<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM JUNE 28, 1997 TO DECEMBER 27, 1997
COMMISSION FILE NUMBER 0-28192
RENAISSANCE WORLDWIDE, INC.
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS
(State or other jurisdiction
INCORPORATION OR ORGANIZATION)
04-2920563
(I.R.S. Employer
Identification No.)
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)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(TITLE OF EACH CLASS)
NASDAQ NATIONAL MARKET
(NAME OF EACH EXCHANGE ON WHICH REGISTERED)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [X]
Based on the closing sales price of the registrant's Common Stock on the
Nasdaq National Market on March 25, 1998, the aggregate market value of the
Common Stock held by non-affiliates of the registrant was $914,078,310.
The number of shares of the registrant's Common Stock outstanding on March 25,
1998 was 50,896,857.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR USE IN CONNECTION
WITH ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 28, 1998 ARE
INCORPORATED BY REFERENCE INTO PART III.
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PART I
ITEM 1: Business
FORWARD-LOOKING STATEMENTS
This Transition Report on Form 10-K contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. The important
factors discussed in Item 7--"Management's Discussion and Analysis of Financial
Condition and Results of Operations" under the caption "Factors That May Affect
Future Results" among others, could cause actual results to differ materially
from those indicated by forward-looking statements made herein and presented
elsewhere by management from time to time.
OVERVIEW
On January 9, 1998, The Registry, Inc. ("The Registry") changed its name to
Renaissance Worldwide, Inc. ("Renaissance" or the "Company"). The Company's new
identity reflects its evolution as a global provider of integrated business and
technology consulting in the areas of strategy, solutions, and services. Since
its initial public offering in June 1996, the Company has aggressively expanded
its market presence through growth in its original services business as well as
through the acquisition of complementary strategy, solutions and services
consulting companies, including Renaissance Solutions, Inc. ("RSI") and The
Hunter Group, Inc. ("Hunter"), both of which were acquired during the six month
period ending December 27, 1997. The acquisition of RSI formed the basis for the
Company's strategy capabilities and added to the Company's solutions
capabilities. The acquisition of Hunter significantly enhanced the Company's
solutions capabilities. These acquisitions were important milestones in the
Company's evolution. In connection with this evolution, the Company changed its
name to reflect its new value proposition to customers, its comprehensive scope
of services, and its international presence.
THE COMPANY
Renaissance provides integrated business and technology consulting services
primarily to Fortune 1000 companies and to a lesser extent other businesses
around the world. The Company maintains offices in the United States, Europe,
and Asia-Pacific region. The Company is organized into three business units
based on its principal service categories: strategy, solutions, and services.
Strategy Business Unit
The Strategy Business Unit ("The Strategy Group") provides management
consulting and technology integration services in connection with performance
support systems. The Strategy Group's principal offerings fall into three
categories: strategy development; balanced scorecard implementation; and
knowledge-based processes.
Solutions Business Unit
The Solutions Business Unit ("The Solutions Group") provides information
technology ("IT") solutions design and implementation services. The Solutions
Group's principal offerings fall into six categories: enterprise management; IT
transformation; network solutions; customer management; e-commerce/knowledge
management; and enabling technologies (data warehousing and decision support).
Services Business Unit
The Services Business Unit ("The Services Group") provides IT professionals on
a contract basis to organizations with complex IT operations. The Services Group
places IT professionals with its clients on a supplemental staffing basis to
assist its clients in an array of service areas including technology
implementation, integration, and development. The Services Group focuses
principally on five technology sectors: workgroup/desktop; legacy systems;
networks and communications; database design and development; and Internet/www.
See Note 17 to the Company's Consolidated Financial Statements for further
information about these business units and geographic regions.
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THE STRATEGY GROUP
The Strategy Group is principally composed of certain of the operations of RSI
and its subsidiaries. The Company acquired RSI on July 31, 1997 in a transaction
accounted for as a pooling of interests. During the six month period ending
December 27, 1997, The Strategy Group accounted for approximately 13% of the
Company's revenue.
BUSINESS STRATEGY
The Strategy Group's goal is to be a leading worldwide consulting partner for
complex organizations in transition to the knowledge era economy. Generally,
these organizations seek major performance improvements by aligning strategy
with organization, leveraging high performers and best practices, connecting
people and processes, and learning to adapt on a continuous basis. This
business unit's strategy encompasses the following elements:
. Employ a Multidisciplinary Approach. The Company believes that a key
factor differentiating the Strategy Group's service offerings is the
combination of its expertise in management consulting, knowledge processes,
and technology integration. Renaissance believes that by effectively
linking these capabilities it can help its clients achieve business
performance improvements.
. Emphasize Cross-Selling Activities and Coordinated Account Development.
The Company believes a key element of growth is the coordinated development
of existing and new accounts. The Strategy Group focuses its marketing and
business development activities on targeted new clients, improving services
to existing clients and actively cross-selling its service offerings to
extend the life of existing client relationships.
. Broaden Customer Base Through Targeted Industry Marketing, Geographic
Expansion and Alliances. The Strategy Group is seeking to expand its
professional staff through the addition of personnel with consulting
expertise in targeted industry sectors and is increasing its sector-
specific customer marketing efforts and practice initiatives, including
publications and executive seminars. The Strategy Group is also seeking
marketing alliances with consulting and technology providers who offer
products or services that complement its service offerings.
. Diversify Service Offerings and Markets Through Internal Development and
Acquisitions of Complementary Businesses. The Strategy Group's business
strategy includes the development and marketing of an integrated portfolio
of service offerings targeted toward senior executives in various industry
sectors. The Company seeks to implement this goal through a combination of
innovative internal development and strategic acquisitions designed to
expand its service offerings and targeted markets.
SERVICE OFFERINGS
The Strategy Group provides management consulting and technology integration
services in connection with performance support systems, primarily for large
corporations. Its principal offerings fall into three categories: strategy
development, balanced scorecard implementation, and knowledge-based processes.
. Strategy Development. Strategy development consists of a range of
management consulting services that formulate, communicate, and implement
stategy across the enterprise. In addition, this area includes distinctive
competencies in due diligence, mergers and acquisitions, market opportunity
analysis, and related strategic services aimed at senior management.
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. Balanced Scorecard Implementation. Balanced scorecard implementation
services consist of methods designed to align strategy with organization,
leverage corporate assets and knowledge, connect people and processes, and
promote continuous organizational learning to test and revise strategies.
The Renaissance Balanced Scorecard (TM) is a concept originated by RSI and
described in three Harvard Business Review articles and in a book, The
------- -------- ------ ---
Balanced Scorecard: Measures That Drive Success, co-authored by one of
-----------------------------------------------
RSI's founders.
. Knowledge-based Processes. Knowledge-based processes consist of services
that are designed to help clients compete in the knowledge era. These
services are designed to harness individual and collective intellectual
capital that boosts organizational performance through a focus on knowledge
flow, as opposed to work flow. Examples of services in this area include
performance modeling, identifying and leveraging the behavior of high
performers, designing knowledge networks and implementing decision support
systems. All of the services in this area are designed to create knowledge
communities that translate strategy into action.
THE SOLUTIONS GROUP
The Solutions Group is principally composed of the operations of Hunter and
its subsidiaries, certain of the operations of The Registry and its
subsidiaries, and certain of the operations of RSI and its subsidiaries. The
Company acquired Hunter on November 26, 1997 in a transaction accounted for as a
pooling of interests. During the six month period ending December 27, 1997, The
Solutions Group accounted for approximately 24% of the Company's revenue.
BUSINESS STRATEGY
The Solutions Group's goal is to become a leading provider of knowledge-based,
integrated IT solutions. This business unit's strategy encompasses the following
elements:
. Concept-to-Completion (TM) Approach. The Solutions Group provides Concept-
to-Completion services that position an organization to maximize the
productivity of both technology and staff. The Solutions Group emphasizes
process improvement, change management, and enabling technology integration
through the entire solution process, which encompasses: visioning and
strategic planning; process improvement through (re)engineering and
workflow design; requirements definition and specification; change
management; vendor product evaluation and selection; vendor product
adaptation; systems conversion and migration; full-scale implementation
support; end-user training; and post-implementation support, including
vendor product upgrade services and system maintenance. This understanding
of the complete project life cycle enhances The Solutions Group's ability
to deliver services in any one area and is designed to provide significant
value to clients.
. Strategic Alliances. The Solutions Group concentrates on developing focused
relationships with a critical few "best-in-breed" software and service
providers. These relationships can span product development, marketing,
sales, professional services, and customer support. Hunter is a PeopleSoft
implementation partner and has participated in numerous collaborative
efforts with PeopleSoft. Hunter has also recently entered into alliance
agreements with Lawson Software and J.D. Edwards, among others.
. Leveraged Sales Model. The Solutions Group employs a business development
model that takes advantage of four distinct channels:
. Dedicated Sales Force - The Solutions Group employs account and business
development managers dedicated to specific solutions offerings.
. The Services Group - The Solutions Group uses sales compensation
programs and account engagement methodologies to incent The Services
Group's sales force.
. The Strategy Group - The Strategy Group utilizes The Solutions
Group's resources and personnel in certain client engagements to
meet specific client requirements.
. Alliance Partners - The Solutions Group uses its strategic alliances
with leading software providers to identify qualified sales
opportunities using the respective alliance partners' sales channels.
. Geographic Expansion. The Solutions Group believes that expanding its
presence in the United States and abroad is important to its long term
success. Currently, The Solutions Group has offices in the greater Boston
area, Atlanta, Austin, Baltimore, Charlotte, Chicago, Dallas, Honolulu,
London, Los Angeles, Melbourne, Moline (IL), New York, Philadelphia,
Richmond, San Francisco, Singapore, Sydney, Toronto, and Vancouver.
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SERVICE OFFERINGS
The Solutions Group provides IT solutions design and implementation services.
Its principal offerings fall into six categories: enterprise management; IT
transformation; network solutions; customer management; e-commerce/knowledge
management; and enabling technologies (data warehousing and decision support).
. Enterprise Management. The Solutions Group assists organizations in planning,
selecting, and implementing Enterprise Resource Planning ("ERP") applications
for accounting, human resources, distribution, materials management, and
manufacturing. Its Concept-to-Completion services include visioning and
strategy development, needs assessment, vendor selection, business process
(re)engineering, workflow automation, systems implementation and end-user
training. Partnerships with industry leaders such as PeopleSoft, Lawson, and
J.D. Edwards keep these services on the leading edge of innovative
technologies and industry best practices. The Solutions Group has helped over
1,000 customers optimize their investment in ERP applications.
. IT Transformation. The Solutions Group believes that for IT organizations to
provide superior service to their customers, they must develop the right
strategies and implement those strategies to achieve measurable improvements
in performance. These services include IT Strategy and Management, involving
Renaissance's FastPath(TM) assessments of IT strategy, management practices,
and organizational design; the IT Balanced Scorecard(TM), which translates IT
strategies into measurable objectives; IT Architecture, including outsourcing
analyses and architecture and migration strategies; Year 2000 Strategy and
Implementation, focused on obtaining year 2000 compliance and certification;
and Program Management, designed to promote on-time, on-budget project
delivery.
