
Except as otherwise provided by law, by the Articles of Organization or by
these By-Laws, the President, Treasurer and Clerk each shall hold office until
the first meeting of the Directors following the next annual meeting of
stockholders, or the special meeting held in lieu thereof, and thereafter until
his successor is chosen and qualified. Other officers shall hold office until
the first meeting of the Directors following the next annual meeting of
stockholders, or the special meeting held in lieu thereof, unless a shorter term
is specified in the vote choosing or appointing them. Election or appointment
of an officer shall not in and of itself create contract rights. The Board of
Directors may, however, authorize the corporation to enter into an employment
contract with any officer in accordance with applicable law, but no contract
right shall prohibit the Board of
9
<PAGE>
Directors from removing any officer at any time in accordance with Article III,
Section 5 hereof.
Section 4. Resignation.
-----------------------
Any officer may resign by delivering his written resignation to the
corporation at its principal office or to the President or Clerk, and such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 5. Removal.
-------------------
The Directors may remove any officer appointed by the Directors with or
without cause by a vote of a majority of the entire number of Directors then in
office; provided that an officer may be removed for cause only after reasonable
notice and opportunity to be heard by the Board of Directors prior to action
thereon.
Section 6. President.
---------------------
The President shall be the chief executive officer of the corporation
except as the Board of Directors may otherwise provide. It shall be his duty
and he shall have the power to see that all orders and resolutions of the
Directors are carried into effect. He shall from time to time report to the
Directors all matters within his knowledge which the interests of the
corporation may require to be brought to its notice. Except as otherwise
provided by the Board of Directors, in the absence of a Chairman of the Board of
Directors, the President shall preside at all meetings of the stockholders and
of the Directors. The President shall perform such duties and have such powers
additional to the foregoing as the Directors shall designate.
Section 7. Vice Presidents.
---------------------------
In the absence or disability of the President, his powers and duties shall
be performed by the Vice President, if only one, or, if more than one, by the
one designated for the purpose by the Directors. Each Vice President shall have
such other powers and perform such other duties as the Directors shall from time
to time designate. The Directors may assign to any Vice President the title of
Executive Vice President, Senior Vice President and any other title selected by
the Directors.
Section 8. Treasurer.
---------------------
The Treasurer shall, subject to the direction of the Directors, have
general charge of the financial affairs of the corporation and shall cause to be
kept accurate books of accounts. He shall have custody of all funds, securities
and valuable documents of the corporation, except as the Directors may otherwise
provide. He shall promptly render to the President and to the Directors such
statements of his transactions and accounts as the President and Directors
respectively may from time to time require. The Treasurer shall perform such
duties and have such powers additional to the foregoing as the Directors may
designate.
Section 9. Assistant Treasurers.
--------------------------------
In the absence or disability of the Treasurer, his powers and duties shall
be performed by the Assistant Treasurer, if only one, or, if more than one, by
the one
10
<PAGE>
designated for the purpose by the Directors. Each Assistant Treasurer shall have
such other powers and perform such other duties as the Directors shall from time
to time designate.
Section 10. Clerk.
------------------
The Clerk shall record in books kept for the purpose all votes and
proceedings of the stockholders and of the Directors at their meetings. Unless
the Directors shall appoint a transfer agent and/or registrar or other officer
or officers for the purpose, the Clerk shall be charged with the duty of
keeping, or causing to be kept, accurate records of all stock outstanding, stock
certificates issued and stock transfers; and, subject to such other or different
rules as shall be adopted from time to time by the Directors, such records may
be kept solely in the stock certificate books. The Clerk shall perform such
duties and have such powers additional to the foregoing as the Directors shall
designate.
Section 11. Assistant Clerks.
-----------------------------
In the absence of the Clerk from any meeting of the stockholders or from
any meeting of the Directors, the Assistant Clerk, if one be elected, or, if
there be more than one, the one designated for the purpose by the Directors,
otherwise a Temporary Clerk designated by the person presiding at the meeting,
shall perform the duties of the Clerk. Each Assistant Clerk shall have such
other powers and perform such other duties as the Directors may from time to
time designate.
ARTICLE IV
PROVISIONS RELATING TO CAPITAL STOCK
Section 1. Issuance and Consideration.
--------------------------------------
Any unissued capital stock from time to time authorized under the Articles
of Organization may be issued by vote of the stockholders or by vote of the
Directors. Stock may be issued for cash, tangible or intangible property,
services, or for a debt or note or expenses. Stock having par value shall not
be issued for cash, property, services or expenses worth less than the par
value. For the purpose of this Section 1, a debt or note of the purchaser,
secured or unsecured, shall not be considered property.
Section 2. Certificates of Stock.
---------------------------------
Shares of capital stock of the corporation may be certificated or
uncertificated. Each stockholder, upon request, shall be entitled to a
certificate or certificates representing in the aggregate the shares owned by
him and certifying the number and class thereof, which shall be in such form as
the Directors shall adopt. Each certificate of stock shall be signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer,
but such signatures may be facsimiles when a certificate is countersigned by a
transfer agent or registrar, other than a Director, officer or employee of the
corporation. In case any officer who has signed or whose facsimile signature
has been placed on such certificate shall cease to be such officer before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer
11
<PAGE>
at the time of its issue. Every certificate for shares of stock which are
subject to any restriction on transfer pursuant to the Articles of Organization,
the By-Laws or any agreement to which the corporation is a party, shall have the
restriction noted conspicuously on the certificate and shall also set forth on
the face or back either the full text of the restriction or a statement of the
existence of such restriction and a statement that the corporation will furnish
a copy to the holder of such certificate upon written request and without
charge. Every certificate issued when the corporation is authorized to issue
more than one class or series of stock shall set forth on its face or back
either the full text of the preferences, voting powers, qualifications and
special and relative rights of the shares of each class and series authorized to
be issued or a statement of the existence of such preferences, powers,
qualifications and rights, and a statement that the corporation will furnish a
copy thereof to the holder of such certificate upon written request and without
charge.