. Network Solutions. This area provides a range of full life cycle services
including Infrastructure Readiness, Implementation, and Management and
Operations. Infrastructure Readiness services are designed to ensure that a
client's network and systems infrastructures are capable of supporting their
key business initiatives. Implementation services provide clients with
project teams of certified implementation resources and project managers to
help compress implementation time frames and improve the quality of key
infrastructure project deliverables. Management and Operations services
provide clients with the tools and resources to improve and manage their
existing network and systems infrastructures.
. Customer Management. This service category focuses on a variety of sales
effectiveness offerings using Knowledge-Enabled Selling(TM) and Sales
Performance FastPath(TM) methodologies. Knowledge-Enabled Selling provides
sales strategy audit services, technology/knowledge assessments, and custom
sales force automation deployments. A variety of implementation services are
available through Sales Performance FastPath, including rapid assessment of
sales strategies, system performance reviews, technology selection services,
pilot implementations, and rapid deployments of packaged systems.
. E-Commerce/Knowledge Management. The Solutions Group provides strategic
internet services for its clients, including internet/intranet development,
custom application development, web-enabling legacy systems, and web-site
interface design. The Solutions Group focuses on both electronic commerce and
knowledge management systems primarily for international organizations. These
knowledge-enabled systems are designed to deliver the right information at
the right time in the business process.
. Enabling Technologies (Data Warehousing and Decision Support). This area
offers a comprehensive set of services to assist clients in the
implementation of a data warehouse system. Services in this area include data
warehouse concepts and design, training, data modeling, tool evaluation,
system optimization, and warehouse administration.
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THE SERVICES GROUP
The Services Group is principally composed of certain of the operations of The
Registry and its subsidiaries. During the six month period ending December 27,
1997, The Services Group accounted for approximately 63% of the Company's
revenue.
BUSINESS STRATEGY
The Services Group's goal is to be a leading provider of IT consulting
services for organizations with complex IT operations. This business unit's
strategy encompasses the following elements:
. Emphasize Resource Management. The Company believes that its ability to
provide the highest quality IT professionals is critical to the success of
The Services Group. The Services Group's Delivery Management System is
designed to effectively identify, qualify, place and retain IT
professionals. Most of The Services Group's Resource Managers recruit in
one of five specific technology sectors, enabling The Services Group to
more effectively match the skills of its IT professionals with the needs of
its clients. To attract and retain IT professionals, the Company offers
them a comprehensive benefits package and actively re-markets them before
their engagement ends.
. Focus on Application Development and Software Engineering. Many of The
Services Group's clients are leaders in adopting emerging computing
technologies. The Services Group provides IT professionals 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/www. In addition
to differentiating The Services Group's service offerings from those of
other IT service providers, this focus on application development and
software engineering provides The Services Group an opportunity to enhance
margins by moving away from the commodity pricing more typical for IT
professionals providing routine operations and maintenance services while
enabling its IT professionals the opportunity to work on challenging
projects.
. Build Client Relationships. The Services Group 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. 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 Services Group is better able to anticipate opportunities to
provide additional services.
. 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 Services Group has offices
across the country allowing national coverage for larger accounts and
mobility for IT professionals.
SERVICE OFFERINGS
The Services Group provides IT supplemental staffing and project management
services on a contract basis for application development and software
engineering. The Services Group's IT professionals, billed primarily on an
hourly basis, typically work on implementation, integration and development
engagements lasting from six to twelve months under the direction of the client.
The Services Group organizes its IT services in five sectors:
workgroup/desktop; legacy systems; networks and communications; database design
and development; and Internet/www.
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. Workgroup/Desktop. Workgroup/desktop engagements involve front-end
graphical user interface (GUI) development, rapid application prototyping
and development, object-oriented development; and workgroup application
services.
. Legacy Systems. 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.
. Networks and Communications. 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).
. Database Design and Development. Database design and development
assignments involve design, development and implementation of relational
database applications and systems.
. Internet/www. Internet engagements include Web Page design, Internet
security design issues and intranetworking systems development.
The Services Group also includes several additional service offerings. The
Technical Communications Consulting service, based in Chicago and Dallas,
assists hardware and software vendors and other organizations in developing
documentation, instruction and accompanying related materials associated with
introducing new or upgrading existing products. The Help Desk service, based in
the Response Alliance Center in Atlanta, assists clients in identifying their
help desk requirements and implementing and operating their Help Desk services.
The Engineering Design Technologies service, based in Newton, MA, provides
access to expert CAD/CAM/CAE professionals as well as project solutions in the
areas of mechanical & hardware engineering.
COMPETITION
The market for the Company's consulting services is intensely competitive on
the local, national, and international levels. The market is fragmented and
subject to rapid change. The market is served by numerous management consulting
companies, technology consultants, temporary personnel agencies and outsourcing
companies, solutions providers, implementers, systems integrators, diversified
technology companies (including hardware and software companies), and other
service companies, many of which have greater financial, technical, marketing,
and other resources and have greater name recognition than the Company. Some of
these competitors have a nationwide and/or worldwide 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 consultants.
The Solutions Group and The Services Group compete for IT professionals. IT
professionals, including those who are currently on assignment with the Company,
often seek engagements from more than one 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 Strategy Group and The Solutions
Group compete for management consultants. Management consultants, who often
hold advanced degrees, are in high demand across many business sectors. Primary
competitive factors for recruiting and retaining such professionals include:
compensation; quality of benefits; quality, variety, complexity of assignments,
opportunity for advancement, and opportunity for professional development.
The Company competes for clients with a wide array of service providers. The
Company considers large organizations with complex business and technology 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 companies
as approved providers of the type of services provided by Renaissance. Primary
competitive factors for obtaining and retaining clients include: comprehensive
service offerings; careful matching of consultant skills with the client's
requirements; nationwide and worldwide presence; organizational expertise and
expertise of individual consultants; price of services; monitoring of client
satisfaction during and after an engagement; and general responsiveness to
client needs.
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Although the Company believes that it competes favorably in recruiting IT
professionals and management consultants as well as in obtaining clients, there
is no assurance that it will continue to be successful in doing so.
GROWTH STRATEGY
The Company believes that a balance of internal growth and selective
acquisitions will best position Renaissance to capitalize on opportunities in
the integrated consulting services marketplace. The Company's growth strategy
consists of the following primary components:
. Expand Solutions Business and Increase Scalability. Renaissance management
believes that opportunity exists in The Solutions Group's markets. The
Company is developing a broad range of services intended to offer
considerable value to clients.
. Leverage Existing Relationships. Renaissance management believes that the
combined organization offers a unique value proposition to clients.
Through firmly established existing client relationships, the Company
believes it can increase market share by offering the expanded array of
client services to clients already familiar with the organization.
. Aggressively Build Sales and Marketing Capabilities. Through an expanded,
dedicated sales force and strategic partnerships with technology industry
leaders, management expects to aggressively build market share in the
solutions business and throughout the Company.
. Support, Develop and Continue to Offer Increasing Opportunity to
Professional Staff. Management believes that Renaissance has assembled a
world-class professional staff. A strategic part of growing the
organization is retention of best-in-class individuals and advancement of
leadership at all levels. The expanded organization and history of
continued rapid growth have provided professional staff with an array of
opportunities and challenges. Management believes that this trend will
continue to enhance the Company's efforts to attract and retain top
professional talent.
. Continue Selective Acquisition Strategy. Renaissance expects to continue
to seek to acquire companies, both nationally and internationally, in its
growing areas of operation to facilitate its expansion into new geographic
markets or to enhance its service offering portfolio in an attempt to
further meet client requirements.
. Offer Additional Services to Existing Client Base through Current Sales
Structure. Renaissance intends to continue its practice of developing
complementary services, such as the Engineering Design Technologies service
and Network Investment Health, which is designed to maximize network return
on investment. These services can then be expanded on a national level
after their viability and profitability is demonstrated at the local level.
CLIENT BASE
Renaissance focuses its sales efforts primarily on large organizations with
complex business and technology needs. In the six month period ended December
27, 1997 approximately 22% of the Company's revenue was derived from its top 10
customers, none of which accounted for more than 10% of revenue. The primary
industries served by Renaissance are financial services, communications,
manufacturing, systems integration and pharmaceutical.
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EMPLOYEES
As of December 27, 1997, Renaissance had approximately 4,500 employees,
consisting of 1,500 salaried consultants, 1,900 hourly consultants and 1,100
branch, corporate and administrative staff. In addition, the Company had
approximately 400 consultants working on an independent contractor basis as of
such date. Renaissance is not a party to any collective bargaining agreements
and considers its relationships with its employees to be satisfactory.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Renaissance are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------ --- ------------
<S> <C> <C>
G. Drew Conway........ 40 President, Chief Executive Officer and Director
Robert E. Foley....... 49 Chief Financial Officer and Treasurer
Richard L. Bugley..... 54 Vice President, General Counsel and Clerk
Raymond G. Carlin..... 42 President, The Solutions Group
</TABLE>
Mr. Conway is the founder of Renaissance, and 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.
Mr. Foley has served as Chief Financial Officer since joining Renaissance in
July 1990 and as Treasurer since March 1996. Mr. Foley has also served as an
Adjunct Professor of Finance at Northeastern University.
Mr. Bugley has served as General Counsel of Renaissance since May 1996 and as
Vice President since December 1997. From September 1993 until May 1996 he was
General Counsel and Secretary of Banyan Systems, Inc., a manufacturer and
supplier of network operating systems and services. From September 1992 until
May 1993 he was Vice President and General Counsel of Loyalty Management Group,
Inc., a consumer marketing company. Mr. Bugley has been a member of the
Massachusetts Bar since 1979.
Mr. Carlin has served as President of The Solutions Group since January 1998.
Previously, Mr. Carlin served in a series of positions at NCR Corporation
("NCR") from September 1991 to December 1997, including, most recently, Senior
Vice President, America's Region from January 1995 to December 1997. In this
capacity he was responsible for NCR's sales, professional services, customer
support services, and field operations for Canada, Latin America, and the United
States.
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
Renaissance.
ITEM 2. PROPERTIES
The Renaissance's principal executive offices are located in Newton,
Massachusetts, in approximately 30,000 square feet of leased office space, under
leases that expire on September 30, 2010, from the 189 Wells Avenue Realty Trust
(the "Realty Trust"), of which G. Drew Conway is the sole beneficiary and an
executive officer of the Company is the sole trustee. See Note 7 to Item 6,
"Selected Consolidated Financial Data," and Note 15 to Consolidated Financial
Statements. Additional executive office space is located in approximately 40,000
square feet of leased space in Lincoln, Massachusetts. Renaissance occupies
these premises under a lease expiring in August 1999.
The Company also maintains offices and leases office space in the various
locations throughout the world in which it maintains branch offices. Renaissance
believes that its facilities are adequate for its current operations, but there
can be no assurance that the Company will be able to lease space on acceptable
terms to accommodate future growth.
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ITEM 3. LEGAL PROCEEDINGS
From time to time, Renaissance is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not currently involved in any legal proceedings the resolution of which, in
management's opinion, would have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
1. A special meeting of stockholders was held on December 30, 1997, to amend
the Company's Restated Articles of Organization to change the corporate name to
"Renaissance Worldwide, Inc." The vote was 22,010,142 votes for and 1,830
against, with 8,365 abstentions and 0 broker nonvotes.
2. An annual meeting of stockholders was held on November 20, 1997 (the "Annual
Meeting") to elect one Class II director. The nominee for re-election was Paul
C. O'Brien. The vote was 19,393,664 votes for and 108,992 against, with 0
abstentions and 0 broker nonvotes. At the Annual Meeting, approval was also
sought to increase by 300,000 shares the number of shares of common stock, no
par value, available for issuance under the Company's 1996 Employee Stock
Purchase Plan. The vote was 19,256,120 votes for and 237,105 against, with 9,431
abstentions and 0 broker nonvotes.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded on the Nasdaq National Market under the
symbol "REGI". The following table sets forth the high and low sales prices of
The Company's common stock for the periods indicated:
<TABLE>
<CAPTION>
QUARTER HIGH LOW
------------- ------ -----
<S> <C> <C>
Fiscal 1996
June 5, 1996 through June 29, 1996........ $18.375 $8.50 *
FISCAL 1997
First Quarter............................. $17.125 $ 12.25
Second Quarter............................ $26.625 $ 17.25
Third Quarter............................. $24.875 $ 17.75
Fourth Quarter............................ $ 28.50 $17.375
TRANSITION PERIOD ENDED DECEMBER 27, 1997
First Quarter............................. $ 27.00 $19.563
Second Quarter............................ $ 24.75 $18.875
FISCAL 1998
First Quarter (through March 25, 1998)... $ 31.75 $ 20.75
</TABLE>
The stock prices shown above have been adjusted to reflect the two-for-one
stock split effected as a stock dividend that was paid on March 24, 1998.
* Initial offering price
HOLDERS OF RECORD
On March 25, 1998 there were approximately 89 holders of record of
Renaissance's common stock.
DIVIDENDS
America's Registry, Inc., a wholly-owned subsidiary of Renaissance
("America's Registry") 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 the Company.
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 its 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."
SALES OF UNREGISTEED SECURITIES
On November 26, 1997, the Company issued and sold 5,972,580 shares of
Common Stock to Terry L. Hunter in connection with its acquisition of all of the
outstanding capital stock of Hunter, of which Mr. Hunter was the sole
stockholder. Also in connection with that acquisition, the Company issued and
sold 328,578 shares to an unaffiliated entity that held a residual equity
interest in Hunter. There were no underwriters involved in these sales. The
Company relied on the exemption from registration under Section 4(2) of the
Securities Act of 1933.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
During the Company's fiscal year ended June 28, 1997 and the six month
transition period ended December 27, 1997, the Company acquired Application
Resources, Inc. ("ARI"), Shamrock Computer Resources, Ltd. ("SCR"), RSI and
Hunter in transactions accounted for as poolings of interest. Each of the
acquired companies had a fiscal year that ended in December. The Statement of
Income Data and Balance Sheet Data for the Company's fiscal years presented
below give effect to these acquisitions by combining their financial position as
of the date shown and their results of operations for the twelve months ended on
that date with those of the Company, as shown in the following table. For the
transition period, the Statement of Income Data and Balance Sheet Data reflect
the results of operations for the six months ended December 27, 1997 and the
financial position on that date for all the companies.
<TABLE>
<CAPTION>
Renaissance ARI SCR RSI Hunter
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal 1993 May 31, 1993 - Dec. 31, 1993 Dec. 31, 1993 Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal 1994 May 31, 1994 Dec. 31, 1994(a) Dec. 31, 1994 Dec. 31, 1994 Dec. 31, 1993
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal 1995 June 24, 1995 Dec. 31, 1995 Dec. 31, 1995 Dec. 31, 1995 Dec. 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal 1996 June 29, 1996 June 30, 1996 June 30, 1996 Dec. 31, 1996 Dec. 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal 1997 June 28, 1997 June 30, 1997 June 30, 1997 June 30, 1997 Dec. 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) ARI commenced operations as a separate entity on October 1, 1994. The
results of operations for 1994 include the three months ended December 31,
1994.
The following table sets forth, on the basis described above, certain selected
consolidated financial data of the Company. The selected consolidated financial
data should be read in conjunction with "Managements Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto included elsewhere in this Report.
11
<PAGE>
<TABLE>
<CAPTION>
TRANSITION
-------------
May 31, JUNE 24, JUNE 29, JUNE 28, PERIOD ENDED
---------------------- ------------ -------------- --------------- -------------
1993 1994 1995(1) (2) 1996(2)(6) 1997 (2)(4) DECEMBER 27,
---------------------- ------------ -------------- --------------- -------------
(in thousands, except per share data) 1997
-------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue.............................. $65,613 $111,018 $ 200,233 $ 288,882 $ 428,258 $285,937
Cost of revenue...................... 50,511 80,181 141,554 202,019 298,679 190,745
------- -------- ----------- ---------- ----------- --------
Gross profit ........................ 15,102 30,837 58,679 86,863 129,579 95,192
Selling, general and administrative
expenses.......................... 15,487 24,178 45,589 67,515 95,254 75,041
Acquisition-related expenses (3)..... - - - 3,524 8,268 17,961
----------------------------------------------------------------------------------
Income (loss) from operations (385) 6,659 13,090 15,824 26,057 2,190
Interest and other income
(expense), net............ (340) (853) (693) (605) 3,740 (394)
----------------------------------------------------------------------------------
Income (loss) before taxes........... (725) 5,806 12,397 15,219 29,797 1,796
Provision for income taxes........... 283 619 3,597 7,216 15,237 7,765
----------------------------------------------------------------------------------
Net income (loss).................... $(1,008) $ 5,187 $ 8,800 $ 8,003 $ 14,560 $ (5,969)
======= ======== =========== ========== =========== ========
Net income (loss) per share - basic $ (0.03) $ 0.15 $ 0.24 $ 0.21 $ 0.31 $ (0.12)
Weighted average common
shares outstanding - basic (5) 33,198 33,582 36,308 38,416 46,018 49,982
Net income (loss) per share - diluted $ (0.03) $ 0.15 $ 0.23 $ 0.19 $ 0.29 $ (0.12)
Weighted average common and
potential common shares
outstanding - diluted (5) 33,198 34,304 38,544 42,392 50,128 49,982
Distributions $ 206 $ 530 $ 4,122 $ 2,958 $ 540 $ --
Balance Sheet Data:
Cash and cash equivalents............ $ 225 $ 2,795 $ 8,008 $ 63,247 $ 27,892 $ 17,835
Working capital...................... 1,761 6,508 24,697 107,984 129,515 70,903
Total assets......................... 15,478 33,259 70,083 154,372 239,135 298,391
Total debt, including
current portion.................... 8,452 12,359 23,742 7,546 6,290 44,197
Stockholders' equity................. 2,130 9,145 30,419 116,693 190,311 187,114
</TABLE>
- --------------
(1) Renaissance 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.
(2) Statement of Income Data for the years ended June 24, 1995, June 29, 1996
and June 28, 1997 are for 52, 53 and 52 weeks, respectively.
(3) Represents transaction and other related costs associated with acquisitions
accounted for as poolings of interests.
(4) In August 1996, ARI received a settlement of $1.6 million from its insurance
company for payment of defense costs and related expenses associated with
certain litigation. This amount, less related expenses, has been included in
interest and other income (expense), net, in the Statement of Income Data
above.
12
<PAGE>
(5) The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per share" and Securities and Exchange Commission Staff Accounting
Bulletin No. 98, and has retroactively restated all prior periods' earnings
per share data. See Note 2 to Consolidated Financial Statements.
(6) In conjunction with the renegotiation of Renaissance's lease with the
Realty Trust, the accounts of the Realty Trust have been consolidated with
those of Renaissance, commencing September 19, 1995. See Note 15 to
Consolidated Financial Statements.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since its initial public offering in June 1996, the Company has executed an
aggressive acquisition strategy significantly expanding the Company's national
and international presence and increasing the number of management consulting
and IT service offerings provided by the Company. With the growth came a
reorganization of the Company's structure into three business units: strategy,
solutions and services; and a renaming of the Company to Renaissance Worldwide,
Inc. to reflect the Company's new value proposition to clients, expanded
international presence and broader range of consulting services.
The more significant of the acquisitions executed in the past 18 months were
the acquisitions of RSI and Hunter. RSI, a publicly traded company prior to
acquisition with revenues for the twelve months ended June 1997 of $64.3
million, provides management consulting and technology integration services and
is the cornerstone of the Strategy Group and IT transformation service of the
Solutions Group. Hunter, with revenues of $39.2 million for the twelve months
ended December 1996, provides IT solutions design, systems implementation and
education services and comprises the enterprise management service of the
Solutions Group.
In addition to RSI and Hunter, the Company has acquired 14 other companies
since June of 1996 (three of which were acquired by RSI prior to merger). Of
these acquisitions, five were placed within the Services Group, six were placed
within the Solutions Group, and 3 were placed within the Strategy Group.
Revenue is recognized for consulting services performed either on a time and
materials basis, as is the case with the Services Group and certain sectors of
the Solutions group, or on a fixed price basis for the remainder of the
Solutions Group and the Strategy Group. Revenue for fixed price contracts is
recognized using the percentage of completion method based upon the number of
labor hours incurred compared to the total estimated labor hours at
13
<PAGE>
estimated realizable rates. Under the percentage of completion method, the
Company must estimate the percentage of completion of each project at the end of
each financial reporting period. Estimates are subject to adjustment as a
project progresses to reflect changes in projected completion costs or dates.
The cumulative effect of any revision in estimates of the percentage of
completion, or the effect of identifiable losses on cost over-runs, is reflected
in the financial reporting period in which the change in the estimate or the
loss becomes known. The Company mitigates the risk of losses for cost over-runs
by subdividing its projects into smaller phases. In these cases, the Company and
its clients agree on a fixed price and fixed time frame prior to the
commencement of each phase of the project. These agreements may be revised,
subject to the approval by the Company and its clients, when a significant
change in the scope or cost of a phase arises that neither the Company nor the
client had anticipated. Because the Company bears the risk of cost over-runs and
inflation associated with fixed-price, fixed-time frame projects, the Company's
operating results may be adversely affected by inaccurate estimates of contract
completion costs and dates.
Because revenue is recognized only when consultants are working, operating
results are adversely affected when client facilities are closed due to holidays
or inclement weather. The Company experiences a certain amount of seasonality in
the quarter ended the last Saturday in December due to the number of holidays
falling in the quarter and shutdowns by certain customers for the holiday week.
In addition, lower gross margins are experienced in the first quarter of the
calendar year due primarily to the timing of unemployment tax accruals and, to a
lesser extent, social security taxes.
Revenue growth is achieved by increasing the number of projects or consultants
on engagements and, to a lesser extent, by increasing average bill rates and by
value pricing projects. Gross margin increases are achieved primarily by
increasing the utilization of the salaried consultants, and to a lesser extent,
by increasing the bill rates of hourly consultants and increasing the amount of
revenue generated by The Strategy and Solutions Groups. The Strategy and
Solutions Groups generally obtain higher gross margin percentages then The
Services Group for a variety of reasons.