Section 3. Transfer of Stock.
-----------------------------
Subject to the restrictions, if any, stated or noted on the stock
certificate, the stock of the corporation shall be transferable, so as to affect
the rights of the corporation, only by transfer recorded on the books of the
corporation or its transfer agent, in person or by duly authorized attorney, and
upon the surrender of the certificate or certificates properly endorsed or
assigned with such proof of authority or authenticity of signature as the
corporation shall reasonably require.
Section 4. Equitable Interests Not Recognized.
----------------------------------------------
The corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person except as may be otherwise expressly provided by
law.
Section 5. Lost or Destroyed Certificates.
------------------------------------------
The Board of Directors of the corporation may, subject to Massachusetts
General Laws, Chapter 156B, Section 29, as amended from time to time, determine
the conditions upon which a new certificate of stock may be issued in place of
any certificate alleged to have been lost, destroyed, or mutilated. The Board
of Directors may, in their discretion, require the owner of a lost, mutilated or
destroyed certificate, or his legal representative, to give a bond, sufficient
in their opinion, with or without surety, to indemnify the corporation against
any loss or claim which may arise by reason of the issue of the shares in place
of such lost, mutilated or destroyed stock certificate.
ARTICLE V
STOCK IN OTHER CORPORATIONS
Except as the Directors may otherwise designate, the President or Treasurer
may waive notice of, and appoint any person or persons to act as proxy or
attorney in fact for this corporation (with or without power of substitution)
at, any meeting of stockholders
12
<PAGE>
or shareholders of any other corporation or organization, the securities of
which may be held by this corporation.
ARTICLE VI
INSPECTION OF RECORDS
Books, accounts, documents and records of the corporation shall be open to
inspection by any Director at all times during the usual hours of business. The
original, or attested copies, of the Articles of Organization, By-Laws and
records of all meetings of the incorporators and stockholders, and the stock and
transfer records, which shall contain the names of all stockholders and the
record address and the amount of stock held by each, shall be kept in
Massachusetts at the principal office of the corporation, or at an office of its
transfer agent or of the Clerk or the resident agent, if any, of the
corporation. Said copies and records need not all be kept in the same office.
They shall be available at all reasonable times to the inspection of any
stockholder for any proper purpose but not to secure a list of stockholders or
other information for the purpose of selling said list or information or copies
thereof or of using the same for a purpose other than in the interest of the
applicant, as a stockholder, relative to the affairs of the corporation.
ARTICLE VII
CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS
Checks, notes, drafts and other instruments for the payment of money
drawn or endorsed in the name of the corporation may be signed by any officer or
officers or person or persons authorized by the Directors to sign the same. No
officer or person shall sign any such instrument as aforesaid unless authorized
by the Directors to do so.
ARTICLE VIII
SEAL
The Board of Directors may adopt and alter the form of seal of the
corporation.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall, unless otherwise decided by the
Board of Directors, end on the last Saturday in June.
13
<PAGE>
ARTICLE X
AMENDMENTS
Except as otherwise provided in the Articles of Organization and except
with respect to a By-Law adopted by the Directors, these By-Laws may at any time
be amended by the affirmative vote of the holders of (i) two-thirds of each
class of stock outstanding and entitled to vote on the matter, or (ii) in the
case of any such amendment that has been approved by vote of the Board of
Directors taken at a meeting held prior to the meeting of stockholders at which
such amendment is to be voted upon, a majority of the stock present or
represented and entitled to vote and voting on such amendment, provided that
such majority shall be at least a majority of the number of shares required to
constitute a quorum for action on such matter, and provided, further, that
notice of the substance of the proposed amendment is stated in the notice of the
meeting. If authorized by the Articles of Organization, the Directors also may
make, amend or repeal these By-Laws, in whole or in part, except with respect to
any provision hereof (i) which alters the provisions of these By-Laws with
respect to the removal of Directors or the election of committees by Directors
and the delegation of powers thereto, or (ii) which by law, the Articles of
Organization or these By-Laws requires action by the stockholders. Not later
than the time of giving notice of the meeting of stockholders next following the
making, amending or repealing by the Directors of any By-Law, notice thereof
stating the substance of such change shall be given to all stockholders entitled
to vote on amending the By-Laws. Except as otherwise provided in the Articles
of Organization, any By-Law adopted by the Directors may be amended or repealed
by an affirmative vote of the holders of two-thirds of each class of stock
outstanding and entitled to vote on the matter.
14
<PAGE>
N U M B E R S H A R E S
REGI
[LOGO OF THE REGISTRY, INC. APPEARS HERE]
COMMON STOCK SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE
IN BOSTON, MA OR NEW YORK, NY
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
CUSIP 75913U 10 1
THIS CERTIFIES THAT
Is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, OF
THE REGISTRY, INC.
transferable on the books of the Company by the holder hereof, in person or by
duly authorized attorney, upon surrender of this certificate properly endorsed
or assigned. This certificate and the shares represented hereby are issued and
shall be held subject to the laws of the Commonwealth of Massachusetts and the
provisions of the Articles of Organization and the Bylaws of the Company as
amended from time to time, to which the holder by acceptance hereof assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Company and the facsimile signatures of
its duly authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
[SEAL OF THE REGISTRY, INC. APPEARS HERE]
/s/ G. Drew Conway
CHIEF EXECUTIVE OFFICER
AND PRESIDENT
/s/ Robert E. Foley
CHIEF FINANCIAL OFFICER
AND TREASURER
<PAGE>
THE REGISTRY, INC.
THE CORPORATION AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF STOCK.