Due to the significant expansion in the past 18 months, the Company has
increased the infrastructure of its internal IT, human resources, marketing
and finance areas, as well as expanded a number of its branch facilities to
accommodate growth. This has resulted in increases in the selling, general and
administrative expenses in the past six months.
The Company is currently reviewing its IT infrastructure for year 2000
considerations and capacity given the recent growth and anticipated growth in
the next five years. Three significant IT projects are currently underway to
expand and improve the Company's IT capabilities. The first project involves the
replacement of the resume tracking system utilized by the Services Group's
branch offices to match IT consulting candidates to customer requirements. This
system, developed internally, is operational and is now being rolled out to
branch offices. The project should be completed by December 1998 and no
additional significant capital expenditures are expected for this project. The
second project involves the conversion of the enterprise-wide financial and
human resource systems to the PeopleSoft system. The Company expects a
significant benefit by conforming all accounting and human resource systems to
PeopleSoft, allowing for additional capacity without additional headcount, a
reduction of manual input, as well as expanded and more timely reporting of
financial information. The third project involves the development and deployment
of a Knowledge Network, a corporate intranet that will share information and
experience to benefit internal employees as well as consultants on assignment.
The Company is staffing the PeopleSoft and Knowledge Network projects
internally. While using internal resources reduces the overall costs of these
projects, the Company will experience some decrease in the billable utilization
of its consultants as a result of using these resources on internal projects.
The Company has capitalized certain of the internal costs associated with these
projects (see Note 2 to the Consolidated Financial Statements). The Company
expects to use internal resources to address its Year 2000 compliance issues and
does not expect that the costs of bringing its systems into compliance will have
a material adverse affect on its financial condition or results of operations.
RECENT ACQUISITIONS
In July 1997 and November 1997, the Company acquired all of the outstanding
stock of RSI and Hunter, respectively. In total, 21,647,012 shares of
Renaissance common stock were exchanged for all of the outstanding common stock
of RSI and Hunter. In addition, outstanding stock options to purchase RSI and
Hunter common stock were converted into options to purchase 3,361,088 shares of
Renaissance's common stock. These transactions have been accounted for as
poolings-of-interests and, therefore, all prior period financial statements have
been restated as if the acquisitions took place at the beginning of such
periods. Renaissance incurred
14
<PAGE>
transaction and related costs of $18.0 million in the six months ended
December 27, 1997 related to these acquisitions, which have been expensed as
incurred.
In addition, in the six months ended December 27, 1997, the Company acquired
four companies in acquisitions accounted for as purchases: Technomics
Consultants International, Inc.; McClain Group, Inc.; Eligibility Management
Systems, Inc.; and Cambridge Software Group, Inc. Renaissance paid an aggregate
of $37.5 million in cash for these acquisitions, of which $33.5 million was
payable at closing. In addition, the Company may become obligated to pay up to
$12.6 million in contingent cash consideration. The purchase price has been
allocated to the assets acquired and liabilities assumed based upon their
estimated fair values as of the respective dates of acquisition. The excess of
the consideration paid over the estimated fair value of net assets acquired has
been recorded as goodwill. The results of operations for these acquisitions have
been included in Renaissance's results of operations from the respective dates
of acquisition.
SIX MONTHS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
Revenue: Revenue increased 52.6% to $285.9 million for the six months ended
December 27, 1997 from $187.4 million for the six months ended December 28,
1996. The increase was attributable primarily to increases in the revenues of
the Services Group whose revenues comprised 62.6% of the total revenues for the
six months ended December 27, 1997. The Services Group's revenues increased by
$39.3 million, or 28.1%, in the period due to growth within existing branch
offices, as well as growth resulting from having the revenues of acquisitions
made during the six months ended December 1996 in the results of operations for
the entire period of 1997. The Strategy Group, which comprised 13.0% of
Renaissance's total revenues, experienced revenue increases of 100.9% to $37.0
million for the six months ended December 27, 1997 from $18.4 million for the
six months ended December 28, 1996. The increases were a result of greater
utilization of the salaried consultants as well as the addition of the COBA-
Boston and COBA-UK acquisitions in the third quarter of fiscal 1997. Revenues
from The Solutions Group increased $40.7 million, or 139.4%, to $69.8 million in
the period due to an increase in the overall number of engagements over the
prior period.
Gross Profit: Gross profit increased 69.6% to $95.2 million for fiscal 1997
from $56.1 million in fiscal 1996. As a percentage of revenue, gross profit
increased to 33.3% in the six months ended December 27, 1997 from 30.0% in the
six months ended December 28, 1996. This increase is attributable to the
increased number of higher margin solutions and strategy projects and the
increased utilization of the salaried consultants as compared with the prior
period.
Selling General and Administrative Expenses: Selling, general and
administrative expenses, excluding acquisition-related expenses, increased by
72.7% to $75.0 million in the six months ended December 27, 1997 from $43.5
million in the six months ended December 28, 1996. As a percentage of revenue,
selling, general and administrative expenses increased to 26.2% of revenue for
the six months ended December 27, 1997 from 23.2% in the six months ended
December 28, 1996. This increase was attributable to the additional costs
necessary to support the growth in the Company's business and professional
staff, increases in facilities and investments in upgrading the Company's
telecommunications networks and systems, as well as increases in amortization of
goodwill due to the additional acquisitions made during fiscal 1997 and the
transition period ended December 27, 1997.
Acquisition-Related Expenses: The Company incurred acquisition-related
expenses in the six months ended December 27, 1997 of $18.0 million as a result
of its acquisitions of RSI and Hunter during the period. Acquisition-related
costs of $8.7 million in the six months ended December 28, 1996 resulted from
the acquisitions of ARI, SCR and ISS during the period. These costs primarily
represent investment banking, accounting, printing, and legal costs. Costs were
higher for the RSI and Hunter acquisitions due to their relatively larger size.
Interest and Other Income (Expense), Net: Interest and other income (expense),
net changed by $3.2 million to $0.4 million in expense in the six months ended
December 27, 1997 from $2.8 million in income in the six months ended December
28, 1996. The 1996 period included the receipt by ARI of approximately $1.5
million in net proceeds from the settlement of certain litigation. In addition,
amounts outstanding under the Company's lines of credit and other indebtedness
were reduced during the 1996 period as a result of the receipt of the proceeds
from the
15
<PAGE>
Company's initial public offering in June 1996 and from the proceeds from RSI's
public offerings in May and November of 1996. Borrowings under the Company's
line of credit increased during the period ended December 27, 1997.
FISCAL YEARS ENDED JUNE 28, 1997 AND JUNE 29, 1996
Revenue: Revenue increased 48.2% to $428.3 million for fiscal 1997 from $288.9
million in fiscal 1996. The increase was attributable primarily to increases in
the revenues of The Services Group, which comprised 72.2% of the Company's total
revenues for the fiscal year ended June 28, 1997. The Services Group's revenue
increased by $95.2 million, or 44.4%, in the period due to growth within the
existing branch offices, the continued maturation of newer branch offices and
the addition of new branches resulting from acquisitions accounted for as
purchases completed during the year, all of which resulted in a greater number
of IT professionals placed during the period. The Strategy Group, which
comprised 10.6% of Renaissance's total revenues, experienced revenue increases
of $10.5 million, or 30.3%, during the fiscal year ended June 28, 1997. Revenues
from The Solutions Group increased $33.7 million, or 84.5%, in the period due to
an increase in the overall number of engagements and the enhanced performance of
Hunter's UK subsidiary which commenced operations in September 1995.
Gross Profit: Gross profit increased 49.2% to $129.6 million for fiscal 1997
from $86.9 million in fiscal 1996. As a percentage of revenue, gross profit
increased to 30.3% in fiscal 1997 from 30.1% in fiscal 1996. This increase is
attributable to the increased number of higher margin solutions and strategy
projects and the increased utilization of the salaried consultants as compared
with the prior period.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses, excluding acquisition-related expenses, increased by
41.1% to $95.3 million in fiscal 1997 from $67.5 million in fiscal 1996. As a
percentage of revenue, selling, general and administrative expenses decreased to
22.2% of revenue for fiscal 1997 from 23.4% in fiscal 1996. This decrease was
attributable to the increase in total revenues during a period in which, other
than through acquisition, there was limited branch expansion. The total increase
in the selling, general and administrative expenses is a result of additional
costs necessary to support the growth in the Company's business and professional
staff, increases in facilities and investments in upgrading the Company's
telecommunications networks and systems.
Acquisition-Related Expenses: The Company incurred acquisition-related
expenses in fiscal 1997 of 8.3 million in connection with its acquisitions of
ISS, ARI, and SCR during the period. The Company incurred acquisition-related
expenses in fiscal 1996 in connection with its acquisition of ISS.
Interest and Other Income (Expense), Net: Interest and other income (expense),
net increased $4.3 million to $3.7 million in income in fiscal 1997 from $0.6
million in expense in fiscal 1996. The 1996 period included the receipt by ARI
of approximately $1.5 million in net proceeds from the settlement of certain
litigation. In addition, amounts outstanding under the Company's lines of credit
were reduced during the year upon receipt of the proceeds from the Company's
initial public offering in June 1996 and its subsequent offering in February of
1997 and from the proceeds from RSI's public offerings in May and November of
1996. The remaining proceeds from these offerings also generated increased
interest income.
FISCAL YEARS ENDED JUNE 29, 1996 AND JUNE 24, 1995
Revenue: Revenue increased 44.3% to $288.9 million in fiscal 1996 from $200.2
million for fiscal 1995. This increase was attributable primarily to revenue
increases in The Services Group, which comprised 74.2% of total revenues for the
period. The Services Group's revenues increased $61.1 million, or 39.9%, in the
period due primarily to a growth of sales within existing offices and the
continued maturation of newer branch offices, resulting in a greater number of
IT professionals placed with clients during the period. The Strategy Group,
which comprised 12.0% of Renaissance's total revenue during the year,
experienced a revenue increase of $12.2 million, or 53.9%, during the fiscal
year ended June 29, 1996. Revenues from The Solutions Group increased $15.4
million, or 63.0%, in the period due to an increase in the overall number of
engagements offset slightly by decreases in average billing rates.
Gross Profit: Gross profit increased 48.0% to $86.9 million for fiscal 1996
from $58.7 million in fiscal 1995. As a percentage of revenue, gross profit
increased to 30.1% in fiscal 1996 from 29.3% in fiscal 1995. This increase
16
<PAGE>
is attributable to the increased number of higher margin solutions and strategy
projects and the increased utilization of the salaried consultants in the
Services Group as compared with the prior period. These increases were offset by
decreases in the utilization of consultants in The Solutions Group resulting
from significant hiring for future projects during the period.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 48.1% to $67.5 million in fiscal 1996 from
$45.6 million in fiscal 1995. As a percentage of revenue, selling, general and
administrative expenses increased to 23.4% of revenues in fiscal 1996 from 22.8%
in fiscal 1995. These increases both in absolute dollars and as a percentage of
revenues are due principally to additional costs incurred to support the growth
in the Company's business and professional staff in 1996 including salaries for
administrative staff, facilities expense and investments in upgrading the
Company's telecommunications networks and systems.
Interest and Other Income (Expense), Net: Interest and other income (expense),
net changed by $88,000 to $605,000 in expense for the fiscal year ended June 29,
1996 from $693,000 in expense for the comparable prior period. This change is
attributable primarily to slight decreases in the amounts outstanding under the
Company's line of credit and other debt facilities in the period.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the ten quarters ending with the quarter ended December
27, 1997, in thousands of dollars and as a percentage of revenue. This data has
been prepared on the same basis as the audited financial statements and in the
opinion of management, 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 Renaissance'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.
17
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
SEPT. DEC. MARCH JUNE SEPT.
-------- -------- ---------- --------- ----------
1995 1995 1996(1) 1996(2) 1996
-------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
STATEMENT OF INCOME DATA:
Revenue........................ $61,834 $65,233 $76,498 $85,317 $89,825
Gross profit................... 17,937 19,475 22,382 27,069 25,536
Income (loss) from operations.. 3,958 4,211 4,658 2,997 4,214
Net income (loss).............. 2,561 3,001 2,233 208 3,741
Net income (loss) per share-
basic......................... $ 0.06 $ 0.08 $ 0.06 $ 0.01 $ 0.10
Net income (loss) per
share-diluted................. $ 0.06 $ 0.07 $ 0.05 $ 0.01 $ 0.08
As a Percentage of Revenue:
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit................... 29.0% 29.9% 29.3% 31.7% 28.4%
Income from operations......... 6.4% 6.5% 6.1% 3.5% 4.7%
Net income (loss).............. 4.1% 4.6% 2.9% 0.2% 4.2%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
DEC. MARCH JUNE SEPT. DEC.
----------- --------- --------- ----------- -----------
1996(2)(3)(4) 1997 1997 1997(5) 1997(6)
------------- --------- --------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA: $97,556 $115,629 $125,248 $139,762 $146,175
Revenue........................ 30,586 36,777 36,680 46,355 48,837
Gross profit................... (211) 12,127 9,927 471 1,719
Income (loss) from operations.. (2,963) 7,254 6,528 (3,958) (2,011)
Net income (loss)..............
Net income (loss) per share-
basic......................... $ (0.07) $ 0.15 $ 0.13 $ (0.08) $ (0.04)
Net income (loss) per
share-diluted................. (0.07) $ 0.14 $ 0.12 (0.08) (0.04)
As a Percentage of Revenue:
Revenue........................ 100.0 % 100.0% 100.0% 100.0% 100.0%
Gross profit................... 31.4% 31.8% 29.3% 33.2% 33.4%
Income (loss) from operations.. (0.2)% 10.5% 7.9% 0.3% 1.2%
Net income (loss).............. (3.0)% 6.3% 5.2% (2.8)% (1.4)%
</TABLE>
- --------------
(1) Includes a $642,000 charge associated with the conversion of America's
Registry from an S corporation to a C corporation. See Note 9 to
Consolidated Financial Statements.
(2) In December 1996, the Company completed the acquisition of ISS, which has
been accounted for as a pooling of interests. Transaction costs have been
expensed as incurred and total $3.5 million in the quarter.
(3) In November 1996, the Company completed the acquisitions of ARI and SCR,
each of which has been accounted for as a pooling-of-interests. Transaction
costs have been expensed as incurred and totaled $4.9 million in the
quarter.
(4) Includes a $403,000 credit associated with the conversion of SCR from an S
corporation to a C corporation. See Note 9 to Consolidated Financial
Statements.
(5) In July 1997, Renaissance completed the acquisition of RSI, which has been
accounted for as a pooling of interests. Transaction costs have been
expensed as incurred and totaled $11.2 million in the quarter.
(6) In November 1997, Renaissance completed the acquisition of Hunter, which
has been accounted for as a pooling of interests. Transaction costs have
been expensed as incurred and totaled $6.8 million in the quarter.
The above quarterly data reflects the results of operations for 13 weeks,
except for the September 1995 quarter which includes 14 weeks. The March 1996
and 1997 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. Renaissance 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.
LIQUIDITY AND CAPITAL RESOURCES
On February 26, 1997, the Company completed a public offering in which it sold
2,468,332 shares of Renaissance Common Stock. The Company received $48.3 million
from the sale of shares, net of all underwriting discount and expenses
associated with the offering. Net proceeds were used to repay all outstanding
indebtedness under Renaissance's credit facilitiy, approximately $18.2 million.
Approximately $2.5 million was used to finance the upgrade of Renaissance's IT
infrastructure. The remaining proceeds were utilized to fund working capital and
general corporate purposes and to finance the acquisitions made in the six
months ended December 27, 1997 (see Recent Acquisitions).
18
<PAGE>
Renaissance has a revolving advance facility with BNY Financial Corporation
(the "Line of Credit") under which it can borrow the lesser of $50.0 million or
85% of eligible receivables. 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 incurrance of additional debt and the payment of dividends on the
Company's Common and 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.
As of December 27, 1997, there was $36.1 million outstanding with availability
of $13.9 million. 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.
In addition to cash and cash equivalents at December 27, 1997, the Company had
invested $5.9 million in marketable securities consisting of various federal
agency and municipal bonds.
The Company experienced negative cash flows from operations of $23.1 million
for the six months ended December 27, 1997. The negative operating cash flows
during this period are primarily due to a $25.9 million in gross accounts
receivable during the period. This increase was attributable primarily to
increased revenues as well as the shift in certain invoicing requirements
resulting in additional clients being invoiced on a monthly basis as opposed to
their previous weekly basis. Additionally, cash flows from operations were
impacted by fluctuations in current and other assets and payable balances
between the periods and changes in deferred taxes in the period. The operating
cash flow decreases were mitigated by increases in accrued expenses due
primarily to acquisition related accruals and end of year bonus accruals.
The Company had negative cash flows from investing activities of $24.9 million
for the six months ended December 27, 1997. The primary uses of cash for
investing activities in the period were $37.0 million paid for acquisitions and
$9.7 million in fixed asset purchases. This was mitigated by net proceeds from
sales of marketable securities of $22.8 million in the period.
The Company had cash provided by financing activities of $37.6 million for the
six months ended December 27, 1997. The primary sources of cash from financing
activities were $32.2 million in net borrowings on the Company's lines of credit
and $6.0 million of issuances of long-term debt.
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 existing branch offices or the development of new branch offices
and service offerings. The Company also anticipates making approximately $10.0
million in capital expenditures over the next twelve months on the new resume
tracking system rollout, the PeopleSoft implementation and the Knowledge Network
development (See Overview). In connection with certain of its acquisitions, the
Company may be obligated to make certain contingent payments over the next
several years, including $9.3 million which the Company currently is required to
pay over the next 15 months. 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 its Line of Credit, together with cash flows from
operations, will be sufficient to meet the Company's presently anticipated
working capital needs for at least the next 12 months.
Foreign currency fluctuations and inflation did not have a significant impact
on the Company for any of the periods presented.
RECENTLY ENACTED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 specifies modifications to the calculation of earnings per share
from that previously used by Renaissance. Under SFAS 128, "basic earnings per
share" is calculated based upon the weighted average number of common shares
actually outstanding, and "diluted earnings per share" is calculated based upon
the weighted average number of common and potential common shares outstanding.
SFAS 128 was effective in Renaissance's December 1997 quarter and was adopted at
that time with retroactive restatement of all previously reported amounts.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
standards for the reporting of comprehensive income in a company's full set of
financial statements, and is effective for fiscal years beginning after December
15, 1997.
Comprehensive income is defined in SFAS 130 as the change in equity (net
assets) of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. Comprehensive income reported
by an entity will disclose both net income and other comprehensive income.
Classifications within
19
<PAGE>
other comprehensive income could include foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments in
debt and equity securities. SFAS 130 will affect Renaissance's reporting of
unrealized gains and losses on marketable securities, as well as the reporting
of translation adjustments resulting from certain investments in foreign
subsidiaries. Such disclosures of comprehensive income will be in addition to
existing reporting of net income. Renaissance will adopt this statement as
required.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 is effective for fiscal years beginning after December
15, 1997 and requires restatement of disclosures for all periods presented.
SFAS 131 requires that companies disclose information about operating segments
in annual and interim financial statements. SFAS 131 utilizes the "management
approach" in determining what constitutes an operating segment. An operating
segment is defined in SFAS 131 as a business component:
. which engages in business activities from which it may earn revenues and
incur expenses;
. whose operating results are regularly reviewed by a chief operating
decision maker to make decisions about resources to be allocated to the
segment and assess its performance; and
. for which discrete financial information is available.
SFAS 131 requires that a Company disclose information about operating segments
that meet any of the following thresholds:
. its reported revenue, including both customer and intersegment sales, is
greater than or equal to 10% of combined revenue,
. the absolute amount of its reported profit or loss is greater than 10% or
more of the absolute amount, of (1) the combined reported profit of all
segments that did not report a loss or (2) the combined reported losses of
all segments that did report a loss,
. its assets are greater than or equal to 10% or more of combined assets of
all operating segments.
The adoption of SFAS 131 will not impact Renaissance's financial position,
results of operations or cash flows. Management has determined that the
adoption of SFAS 131 will not materially differ from the Company's presentation
of operating segments in Note 17 to the Consolidated Financial Statements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Need to Attract and Retain Qualified Professionals. The Company's continued
success and future growth will depend upon its ability to attract, develop and
retain a sufficient number of experienced and highly skilled professional
employees, including IT professionals and management consultants. The vast
majority of the IT professionals in Renaissance's database are also included in
one or more of the databases of Renaissance's competitors, and there can be no
assurance that experienced IT professionals currently working on projects for
Renaissance will not choose to work on projects for competitors on their next
assignment. Competition for IT is intense and demand for their services has, to
date, substantially exceeded their supply, and Renaissance expects such
competition will continue to increase. Management consultants are also in high
demand and are likely to remain in high demand for the foreseeable future. Many
of the companies with which Renaissance's three business units compete for
qualified professionals have substantially greater financial and other resources
than the Company and may offer more attractive compensation and benefits
packages. There can be no assurance that the Company will be able to recruit,
develop and retain a sufficient number of experienced and highly skilled
professionals to staff its consulting projects. An inability of the Company to
recruit, train and maintain a sufficient number of professional personnel could
have a material adverse effect on the Company's business prospects and results
of operations, particularly its ability to complete existing projects or secure
new projects.
20
<PAGE>
Ability to Sustain and Manage Internal Growth; Development of Additional
Services. Renaissance's business has grown rapidly during the past four years
due to rapid growth through acquisition, an increased number of branch offices,
and an increased demand for services from existing clients across all business
units. Renaissance'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 personnel to staff new and
recently-opened branch offices; (iii) the ability to identify and qualify IT
professionals and management consultants within both new and existing markets;
and (iv) Renaissance's ability to develop additional business from existing
clients and to obtain new clients. There can be no assurance that newly acquired
companies will achieve results consistent with past performance. There can be
no assurance that recently-opened offices will reach or maintain any level of
profitability or that Renaissance's historical revenue growth will continue.
Further, Renaissance's rapid growth and expansion has placed and could continue
to place a significant strain on Renaissance's personnel and resources, and the
failure to manage growth effectively could have a material adverse effect on
Renaissance's business, operating results and financial condition. In addition,
Renaissance's ability to develop successful additional services in each of its
business units depends on various factors, including identification of suitable
service areas in which to invest resources and Renaissance's ability to
effectively integrate such services into its overall operating structure. There
can be no assurance that any additional service developed by Renaissance will
perform according to management's expectations.