THE CORPORATION WILL FURNISH TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN
REQUEST AND WITHOUT CHARGE, THE PREFERENCES, VOTING POWERS, QUALIFICATIONS AND
SPECIAL AND RELATIVE RIGHTS OF EACH CLASS OF STOCK AND SERIES THEREOF, IF ANY,
AUTHORIZED TO BE ISSUED.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT/TRAN MIN ACT - __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts/Transfers to Minors
Act ____________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
| |
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within-named Company with full
power of substitution in the premises.
Dated,_________________
_____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
_____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCK-
BROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
HILL & BARLOW
A Professional Corporation
One International Place
Boston, Massachusetts 02110-2607
Telephone 617-428-3000
Facsimile 617-428-3500
ANDREA M. TEICHMAN
Direct Line: 617-428-3540
May 14, 1996
The Registry, Inc.
189 Wells Avenue
Newton, MA 02159
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-1 dated April 11, 1996 (S.E.C. File No. 333-3366), as
amended by Amendment No. 1 dated May 14, 1996 (collectively, the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), relating
to the public offering (the "Offering") of an aggregate of 2,530,000 shares of
common stock, no par value per share (the "Shares"), of The Registry, Inc., a
Massachusetts corporation (the "Company"), of which 2,230,000 shares are to be
offered by the Company and 300,000 shares are to be offered by the sole
stockholder of the Company (the "Selling Stockholder"), including 330,000 shares
of common stock subject to an over-allotment option granted by the Company to
the Underwriters (as defined below). The Shares are to be sold by the Company
and the Selling Stockholder pursuant to an underwriting agreement (the
"Underwriting Agreement") among the Company, the Selling Stockholder, and Adams,
Harkness & Hill, Inc. and A.G. Edwards & Sons, Inc. as representatives of the
several underwriters named in the Underwriting Agreement (the "Underwriters").
We have acted as counsel for the Company and as special counsel for the
Selling Stockholder in connection with the sale by the Company and the Selling
Stockholder of the Shares. We have examined and relied upon (i) signed copies of
the Registration Statement and all exhibits thereto, all as filed with the
Commission, (ii) the Underwriting Agreement in the form filed as Exhibit 1.1 to
the Registration Statement, (iii) copies of the Restated Articles of
Organization and By-Laws of the Company, and all amendments thereto, and (iv)
originals, or copies certified to our satisfaction, of such records of meetings
of the directors and stockholders of the Company, documents and other
instruments as in our judgment are necessary or appropriate to enable us to
render this opinion expressed below.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies, and the authenticity of the originals
of such latter documents.
Based upon the foregoing, we are of the opinion that the Shares to be
issued and sold by the Company and to be sold by the Selling Stockholder have
been duly authorized by all necessary corporate action of the Company, and, when
issued and sold by the Company and sold by the Selling Stockholder in accordance
with the terms of the Underwriting Agreement, will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as part of the Registration
Statement and to the use of our name therein and in the related Prospectus under
the caption "Legal Matters." We also hereby consent to the incorporation by
reference of this opinion in any subsequent registration statement for the same
Offering that may be filed under Rule 462(b) of the Act.
It is understood that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.
Very truly yours,
HILL & BARLOW,
a Professional Corporation
By: /s/ Andrea M. Teichman
-------------------------
Andrea M. Teichman,
a member of the firm
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, (the "Agreement") is entered into as of the
13th day of May, 1996, by and between The Registry, Inc., a Massachusetts
corporation with its principal place of business at 189 Wells Avenue, Newton,
Massachusetts 02159 (the "Corporation") and G. Drew Conway, an individual
residing at 76 Chesterton Road, Wellesley, Massachusetts 02181 (the
"Employee").
The Corporation desires to employ the Employee, and the Employee
desires to be employed by the Corporation. In consideration of the mutual
covenants and promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Term of Employment. The Corporation hereby agrees to employ the
------------------
Employee, and the Employee hereby accepts employment with the Corporation, upon
the terms set forth in this Agreement, for the period commencing on the date
hereof (the "Commencement Date") and ending on the fourth anniversary of the
date hereof (the "Four-Year Term"), unless earlier terminated in accordance with
the provisions of Section 4 hereof (such period being hereinafter referred to as
the "Employment Period"). Each of the one-year periods commencing on the
Commencement Date and on each of the first, second, and third anniversaries
thereof is referred to herein as an "Employment Year".
2. Title; Capacity.
---------------
2.1 The Employee shall serve as President and Chief Executive Officer
of the Corporation. The Employee shall be subject to the supervision of, and
shall have such authority as is delegated to him by, the Board of Directors of
the Corporation (the "Board") and his powers and authority shall be superior to
any other officer or employee of the Corporation or any subsidiary thereof. The
Employee agrees to serve without additional compensation, if elected or
appointed thereto, as a member of the Board, provided that the Employee is
indemnified for serving in any and all such capacities on a basis no less
favorable than is currently provided by Article 6B of the Corporation's Articles
of Organization, as amended.
2.2 The Employee hereby accepts such employment and agrees to
undertake the duties and responsibilities inherent in such position and such
other duties and responsibilities as the Board shall from time to time
reasonably assign to him. The Employee agrees to devote his full business time,
attention and energies to the business and interests of the Corporation during
the Employment Period; provided, however, that the Employee shall be free to
-----------------
serve as a director of other corporations or entities and to participate in
civic and charitable activities so long as such activities do not interfere with
his duties and responsibilities to the Corporation hereunder. The Employee
agrees to abide by the reasonable rules, regulations, instructions, personnel
practices and policies of
<PAGE>
the Corporation and any reasonable changes therein which may be adopted from
time to time by the Corporation.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Corporation shall pay the Employee, in weekly
------
installments, an annual base salary of $400,000 for the first Employment Year,
$425,000 for the second Employment Year, $475,000 for the third Employment Year
and $525,000 for the fourth Employment Year during the Employment Period (such
annual amount, the "Base Salary").