Risks Associated with Acquisitions. Renaissance has grown, and intends to
continue to grow, in part through the acquisition of other businesses.
Renaissance'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 and the increased costs of
capitalizing on such opportunities. Renaissance competes for acquisition
opportunities with other companies that have significantly greater financial and
management resources than Renaissance. Further, the anticipated benefits from
any acquisitions may not be achieved unless the operations of the acquired
business are successfully combined with those of Renaissance in a timely manner.
The integration of Renaissance's acquisitions requires substantial attention
from management, and any difficulties encountered in the transition process
could have a material adverse effect on Renaissance's business, operating
results and financial condition. In addition, the process of integrating the
various businesses could cause the interruption of or the loss of momentum in
the activities of some or all of these businesses, which could have a material
adverse effect on Renaissance's business prospects, operating results and
financial condition. Further, acquired businesses may experience employee
turnover rates higher than have been experienced historically. Higher employee
turnover rates could adversely impact Renaissance's efforts to integrate these
businesses. There can be no assurance that Renaissance will be able to identify
suitable acquisition candidates on reasonable terms or integrate acquired
businesses successfully.
Dependence on Key Clients; Price Reduction Agreements; Terminability of Client
Arrangements. Renaissance's top ten clients accounted for approximately 22% of
the revenue for the six months ended December 27, 1997. The loss of a
significant client could have a material adverse effect on Renaissance's
business, operating results and financial condition. Renaissance 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 Renaissance will be able to maintain
desired pricing levels with these or other clients. Nearly all of Renaissance'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
Renaissance's services at historical levels, if at all. An unanticipated
termination of a major project could have a material adverse effect on the
Company's business, operating results and financial condition.
Project Risks. Many of The Strategy Group's and The Solutions Group's
engagements involve projects which are critical to the operations of its
customers' businesses and which provide benefits that may be difficult to
quantify. The failure or inability to meet a customer's expectations in the
performance of its services could result in the incurrence by Renaissance of a
financial loss and could damage Renaissance's reputation and adversely affect
its ability to attract new business. In addition, an unanticipated difficulty in
completing a project could have an adverse
21
<PAGE>
effect on the Company's business and results of operations. Fees for The
Strategy Group's and The Solutions Group's engagements typically are based on
the project schedule, staffing requirements, the level of customer involvement,
and the scope of the project as agreed upon with the customer at the project's
inception. The Strategy Group and The Solutions Group generally seeks to obtain
an adjustment in its fees in the event of any significant change in any of the
assumptions upon which the original estimate was based. However, there can be no
assurance that the Company will be successful in obtaining any such adjustment
in the future.
Risks Associated with Year 2000 Issues. The Company from time to time performs
certain services for its clients with respect to the Year 2000 ("Y2K")
operability issue. There can be no assurance that such services will
successfully fix all aspects of such Y2K issue for all clients. Although the
Company believes that it does not derive a significant portion of its revenue
from Y2K services, there can be no assurance that the Company will be protected
from claims by such clients in the event that the services are unsuccessful in
fixing the Y2K issue. In addition, due to the complexity of the Y2K issue, and
its possible association with other critical client systems or processes, there
can be no assurance that the Company will be protected from claims in the event
such critical client systems or processes fail. Any such claims could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Risk of International Operations. The success of Renaissance's international
operations will depend greatly upon the continued development of the technology
infrastructure and Renaissance's ability to manage generally lower
gross profit margins associated with international IT consulting operations.
There can be no assurance that Renaissance's international operations will be
profitable or support Renaissance's growth strategy. The risks inherent in
Renaissance's international business activities include unexpected changes in
regulatory environments, foreign currency fluctuations, tariffs and other trade
barriers, difficulties in managing international operations and potential
foreign tax consequences, including repatriation of earnings and the burden of
complying with a wide variety of foreign laws and regulations. The failure of
Renaissance to manage growth, attract and retain personnel, manage major
development efforts or profitable deliver services could have a material adverse
impact on Renaissance's ability to successfully develop its international
operations and could have a material adverse effect on Renaissance's business,
operating results and financial condition.
Dependence on Key Personnel. Renaissance depends to a significant extent on
key management, technical and other personnel. Renaissance'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
Renaissance's business, operating results and financial condition. Renaissance
maintains a split dollar key man life insurance policy on Mr. Conway.
Concentration of Ownership. As of March 16, 1998, Renaissance's President,
Chief Executive Officer and principal stockholder, G. Drew Conway, owns
approximately 26.4% of the outstanding Renaissance Common Stock. As of the same
date, Terry L. Hunter, president of Hunter and principal stockholder, owns
approximately 11.7% of the outstanding Renaissance Common Stock. As a result,
Messrs. Conway and Hunter are able to have a significant impact on matters
requiring stockholder approval. This concentration of ownership could have the
effect of making it difficult for a third party to acquire control of
Renaissance and may discourage third parties from attempting to do so. Further,
future sales of substantial amounts of Common Stock by Mr. Conway or Mr. Hunter,
or the potential for such sales, could adversely affect the prevailing market
price of the Common Stock.
Dependence on PeopleSoft. Hunter is highly dependent on its relationship with
PeopleSoft, a provider of ERP software products. During the six-month period
ended December 27, 1997, management estimates that PeopleSoft implementations by
Hunter accounted for approximately 48% of The Solutions Group's revenue. During
the same period, substantially all of Hunter's revenue from training services
was generated by training in PeopleSoft products. As a result, the Company is
partially dependent on PeopleSoft's marketing efforts and continued success.
Hunter participates in a number of PeopleSoft programs that enable Hunter to
obtain early information about new software products and courseware and to
benefit from the increased credibility and enhanced reputation resulting from
vendor accreditation. A failure to maintain the alliance with PeopleSoft may
significantly interfere with Hunter's ability to provide services to existing or
potential clients. Neither PeopleSoft nor any other key provider of software
products has any obligation to continue its relationship with Hunter.
Significant changes to the vendor-sponsored programs in which Hunter
participates or any deterioration in the relationship between Hunter and
PeopleSoft could result in the loss of vendor certifications, or a reduction in
the number of client referrals or other vendor actions, any of which could
adversely affect Hunter's ability to compete successfully and, thus, have a
material adverse effect on Hunter's business, financial condition and results of
operations.
Intellectual Property Rights. The Company's success is dependent in part
upon its intellectual property and methodologies, some of which are proprietary
to Renaissance. A significant portion of The Strategy Group's management
consulting services are based on the Balanced Scorecard concept described in
three Harvard Business Review articles and in the book The Balanced Scorecard,
all of which were co-authored by one of RSI's founders.
22
<PAGE>
Renaissance believes that the Balanced Scorecard name is in the public domain.
As a result, third parties may provide services using the Balanced Scorecard
name which are competitive with the services offered by Renaissance.
Renaissance relies upon a combination of trade secret, nondisclosure and other
contractual arrangements, and copyright and trademark laws to protect its
proprietary rights. Renaissance presently holds no patents or registered
copyrights. Renaissance has recently filed applications to register certain of
its trademarks, both domestically and abroad. Renaissance generally enters into
confidentiality agreements with its employees, consultants, customers and
potential customers and limits distribution of its proprietary information.
There can be no assurance that the steps taken by Renaissance in this regard
will be adequate to deter misappropriation of its proprietary information or
that Renaissance will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights. Although Renaissance believes
that its services and products do not infringe on the intellectual property
rights of others, there can be no assurance that such a claim will not be
asserted against Renaissance in the future.
Government Regulation of Immigration. Certain of Renaissance's IT
professionals are foreign nationals working in the United Stated under H-1B
permits. Accordingly, both Renaissance and these foreign nationals must comply
with United States immigration laws. The inability of Renaissance to obtain H-1B
permits for certain of its employees in sufficient quantities or at a sufficient
rate could have a material adverse effect on Renaissance's business, operating
results and financial condition. Furthermore, Congress and administrative
agencies with jurisdiction over immigration matters have periodically expressed
concerns over the levels of legal and illegal immigration into the U.S. These
concerns have often resulted in proposed legislation, rules and regulations
aimed at reducing the number of work permits that may be issued. Any changes in
such laws making it more difficult to hire foreign nationals or limiting the
ability of Renaissance to retain foreign employees could require Renaissance to
incur additional unexpected labor costs and expenses. Any such restrictions or
limitations on Renaissance's hiring practices could have a material adverse
effect on Renaissance's business, operating results and financial condition.
Fluctuations in Operating Results; Seasonality. Renaissance's operating
results have fluctuated in the past based on many factors, including: the
opening of new branch offices; the number, significance, mix and timing of
client projects; the number of business days in a particular period; and general
economic conditions. In view of Renaissance's significant growth in recent
years, Renaissance 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 Renaissance 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, Renaissance generally experiences a certain amount of seasonality in
its fourth fiscal quarter due to the number of holidays in that quarter.
Further, Renaissance generally experiences lower operating margins in its first
fiscal quarter due in part to the timing of unemployment tax accruals.
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
consultants. Renaissance is unable to predict the level of economic activity at
any particular time, and fluctuations in the general economy could adversely
affect Renaissance's business, operating results and financial condition.
Potential Decrease in Services After the Year 2000. As the year 2000
approaches, many potential clients are evaluating their legacy systems and must
decide whether to repair or replace existing applications that have year 2000
operability issues. While the Company believes that such evaluations are
favorably affecting demand for its services, this demand driver is likely to
dissipate as year 2000 issues are resolved. Given the lack of precedent for an
issue of this magnitude, the Company's ability to accurately forecast the effect
of the issue on quarter to quarter revenue achievement is limited. A core
element of the Company's growth strategy is to use the business relationships
and the knowledge of its clients' computer systems obtained in providing its
services to generate additional IT projects for these clients. There can be no
assurance, however, that the Company will be successful in generating additional
business from these clients.
23
<PAGE>
Rapid Technological Change. The Company's future success will depend on its
ability to maintain its expertise in rapidly advancing technologies, as well as
to respond quickly to evolving industry trends and client needs. There can be
no assurance that the Company will be successful in adapting to these advances
in technology or in addressing changing client needs on a timely basis or, if
the Company does gain such expertise, that it will be able to market new
services successfully. There can be no assurance that the Company will
satisfactorily complete projects where unproven technologies or tools are
critical to the projects' success. In addition, there can be no assurance that
the services or technologies developed by others will not significantly reduce
demand for the Company's services or render the Company's services obsolete.
Competition. The Company's service areas are highly competitive and are
subject to low barriers to entry and rapid change. The Company faces
competition for client assignments from a number of companies having
significantly greater financial, technical and marketing resources and greater
name recognition that the Company. Principal competitors for the Company's
services include the consulting practices of the six largest international
accounting firms, and the professional services groups of many large technology
and management consulting companies. The Company also competes with smaller
service providers whose specific, more narrowly focused service offerings may be
more attractive to potential clients than the Company's multidimensional
approach. In addition, several software vendors, including PeopleSoft, have
developed and may expand their own consulting, training and implementation
capabilities. Furthermore, clients may elect to use their internal resources
instead of utilizing the Company's services. There can be no assurance that the
Company will compete successfully with potential clients' internal resources or
with existing or new competitors.
24
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Price Waterhouse LLP........................................... 26
Report of Graves, McKenna, Lundeen & Almquist, P.L.L.P. ................. 27
Report of Deloitte & Touche LLP.......................................... 28
Report of Coopers & Lybrand L.L.P. ...................................... 29
Consolidated Balance Sheet as of June 29, 1996, June 28, 1997 and
December 27, 1997...................................................... 30
Consolidated Statement of Income for the Years Ended June 24, 1995,
June 29, 1996 and June 28, 1997 and the Six Months Ended
December 27, 1997...................................................... 31
Consolidated Statement of Changes in Stockholders' Equity for the
Years Ended June 24, 1995, June 29, 1996 and June 28, 1997 and the
Six Months Ended December 27, 1997..................................... 32
Consolidated Statement of Cash Flows for the Years Ended June 24, 1995,
June 29, 1996 and June 28, 1997 and the Six Months Ended
December 27, 1997...................................................... 34
Notes to Consolidated Financial Statements............................... 35
Financial Statement Schedule:
For the Years Ended June 24, 1995, June 29, 1996 and June 28, 1997,
and the Six Months Ended December 27, 1997
II--Valuation and Qualifying Accounts............................... S1
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or Notes
thereto.
See selected quarterly financial data in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Renaissance Worldwide, Inc.
In our opinion, based upon our audits and the reports of other auditors, the
consolidated financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of Renaissance
Worldwide, Inc. (formerly The Registry, Inc.) and its subsidiaries (the
"Company") at June 29, 1996, June 28, 1997 and December 27, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended June 28, 1997 and for the six month period ended December 27,
1997, 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 did not audit the financial statements of Shamrock Computer
Resources, Ltd., a wholly-owned subsidiary, for the year ended December 31,
1995, which are included in the accompanying consolidated statement of income
for the year ended June 24, 1995. We also did not audit the financial statements
of Renaissance Solutions, Inc., a wholly-owned subsidiary, as of December 31,
1996 and for the two years in the period then ended, which statements are
included in the accompanying consolidated balance sheet as of June 29, 1996 and
in the accompanying consolidated statement of income for the years ended June
24, 1995 and June 29, 1996, respectively. We also did not audit the financial
statements of The Hunter Group, Inc., a wholly-owned subsidiary, as of December
31, 1995 and 1996, and for each of the three years in the period ended December
31, 1996, which statements are included in the accompanying consolidated balance
sheet as of June 29, 1996 and June 28, 1997, respectively, and in the
accompanying consolidated statement of income for the years ended June 24, 1995,
June 29, 1996 and June 28, 1997, respectively. In the aggregate, these
statements reflect total assets of $89,182,000 and $12,077,000 in the
accompanying consolidated balance sheet as of June 29, 1996 and June 28, 1997,
respectively, and total revenues of $71,676,000, $72,004,000, and $39,215,000 in
the accompanying consolidated statement of income for the years ended June 24,
1995, June 29, 1996 and June 28, 1997, respectively. Those statements were
audited by other auditors whose reports thereon have been furnished to us, and
our opinion expressed herein, insofar as it relates to the amounts included for
Shamrock Computer Resources, Ltd., Renaissance Solutions, Inc. and The Hunter
Group, Inc. for these periods is based solely on the reports of the other
auditors. 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 and the reports of other auditors provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 12, 1998, except as to the
"Stock Split and Authorized Shares" section
of Note 10 which is as of March 24, 1998
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Shamrock Computer Resources, Ltd.
Minneapolis, Minnesota
We have audited the statements of income, changes in stockholders' equity, and
cash flows of Shamrock Computer Resources, Ltd. for the year ended December 31,
1995 (not presented separately herein). 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Shamrock
Computer Resources, Ltd. for the year ended December 31, 1995 in conformity with
generally accepted accounting principles.
Graves, McKenna, Lundeen & Almquist, PLLP
Certified Public Accountants
Minneapolis, Minnesota
December 13, 1996
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
Renaissance Solutions, Inc.:
We have audited the consolidated balance sheet of Renaissance Solutions, Inc.
and its subsidiaries (the "Company") as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1996 (not presented
separately herein). 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Renaissance Solutions, Inc. and its
subsidiaries as of December 31, 1996, and the results of their operations and
their cash flows for each of the two years in the period ended December 31, 1996
in conformity with generally accepted accounting principles.
As described in Note 3, the consolidated financial statements of the Company
give retroactive effect to the acquisition of International Systems Services
Corporation by the Company on December 31, 1996 as a pooling-of-interests.
Deloitte & Touche LLP
Boston, Massachusetts
February 28, 1997
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
THE HUNTER GROUP, INC.
We have audited the consolidated balance sheets of The Hunter Group, Inc. and
Subsidiaries as of December 31, 1995 and 1996, and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1996 (not presented separately
herein). 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 11, on November 26, 1997, pursuant to an Agreement and
Plan of Merger, dated November 15, 1997, the Company was acquired by Renaissance
Worldwide, Inc. (formerly The Registry, Inc.).
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Hunter Group,
Inc. and Subsidiaries as of December 31, 1995 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Baltimore, Maryland
February 14, 1997, except for Note 3, as to
which the date is September 30, 1997, and Note 11,
as to which the date is November 26, 1997.
29
<PAGE>
RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
-------------- -------------- ------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 63,247 $ 27,892 $ 17,835
Marketable securities 17,910 28,675 5,867
Accounts receivable, net of allowance for doubtful accounts of
$1,330, $1,783, and $3,387 at June 29, 1996, June 28, 1997 and 57,621 109,565 141,007
and December 27, 1997, respectively
Notes receivable 82 1,663 1,689
Deferred income taxes 607 2,299 2,167
Other current assets 2,057 4,114 7,266
---------------------------------------------------
Total current assets 141,524 174,208 175,831
Fixed assets, net 11,457 17,046 24,422
Notes receivable from officers 60 529 102
Goodwill and other intangible assets, net of accumulated amortization
of $145, $1,028, and $2,593 at June 29, 1996, June 28, 1997 and
December 27, 1997, respectively 773 46,068 94,247
Other assets 523 1,284 2,934
Deferred income taxes 35 - 855
---------------------------------------------------
Total assets $154,372 $239,135 $298,391
===================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 3,435 $ 3,050 $ 37,600
Current portion of capital lease obligations 131 170 92
Current portion of long-term debt 1,126 550 2,866
Note payable to officer 500 - -
Accounts payable 8,469 8,755 12,414
Accrued salaries and wages 6,721 10,385 11,226
Other accrued expenses 9,905 18,109 40,588
Income taxes payable 2,202 1,433 -
Deferred income taxes 1,051 2,241 142
---------------------------------------------------
Total current liabilities 33,540 44,693 104,928
Deferred income taxes 1,104 1,115 2,484
Capital lease obligations 254 236 37
Long-term debt 2,600 2,284 3,602
Other liabilities 181 496 226
---------------------------------------------------
Total liabilities 37,679 48,824 111,277
---------------------------------------------------
Commitments and contingencies (Notes 4 and 12)
Stockholders' equity
Preferred stock, no par value: 1,916 - -
Authorized 5,000,000 shares, issued and outstanding -
2,448,000 at June 29, 1996 (liquidating preference $1,934),
and 0 at June 28, 1997 and December 27, 1997
Preferred stock, $0.10 par value (Note 10) - - -
Common stock, no par value: 181 4,704 4,704
Authorized 99,000,000 shares; issued and outstanding
44,429,413 shares at June 29, 1996, 49,603,316 shares at June
28, 1997 and 50,111,264 shares at December 27, 1997
Additional paid in capital 100,331 157,159 160,701
Notes receivable from stockholders (476) (476) (476)
Deferred stock compensation (179) - -
Retained earnings 14,673 28,782 21,986
Unrealized gain (loss) on investments (18) (21) 22
Cumulative translation adjustment 265 163 177
---------------------------------------------------
Total stockholders' equity 116,693 190,311 187,114
---------------------------------------------------
Total liabilities and stockholders' equity $154,372 $239,135 $298,391
===================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
JUNE 24, JUNE 29, JUNE 28, DECEMBER 27,
1995 1996 1997 1997
<S> <C> <C> <C> <C>
Revenue $200,233 $288,882 $428,258 $285,937
Cost of revenue 141,554 202,019 298,679 190,745
---------------------------------------------------------
58,679 86,863 129,579 95,192
Selling, general and administrative 45,589 67,515 95,254 75,041
expenses
Acquisition-related expenses - 3,524 8,268 17,961
---------------------------------------------------------
Income from operations 13,090 15,824 26,057 2,190
Interest expense (1,344) (2,279) (925) (1,156)
Interest income 651 1,674 4,665 762
---------------------------------------------------------
Income before taxes 12,397 15,219 29,797 1,796
Income tax provision 3,597 7,216 15,237 7,765
---------------------------------------------------------
Net income (loss) $ 8,800 $ 8,003 $ 14,560 $ (5,969)
---------------------------------------------------------
Net income (loss) per share - basic $0.24 $0.21 $0.31 $(0.12)
Weighted average common shares
outstanding - basic 36,307 38,182 46,018 49,982
Net income (loss) per share - diluted $0.23 $0.19 $0.29 $(0.12)
Weighted average common and
potential common shares
outstanding - diluted 38,544 49,393 50,128 49,982
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON STOCK
NO PAR NO PAR $0.01 PAR
---------------------- -------------------- ------------------
SHARES VALUE SHARES VALUE SHARES VALUE
--------------- ------------- ------------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 25, 1994........................ 2,790,000 $ 2,204 24,079,240 $ 207 200,000 $ 2
Proceeds from issuance of Common Stock, net
of issuance costs.............................. -- -- 2,240,000 -- -- --
Stock issued upon exercise of options........... 123,000 14 70,708 1 -- --
Repurchase of stock............................. (465,000) (302) (255,218) (30) -- --
Amortization of deferred stock compensation..... -- -- -- -- -- --
Distributions................................... -- -- -- -- -- --
Corporate reorganization........................ -- -- -- -- -- --
Sale of warrants to acquire common stock........ -- -- -- -- -- --
Issuance of loan to stockholder................. -- -- -- -- -- --
Cumulative translation adjustment............... -- -- -- -- -- --
Unrealized gain on marketable securities........ -- -- -- -- -- --
Net income for the year......................... -- -- -- -- -- --
-------------- ------------ ----------- ---------- ---------- -------
Balance at June 24, 1995........................ 2,448,000 1,916 26,134,730 178 200,000 2
Consolidation of real estate trust.............. -- -- -- -- -- --
Acquisition of America's Registry............... -- -- 10,666,666 -- (200,000) (2)
Amortization of deferred stock compensation..... -- -- -- -- -- --
Proceeds from issuance of Common Stock, net of
issuance costs................................. -- -- 6,247,640 -- -- --
Stock issued upon exercise of options........... 23,000 -- 311,811 3 -- --
Exercise of Gemini Warrants..................... -- -- 1,013,760 -- -- --
Stock issued through stock purchase plan........ -- -- 67,429 -- -- --