3.2 Additional Compensation. In addition to the annual base salary
-----------------------
to be paid to the Employee by the Corporation, the Employee shall be eligible to
receive with respect to each Employment Year such bonuses as may be awarded from
time to time upon the achievement by the Corporation of certain revenue and
profitability performance targets as are determined in advance of each
Employment Year by the Compensation Committee of the Board; provided, however,
-----------------
that such bonus shall in no event exceed $160,000 in the first Employment Year.
3.3 Fringe Benefits. The Employee shall be entitled to participate
---------------
in all benefit programs that the Corporation establishes and makes available to
its executive level employees, if any, to the extent that the Employee's
position, tenure, salary, age, health and other qualifications make him eligible
to participate. The Employee shall be entitled to the number of vacation days in
each Employment Year, and to compensation in respect of earned but unused
vacation days, determined in accordance with the Corporation's vacation plan.
The Employee shall also be entitled to all paid holidays given by the
Corporation to its executive officers.
3.4 Reimbursement of Expenses. The Corporation shall reimburse
-------------------------
the Employee for all reasonable travel and other expenses incurred or paid by
the Employee in connection with, or related to, the performance of his duties,
responsibilities or services under this Agreement, upon presentation by the
Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Corporation may request.
3.5 Automobile. The Corporation shall provide Employee with an
----------
automobile during the Employment Period, which shall either be the BMW 740iL
currently leased by the Corporation on behalf of Employee or an automobile
comparable in value thereto, and shall pay all insurance premiums thereon.
3.6 Life Insurance. Within sixty (60) days of the date of this
---------------
Agreement, the Corporation shall acquire a split dollar life insurance policy in
the amount of approximately $36 million on the life of Employee, the beneficiary
of which shall be Employee's designee, and to pay all premium thereon (subject
to reimbursement for the non-term premium costs upon Employee's death).
-2-
<PAGE>
4. Employment Termination. The employment of the Employee by the
----------------------
Corporation pursuant to this Agreement shall terminate upon the occurrence of
any of the following:
4.1 At the election of the Corporation for Cause, immediately upon
written notice by the Corporation to the Employee. For purposes of this Section
4.1, "Cause" shall mean:
(a) fraud that is material and related to the property or
business of the Corporation; or
(b) misappropriation of material Corporation assets; or
(c) conviction of, or the entering of a plea of
nolo contendere to, a felony or other crime involving moral turpitude; or
- ---- ----------
(d) intentional dishonesty that is material and related to the
performance of the Employee's duties as an employee of the Corporation; or
(e) failure to perform reasonably assigned duties as a result
of the Employee's abuse of alcohol or drugs after notice from the Corporation
and a reasonable opportunity to cure; or
(f) willful failure to carry out a material directive of the
Board, provided that such directive concerned matters within the scope of
Employee's duties and was capable of being reasonably and lawfully performed.
(g) a material breach by the Employee of the terms of this
Agreement after written notice from the Corporation and 30 days to cure;
provided, however, that the Employee shall in no event be deemed to have
- -------- -------
materially breached Section 2 of this Agreement based on any of the following:
(i) as the result of bad judgment or negligence on the
part of the Employee other than habitual negligence; or
(ii) as the result of an act or omission without intent of
gaining therefrom directly or indirectly a profit to which
the Employee was not legally entitled; or
(iii) because of an act or omission believed by the
Employee in good faith to have been in or not opposed to
the interests of the Corporation; or
(iv) for any act or omission in respect of which a
determination could properly be made that the Employee met
the applicable standard of conduct prescribed for
indemnification
-3-
<PAGE>
or reimbursement or payment of expenses under the Restated
Articles of Organization of the Corporation.
4.2 Upon the death or disability of the Employee. As used in this
Agreement, the term "disability" shall mean the inability to the Employee, due
to a physical or mental disability, to substantially perform the services
contemplated by this Agreement for one hundred and eighty days during any period
of three hundred sixty-five consecutive calendar days. A determination of
disability shall be made by a physician satisfactory to both the Employee, on
the one hand, and the Corporation, on the other hand, provided that if such
--------
parties are unable to agree on a physician, the Employee and the Corporation
shall each select a physician and these two together shall select a third
physician, whose determination as to disability shall be binding on all parties.
4.3 At the election of the Corporation other than for Cause (but
excluding termination due to Employee's death or disability), at any time upon
thirty (30) days' notice to Employee.
4.4 By the Employee for Good Reason, upon ten (10) business days'
notice (except as otherwise provided below) to the Corporation setting forth in
reasonable detail the nature of such Good Reason. The following shall
constitute "Good Reason" for termination by Employee:
(i) Material failure of the Corporation to provide the Employee the
Base Salary, bonus and benefits in accordance with the terms of
Section 3 hereof; or
(ii) Failure to elect or reelect the Employee to, or removal of the
Employee from, the offices set forth in Section 2.1 above; or
(iii) A significant change in the nature or scope of the authorities,
powers, functions or duties attached to the positions summarized
in Section 2.1 above; or
(iv) A determination by the Employee made in good faith that as a
result of a Change in Control of the Corporation, as defined in
Addendum A attached hereto, and a change in circumstances
-------- -
thereafter and since the date of this Agreement significantly
affecting his position, he is unable to carry out the
authorities, powers, functions or duties attached to his
position and contemplated by Section 2.1 of this Agreement and
the situation is not remedied within thirty (30) days after
receipt by the Corporation of written notice from the Employee
of such determination.
4.5 By the Employee other than for Good Reason at any time upon
thirty (30) days' notice to Corporation.
-4-
<PAGE>
5. Effect of Termination.
---------------------
5.1 Termination at Election of the Corporation or by Employee Other
---------------------------------------------------------------
than for Good Reason. In the event of the Employee's employment is terminated
- --------------------
at the election of the Corporation pursuant to Section 4.1 or by Employee other
than for Good Reason pursuant to Section 4.5, the Corporation shall pay to the
Employee the Base Salary and benefits otherwise payable to him under Section 3
through the last day of his actual employment by the Corporation.
5.2 Termination for Death or Disability. In the event the Employee's
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
4.2, the Corporation shall pay to the estate of the Employee or to the Employee,
as the case may be, the compensation and benefits which would otherwise be
payable to the Employee under Section 3 through the last day of the month in
which the termination of his employment because of death or disability occurs.
5.3 Termination Other than for Cause or by Employee for Good Reason.
----------------------------------------------------------------
In the event the Employee's employment is terminated by the Corporation other
than for Cause pursuant to Section 4.3 or by Employee for Good Reason pursuant
to Section 4.4, and provided that no benefits are payable to the Employee under
a separate severance agreement or executive severance plan with the Corporation
as a result of such termination, the Corporation shall (i) pay to the Employee
the base salary and benefits otherwise payable to him under Section 3 through
the last day of actual employment by the Corporation; (ii) for a period of two
(2) years after the date of termination (the "Severance Period") and regardless
of whether Employee commences other employment (provided that such employment
does not violate Section 7 hereof), continue to pay Employee the base salary in
weekly installments at the rate in effect on the date of termination, with an
increase as specified in Section 3.1 of the Agreement at such time as a new
Employment Year would have commenced had the Agreement still been in effect (but
no additional increase to the extent that the Severance Period extends beyond
the fourth anniversary of the Commencement Date); (iii) subject to any employee
contribution applicable to Employee on the date of termination, continue to
contribute to the cost of the Employee's participation in the Corporation's
group medical and dental insurance plans for the Severance Period, provided that
Employee is entitled to continue such participation under applicable law and
plan terms; and (iv) to the extent that such termination occurs during an
Employment Year, provide Employee with a lump sum payment equal to the bonus
paid or payable to Employee with respect to the immediately previous Employment
Year multiplied by a fraction, the numerator of which is the number of days
elapsed in the then-current Employment Year and the denominator of which is 365,
within thirty (30) days of termination.
6. Termination of Employment After Four-Year Term.
-----------------------------------------------
6.1 To the extent that Employee is not earlier terminated in
accordance with the provisions of Section 4 hereof, the Corporation shall notify
Employee in writing on or before the date which is six months prior to the end
of the Four-Year Term if it
-5-
<PAGE>
does not wish to continue Employee's employment after the Four-Year Term on
substantially the same or more favorable terms to Employee than are set forth in
this Agreement.
6.2 If the Corporation (i) fails to continue Employee's employment
after the Four-Year Term other than for Cause or (ii) terminates Employee's
employment within one year after the end of the Four-Year Term other than for
Cause, then the Corporation shall (i) pay to the Employee the base salary and
benefits otherwise payable to him through the last day of actual employment by
the Corporation; (ii) for the period commencing on such termination of
employment and terminating on the one (1) year anniversary of the end of the
Four-Year Term (the "Non-Renewal Period") and regardless of whether Employee
commences other employment (provided that such employment does not violate
Section 7 hereof), continue to pay Employee the base salary in weekly
installments at the rate in effect on the date of termination; and (iii) subject
to any employee contribution applicable to Employee on the date of termination,
continue to contribute to the cost of the Employee's participation in the
Corporation's group medical and dental insurance plans for the Non-Renewal
Period, provided that Employee is entitled to continue such participation under
applicable law and plan terms.
7. Non-Compete; Proprietary Information.
------------------------------------
7.1 For so long as the Employee is employed by the Corporation and
for a period of two (2) years thereafter, the Employee will not directly or
indirectly:
(a) solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the clients or accounts, or
prospective clients or accounts, of the Corporation or any of its affiliates;
(b) recruit, solicit or induce, or attempt to induce, any
employees or independent contractors of the Corporation to terminate their
employment with, or otherwise cease their relationship with, the Corporation or
any of its affiliates;
(c) directly or indirectly, whether as owner, partner, investor,
consultant, agent, employee, co-venturer or otherwise, compete with the
Corporation or any of its affiliates within the United States or any other
geographic region in which the Corporation conducts or proposes to conduct
business or undertake any planning for any business competitive with the
Corporation or any of its affiliates. Specifically, but without limiting the
foregoing, Employee agrees not to engage in any manner in any activity that is
directly or indirectly competitive or potentially competitive with the business
of the Corporation or any of its affiliates as conducted or under consideration
at any time during Employee's employment. Restricted activity includes, without
limitation, accepting employment or a consulting position with any person who
is, or at any time with two (2) years prior to termination of Employee's
employment has been, a customer of the Corporation or any of its affiliates.
For the purposes of this Section 7, the business of the Corporation and its
affiliates shall include the provision of information technology consultants or
any other temporary service personnel with computer-related expertise to
-6-
<PAGE>
third parties or any other business in which the Corporation is engaged while
Employee is employed by the Corporation.
(d) disclose any Proprietary Information (as defined below) to
others outside the Corporation or use the same for any unauthorized purposes
without approval of the Corporation; provided; however, that the foregoing
--------- -------
restriction shall not apply if such information: (i) is generally known to the
public at the time of disclosure or becomes generally known through no wrongful
act on the part of the Employee; (ii) is in the Employee's possession at the
time of disclosure other than as a result of the Employee's breach of any legal
obligation; (iii) becomes known to the Employee through disclosure by sources
other than the Corporation having the legal right to disclose such information;
(iv) is independently developed by the Employee without reference to or reliance
upon Proprietary Information; or (iv) is required to be disclosed by the
Employee to comply with applicable laws or governmental regulations, provided
that the Employee provides prior written notice of such disclosure to the
Corporation and takes reasonable and lawful actions to avoid and/or minimize the
extent of such disclosure.
7.2 For the purposes of this Section 7, "Proprietary Information"
shall mean all information and know-how, whether or not in writing, of a
private, secret or confidential nature concerning the Corporation's business or
financial affairs. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods, techniques,
systems, formulas, compositions, projects, developments, plans, research data,
financial data, personnel data, computer programs and client and information
technology consultant lists.
7.3 The Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, program listings or other written,
photographic or tangible material containing Property Information, whether
created by the Employee or others, which shall come into his custody or
possession, shall be and are the exclusive property of the Corporation to be
used by the Employee only in the performance of his duties for the Corporation.
7.4 The Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in Section 7.1(d),
above, also extends to such types of information, know-how, records and tangible
property of clients of the Corporation or other third parties who may have
disclosed or entrusted the same to the Corporation or to him in the course of
the Corporation's business.
7.5 If any restriction set forth in this Section 7 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
7.6 The restrictions contained in this Section 7 are necessary for
the protection of the business and goodwill of the Corporation and are
considered by the
-7-
<PAGE>
Employee to be reasonable for such purpose. The Employee agrees that any breach
of this Section 7 will cause the Corporation substantial and irrevocable damage
and therefore, in the event of any such breach, in addition to such remedies
which may be available, the Corporation shall have the right to seek specific
performance and injunctive relief.
8. Registration Rights. Each of the Employee and the Corporation agrees
-------------------
to be bound by the Registration Rights provisions attached as Addendum B to this
----------
Agreement, which Addendum shall be deemed to be incorporated by reference in,
and made a part of, this Agreement.
9. Notices. All notices or elections required or permitted under this
-------
Agreement shall be in writing, signed by the party giving such notice or
election, and shall be effective upon personal delivery, three days after
deposit with the United States Post Office, by registered or certified mail,
postage prepaid, or one business day following deposit with Federal Express or
with another nationally recognized overnight courier service, postage prepaid,
addressed to the other party at the address shown above, or at such other
address or addresses as either party may designate to the other in accordance
with this Section 9 with a copy to Hill & Barlow, One International Place,
Boston, Massachusetts 02110, Attention: Andrea M. Teichman, Esq.
10. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
11. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Corporation and the Employee.
12. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
13. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Corporation may
be merged or which may succeed to its assets or business; provided, however,
-------- -------
that the obligations of the Employee are personal and shall not be assigned
except for obligations of Employee pursuant to Addendum B hereto.
14. Miscellaneous.
-------------
14.1 No delay or omission by the Corporation in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Corporation on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
-8-
<PAGE>
14.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
14.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
THE REGISTRY, INC.
By:/s/ Christopher B. Egizi
--------------------------------
Title: Vice President
----------------------------
EMPLOYEE:
/s/ G. Drew Conway
__________________________________
G. Drew Conway
-9-
<PAGE>
Addendum A
----------
Definition of Change of Control.
- --------------------------------
A "Change of Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of 25% or more of the
outstanding voting securities of the Corporation; (ii) the Corporation shall be
merged or consolidated with another corporation unless, following such merger or
consolidation, (A) more than 60% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Corporation, other than affiliates (within the meaning of
the Securities Exchange Act of 1934) of any party to such merger or
consolidation, as the same shall have existed immediately prior to such merger
or consolidation and (B) at least two-thirds of the members of the board of
directors resulting from such consolidation or merger were members of the
Incumbent Board (as hereinafter defined) at the time of the execution of the
initial agreement providing for such consolidation or merger (a surviving
company meeting the requirements of (A) and (B), a "Qualifying Survivor"); (iii)
the Corporation shall sell substantially all of its assets to another
corporation which is not a wholly owned subsidiary, other than to a Qualifying
Survivor; (iv) a person, within the meaning of Section 3(a)(9) or of Section
13(d)(3) (as in effect on the date hereof) of the Securities Exchange Act of
1934, shall acquire 20% or more of the outstanding voting securities of the
Corporation (whether directly, indirectly, beneficially or of record) provided,
however, that the following acquisitions shall not constitute a Change in
Control: (A) any acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion privilege); (B) any
acquisition by the Corporation or by any corporation controlled by the
Corporation; or (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation controlled
by the Corporation; or (v) individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") ceasing for any reason to
constitute at least two-thirds of the Board over any period of 24 consecutive
months or less; provided, however, that any individual becoming a director
-------- -------
subsequent to the date of this Agreement whose election, or nomination for
election by the Corporation's shareholders, was approved by a vote or resolution
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board. For
purposes hereof, ownership of voting securities shall take into account and
shall include ownership as determined by applying the provisions of Rule 13d-
3(d)(1)(i) (as in effect on the date hereof) pursuant to the Securities Exchange
Act of 1934.
-10-
<PAGE>
Addendum B
----------
Registration Rights:
--------------------
1. Certain Definitions. As used in this Addendum B, the following
-------------------
terms shall have the following respective meanings:
"Commission" shall mean the United States Securities and
-----------
Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of
-------------
1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission issued under such Act, as they each may,
from time to time, be in effect.
"Holder" shall mean Employee so long as he holds Registrable
-------
Securities and any one transferee of Employee in the event of
Employee's death so long as such transferee holds at least 1,000,000
shares of Registrable Securities and provided such transferee agrees
in writing with the Corporation to hold such Registrable Securities
subject to all the restrictions hereof.
"Registrable Securities" shall mean the 8,000,000 shares of
-----------------------
Common Stock, no par value per share, of the Corporation owned by the
Employee on the date of this Agreement and any securities issued as
a dividend or other distribution with respect to, or in exchange or in
replacement for, the Common Stock.
"Registration Expenses" shall mean all expenses (except for
----------------------
"Selling Expenses" as defined below) incurred by the Corporation in
complying with these Registration Rights provisions, including,
without limitation, all registration and filing fees, printing
expenses, reasonable fees and disbursements of counsel and accountants
for the Corporation.
The terms "register", "registered" and "registration" shall
--------- ----------- -------------
refer to a registration effected by preparing and filing a
Registration Statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such Registration
Statement.
"Registration Statement" shall mean a registration statement
-----------------------
on Form S-1 filed by the Corporation with the Commission for a public
offering and sale of securities of the Corporation.
"Securities Act" shall mean the Securities Act of 1933, as
---------------
amended, or any similar federal statute, and the rules and regulations
of the
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<PAGE>
Commission issued under such Act, as they each may, from time
to time, be in effect.
"Selling Expenses" shall mean all underwriting discounts and
-----------------
selling commissions applicable to the sale of Registrable Securities
pursuant to these Registration Rights provisions and all fees and
disbursements of counsel for the Holder (unless such counsel also has
acted as counsel to the Corporation with respect to the registration
in question).
2. Incidental Registrations.
------------------------
(a) If at any time or from time to time the Corporation shall
determine to register any of its Common Stock, for its own account or
for the account of any of its shareholders (other than the Holder),
other than a registration relating solely to employee benefit plans or
a registration relating solely to a Commission Rule 145 transaction or
any Rule adopted by the Commission in substitution therefor or in
amendment thereto, or a registration on any registration form which
does not include substantially the same information as would be
required to be included in a Registration Statement covering the sale
of Registrable Securities, the Corporation will:
(i) promptly give to Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under Blue Sky laws), and in any
underwriting involved therein, all of the Registrable
Securities specified in a written request by Holder
received by the Corporation within twenty (20) days
after the giving of such written notice by the
Corporation, subject to the limitations set forth in
Section 2(b).
(b) If the registration of which the Corporation gives
notice is for a registered public offering involving an
underwritten public offering, the Corporation shall so
advise the Holder as a part of the written notice given
pursuant to Section 2(a)(i). In such event the right of any
Holder to registration pursuant to this Section 2 shall be
conditioned upon such Holder's participation in such
underwritten public offering and the inclusion of such
Holder's Registrable Securities in the underwritten public
offering to the extent provided herein. If the Holder
proposes to distribute his securities through such
underwritten public offering, he shall (together with the
Corporation and any other holders distributing their
securities through such underwritten public offering) enter
into an underwriting agreement in customary form, including
without limitation mutually agreeable indemnification
provisions, with the underwriter or underwriters selected
for such underwritten public offering by the Corporation.
Notwithstanding any other provision of this Section 2, if
the underwriter determines that marketing factors require a
limitation of the number of
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<PAGE>
shares to be underwritten, all shares to be sold by the
Corporation shall be included in such offering before any
Registrable Securities are so included. The Corporation
shall so advise the Holder, and the number of shares of
Registrable Securities that may be included in the
registration and underwritten public offering shall be
allocated among the Holder and other holders having similar
registration rights in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities owned by
the Holder and such other holders at the time of filing the
Registration Statement. No Registrable Securities excluded
from the underwritten public offering by reason of the
underwriter's marketing limitation shall be included in such
registration. In the event the contemplated sale does not
involve an underwritten public offering, a determination
that the inclusion of the Registrable Securities adversely
affects the marketing of the shares shall be made by the
Board of Directors of the Corporation in its good faith
discretion.
(c) The Corporation may at any time withdraw or abandon
any Registration Statement which triggers the provisions of
this Section 2 without any liability to the Holder. Whether
or not the registration is underwritten, as a condition to
inclusion of Registrable Shares, the Holder shall enter into
mutually agreeable indemnification covenants with the
Corporation with respect to the registration.
3. Registration Procedures. If and whenever the
-----------------------
Corporation is required by these Registration Rights provisions to
effect the registration of any of the Registrable Securities under the
Securities Act for the Holder, the Corporation shall:
(a) file with the Commission a Registration Statement with
respect to such Registrable Securities and use its best efforts to
cause that Registration Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration Statement as
may be necessary to keep the Registration Statement effective, in the
case of a firm commitment underwritten public offering, until each
underwriter has completed the distribution of all securities purchased
by it and, in the case of any other offering, until the earlier of the
sale of all Registrable Securities covered thereby or 120 days after
the effective date thereof;
(c) as expeditiously as possible furnish to the Holder such
reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by the Holder; and
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<PAGE>
(d) as expeditiously as possible use its best efforts to
register or qualify the Registrable Securities covered by the
Registration Statement under the securities or Blue Sky laws of such
states as the Holder shall reasonably request, and do any and all
other acts and things that may be necessary or desirable to enable the
Holder to consummate the public sale or other disposition in such
states of the Registrable Securities owned by the Holder; provided,
---------
however, that the Corporation shall not be required in connection with
-------
this paragraph (d) to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction.
If the Corporation has delivered preliminary or final
prospectuses to the Holder and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, the
Corporation shall promptly notify the Holder and, if requested, the
Holder shall immediately cease making offers of Registrable Securities
and return all prospectuses to the Corporation. The Corporation shall
promptly provide the Holder with revised prospectuses and, following
receipt of the revised prospectuses, the selling stockholders shall be
free to resume making offers of the Registrable Securities.
4. Expenses of Registration. All Registration Expenses
------------------------
incurred in connection with any registration, qualification and
compliance pursuant to Section 2 shall be borne by the Corporation.
All Selling Expenses incurred in connection with any such registration
shall be borne by the Holder. If, notwithstanding this Agreement,
applicable authorities in any state wherein Registrable Securities are
to be sold require an allocation of Registration Expenses, the Holder
agrees to pay his apportioned share thereof.
5. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the
Registrable Securities under the Securities Act pursuant to Section 2,
the Corporation will indemnify and hold harmless the Holder, each
underwriter of such Registrable Securities, and each other person, if
any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act against any losses, claims, damages
or liabilities, joint or several, to which such Holder, underwriter or
controlling person may become subject under the Securities Act, the
Exchange Act, state securities or Blue Sky laws or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or arise out
of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statement therein not misleading in the light of the circumstances
under which they were made; and the Corporation will reimburse such
Holder, underwriter and each such controlling person for any legal or
any other expenses reasonably incurred by such Holder, underwriter or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
-------- -------
the Corporation will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such
-14-
<PAGE>
Registration Statement, preliminary prospectus or final prospectus, or
any such amendment or supplement, in reliance upon and in conformity
with information furnished to the Corporation, in writing, by or on
behalf of such Holder, underwriter or controlling person specifically
for use in the preparation thereof.
(b) In the event of any registration of any of the
Registrable Securities under the Securities Act pursuant to Section 2,
the Holder will indemnify and hold harmless the Corporation, each of
its directors and officers and each underwriter (if any) and each
person, if any, who controls the Corporation or any such underwriter
within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages or liabilities, joint or several, to which
the Corporation, such directors and officers, underwriter or
controlling person may become subject under the Securities Act,
Exchange Act, state securities or Blue Sky laws or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of
or are based upon any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they
were made, if the statement or omission was made in reliance upon and
in conformity with information relating to the Holder furnished in
writing to the Corporation by or on behalf of the Holder specifically
for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement and the Holder will
reimburse the Corporation for any legal or any other expenses
reasonably incurred by the Corporation in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the obligations of the Holder
-------- -------
hereunder shall be limited to any amount equal to the proceeds to such
Holder from Registrable Securities sold in connection with such
registration.
(c) Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the
--------
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld); and provided, further, that the
-------- -------
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section 5. The Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall pay such expense if representation of such Indemnified Party by
the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim
or litigation
-15-
<PAGE>
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect of such claim or litigation, and no Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
(d) In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which
either (i) the Holder makes a claim for indemnification pursuant to
this Section 5 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of
appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of the Holder in
circumstances for which indemnification is provided under this Section
5; then, in each such case, the Corporation and the Holder will
contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) in such
proportions so that the Holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Securities offered by the Registration Statement bears to
the public offering price of all securities offered by such
Registration Statement, and the Corporation is responsible for the
remaining portion; provided, however, that, in any such case, (A) the
-------- -------
Holder will not be required to contribute any amount in excess of the
proceeds to him of all Registrable Securities sold by him pursuant to
such Registration Statement, and (B) no person or entity guilty of
fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any person
or entity who is not guilty of such fraudulent misrepresentation.
6. Other Registration Rights. Nothing herein contained
-------------------------
shall prohibit or affect the Corporation's right to grant registration
rights to any other persons.
7. Information by Holder. If any Registrable Securities
---------------------
are included in any registration, the Holder shall furnish to the
Corporation in writing such information regarding the Holder and the
distribution proposed by the Holder as the Corporation may reasonably
request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this
Agreement.
8. Rule 144 Reporting. With a view to making available
------------------
the benefits of certain rules and regulations of the Commission which
may at any time permit the sale of the Corporation's capital stock to
the public without registration, at all times after 90 days after the
effective date of the first registration under the Securities Act
filed by the Corporation for an offering of its securities to the
general public, the Corporation agrees to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the
Securities Act;
-16-
<PAGE>
(b) Use its best efforts to file with the Commission in
a timely manner all reports and other documents required of
the Corporation under the Securities Act and the Exchange
Act; and
(c) Furnish to Holder forthwith upon request a written
statement by the Corporation as to its compliance with the
reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Corporation, and
such other reports and documents so filed by the Corporation
as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing that Holder to
sell any such securities without registration.
9. Market "Stand-off" Agreement. The Holder, if requested
----------------------------
by the Corporation and an underwriter of the Corporation's securities,
shall agree not to sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the Corporation held by Holder during
the 180-day period following the effective date of the first
Registration Statement (except for any securities of the Corporation
sold pursuant to such Registration Statement) of the Corporation filed
under the Securities Act. Such agreement shall be in writing in form
satisfactory to the Corporation and such underwriter.
-17-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 8, 1996, relating
to the consolidated financial statements of The Registry, Inc., which appears
in such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the nine months ended March 30, 1996, the
year ended June 24, 1995 and each of the two years in the period ended May 31,
1994 listed under Item 16(b) of this Registration Statement when such schedule
is read in conjunction with the financial statements referred to in our
report. The audits referred to in such report also included this schedule. We
also consent to the references to us under the headings "Experts" and
"Selected Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Consolidated Financial Data."
Price Waterhouse LLP
Boston, Massachusetts
May 13, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRY, INC., MARCH 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUN-25-1995
<PERIOD-END> MAR-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 27,466
<ALLOWANCES> 351
<INVENTORY> 0
<CURRENT-ASSETS> 27,855
<PP&E> 6,803
<DEPRECIATION> 1,602
<TOTAL-ASSETS> 34,884
<CURRENT-LIABILITIES> 28,603
<BONDS> 4,440
0
0
<COMMON> 10
<OTHER-SE> 2,035
<TOTAL-LIABILITY-AND-EQUITY> 34,881
<SALES> 0
<TOTAL-REVENUES> 102,094
<CGS> 0
<TOTAL-COSTS> 75,310
<OTHER-EXPENSES> 22,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,664
<INCOME-PRETAX> 2,591
<INCOME-TAX> 1,208
<INCOME-CONTINUING> 1,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,383
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