Tax benefit associated with option exercises.... -- -- -- -- -- --
Capital contribution............................ -- -- -- -- -- --
Translation adjustment.......................... -- -- -- -- -- --
Unrealized loss on marketable securities........ -- -- -- -- -- --
Distributions................................... -- -- -- -- -- --
Net income for the year......................... -- -- -- -- -- --
Adjustment to eliminate duplication of the
six month period ended December 31, 1995
resulting from the change in fiscal year of
entities acquired in poolings-of-interests
Net income..................................... -- -- -- -- -- --
Distributions.................................. -- -- -- -- -- --
Amortization of deferred stock compensation.... -- -- -- -- -- --
Stock issued upon exercise of stock options.... (23,000) -- (12,622) -- -- --
-------------- ------------ ----------- ---------- ---------- -------
BALANCE AT JUNE 29, 1996........................ 2,448,000 $ 1,916 44,429,414 $ 181 -- $--
Repurchase of stock............................. -- -- (96,286) -- -- --
Proceeds from issuance of stock, net of
issuance costs................................. 165,000 1,564 2,872,946 1,043 -- --
</TABLE>
<TABLE>
<CAPTION>
WARRANTS NOTES
ADDITIONAL TO ACQUIRE RECEIVABLE
PAID-IN COMMON TREASURY FROM
CAPITAL STOCK STOCK STOCKHOLDERS
---------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Balance at June 25, 1994........................ $ 1,322 -- $ -- $(226)
Proceeds from issuance of Common Stock, net
of issuance costs.............................. 15,636 -- -- --
Stock issued upon exercise of options........... 16 -- -- --
Repurchase of stock............................. -- -- -- --
Amortization of deferred stock compensation..... -- -- -- --
Distributions................................... -- -- -- --
Corporate reorganization........................ (1,315) -- -- --
Sale of warrants to acquire common stock........ -- 1,600 -- --
Issuance of loan to stockholder................. -- -- -- (250)
Cumulative translation adjustment............... -- -- -- --
Unrealized gain on marketable securities........ -- -- -- --
Net income for the year......................... -- -- -- --
----------------------------------------------------
Balance at June 24, 1995........................ 15,659 1,600 -- (476)
Consolidation of real estate trust.............. (111) -- -- --
Acquisition of America's Registry by RWI........ 2 -- -- --
Amortization of deferred stock compensation..... -- -- -- --
Proceeds from issuance of Common Stock, net of
issuance costs................................. 68,962 -- -- --
Stock issued upon exercise of options........... 1,696 -- -- --
Exercise of Gemini Warrants..................... 11,917 (1,600) -- --
Stock issued through stock purchase plan........ 607 -- -- --
Tax benefit associated with option exercises.... 1,178 -- -- --
Capital contribution............................ 421 -- -- --
Translation adjustment.......................... -- -- -- --
Unrealized loss on marketable securities........ -- -- -- --
Distributions................................... -- -- -- --
Net income for the year......................... -- -- -- --
Adjustment to eliminate duplication of the
six month period ended December 31, 1995
resulting from the change in fiscal year of
entities acquired in poolings-of-interests
Net income..................................... -- -- -- --
Distributions.................................. -- -- -- --
Amortization of deferred stock compensation.... -- -- -- --
Stock issued upon exercise of stock options.... -- -- -- --
----------------------------------------------------
BALANCE AT JUNE 29, 1996........................ $100,331 -- -- $(476)
Repurchase of stock............................. -- -- (2,000) --
Proceeds from issuance of stock, net of
issuance costs................................. 52,916 -- 2,000 --
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
DEFERRED GAIN/LOSS CUMULATIVE TOTAL
STOCK RETAINED OP TRANSLATION STOCKHOLDERS'
COMPENSATION EARNINGS INVEST ADJUSTMENT EQUITY
------------ -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 25, 1994........................ $(226) $ 5,755 -- $ -- $ 9,038
Proceeds from issuance of Common Stock, net
of issuance costs.............................. -- -- -- -- 15,636
Stock issued upon exercise of options........... -- -- -- -- 31
Repurchase of stock............................. -- -- -- -- (332)
Amortization of deferred stock compensation..... 31 -- -- -- 31
Distributions................................... -- (4,122) -- -- (4,122)
Corporate reorganization........................ -- 1,315 -- -- -
Sale of warrants to acquire common stock........ -- -- -- -- 1,600
Issuance of loan to stockholder................. -- -- -- -- (250)
Cumulative translation adjustment............... -- -- -- (48) (48)
Unrealized gain on marketable securities........ -- -- 35 -- 35
Net income for the year......................... -- 8,800 -- 8,800
-----------------------------------------------------------------------
Balance at June 24, 1995........................ (195) 11,748 35 (48) 30,419
Consolidation of real estate trust.............. -- -- -- -- (111)
Acquisition of America's Registry by RWI........ -- -- -- -- --
Amortization of deferred stock compensation..... 31 -- -- -- 31
Proceeds from issuance of Common Stock, net of
issuance costs................................. -- -- -- -- 68,962
Stock issued upon exercise of options........... -- -- -- -- 1,699
Exercise of Gemini Warrants..................... -- -- -- -- 10,317
Stock issued through stock purchase plan........ -- -- -- -- 607
Tax benefit associated with option exercises.... -- -- -- -- 1,178
Capital contribution............................ -- -- -- -- 421
Translation Adjustment.......................... -- -- -- 313 313
Unrealized loss on marketable securities........ -- -- (53) -- (53)
Distributions................................... -- (2,958) -- -- (2,958)
Net income for the year......................... -- 8,003 -- -- 8,003
Adjustment to eliminate duplication of the
six month period ended December 31, 1995
resulting from the change in fiscal year of
entities acquired in poolings-of-interests
Net income..................................... -- (2,294) -- -- (2,294)
Distributions.................................. -- 174 -- -- 174
Amortization of deferred stock compensation.... (15) -- -- -- (15)
Stock issued upon exercise of stock options.... -- -- -- -- --
------------------------------------------------------------------------
BALANCE AT JUNE 29, 1996........................ $(179) $14,673 $ (18) 265 116,693
Repurchase of stock............................. -- -- -- -- (2,000)
Proceeds from issuance of stock, net of
issuance costs................................. -- (80) -- -- 57,443
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON STOCK
NO PAR NO PAR $0.01 PAR
---------------------- -------------------- ------------------
SHARES VALUE SHARES VALUE SHARES VALUE
--------------- ------------- ------------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Sale of warrants for common stock............... -- -- 1,013,760 -- -- --
Compensation expense in connection with grant
of stock options............................... --
Stock issued upon exercise of options........... -- -- 1,124,509 -- -- --
Stock issued for acquisition.................... -- -- 266,528 -- -- --
Tax benefit associated with options exercises... -- -- -- -- -- --
Amortization of deferred stock compensation..... -- -- -- -- -- --
Conversion of preferred stock................... (2,613,000) (3,480) 1,434,160 3,480 -- --
Stock issued through stock purchase plan........ -- -- 111,474 -- -- --
Unrealized gain on marketable securities........ -- -- -- -- -- --
Buy back of Treasury Stock...................... -- -- (15,005) -- -- --
Distributions................................... -- -- -- -- -- --
Net income for the year......................... -- -- -- -- -- --
Cumulative translation adjustment............... -- -- -- -- -- --
Elimination of duplicate activity for the six
month period ended December 31, 1996
resulting from the change in fiscal year of
entities acquired in poolings-of-interests
Net income..................................... -- -- -- -- -- --
Proceeds from issuance of stock, net of
issuance costs............................... -- -- (344,240) -- -- --
Sale of warrants to acquire capital stock...... -- -- (1,013,760) -- -- --
Stock issued upon exercise of options.......... -- -- (148,402) -- -- --
Tax benefit associated with the exercise of
stock options................................. -- -- -- -- -- --
Stock issued through stock purchase plan....... -- -- (31,782) -- -- --
Translation adjustment......................... -- -- -- -- -- --
Unrealized gain on marketable securities....... -- -- -- -- -- --
---------------------------------------------------------------------------------
BALANCE AT JUNE 28, 1997 -- 0 49,603,317 4,704 -- --
Adjustment to add back elimination of the six
month period ended June 30, 1997
resulting from the change in fiscal year of
entities acquired in poolings-of-interests..... -- -- -- -- -- --
Net income..................................... -- -- -- -- -- --
Cumulative translation adjustment.............. -- -- -- -- -- --
Compensation expense in connection with grant
of stock options............................... -- -- -- -- -- --
Stock issued upon exercise of options........... -- -- 105,700 -- -- --
Stock issued for acquisition.................... -- -- 328,578 -- -- --
Tax benefit associated with exercise of certain
options........................................ -- -- -- -- -- --
Stock issued through stock purchase plan........ -- -- 73,670 -- -- --
Unrealized gain on marketable securities........ -- -- -- -- -- --
Net income for the year......................... -- -- -- -- -- --
Cumulative translation adjustment............... -- -- -- -- -- --
----------------------------------------------------------------------------------
BALANCE AT DECEMBER 27, 1997 -- $ 0 50,111,265 $4,704 -- --
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WARRANTS NOTES
ADDITIONAL TO ACQUIRE RECEIVABLE
PAID-IN COMMON TREASURY FROM
CAPITAL STOCK STOCK STOCKHOLDERS
---------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Sale of warrants for common stock............... 11,917 (1,600) -- --
Compensation expense in connection with grant
of stock options............................... 528 -- -- --
Stock issued upon exercise of options........... 3,490 -- -- --
Stock issued for acquisition.................... 3,979 -- -- --
Tax benefit associated with exercise of certain
options........................................ 3,522 -- -- --
Amortization of deferred stock compensation..... -- -- -- --
Conversion of preferred stock................... -- -- -- --
Stock issued through stock purchase plan........ 1,126 -- -- --
Unrealized gain on marketable securities........ -- -- -- --
Buy back of Treasury Stock...................... -- -- -- --
Distributions................................... -- -- -- --
Net income for the year......................... -- -- -- --
Cumulative translation adjustment............... -- -- -- --
Elimination of duplicate activity for the six
month period ended December 31, 1996
resulting from the change in fiscal year of
entities acquired in poolings-of-interests
Net income..................................... -- -- -- --
Proceeds from issuance of stock, net of
issuance costs................................ (6,496) -- -- --
Sale of warrants to acquire capital stock...... (11,917) 1,600 -- --
Stock issued upon exercise of options.......... (997) -- -- --
Tax benefit associated with the exercise of
stock options................................ (879) -- -- --
Stock issued through stock purchase plan....... (361) -- -- --
Translation adjustment......................... -- -- -- --
Unrealized gain on marketable securities....... -- -- -- --
--------------------------------------------------------------------------
BALANCE AT JUNE 28, 1997 157,159 -- -- (476)
Adjustment to add back elimination of the six
month period ended June 30, 1997
resulting from the change in fiscal year of
entities acquired in poolings-of-interests.... -- -- -- --
Net income.................................... -- -- -- --
Cumulative translation adjustment............. -- -- -- --
Compensation expense in connection with grant
of stock options............................... 750 -- -- --
Stock issued upon exercise of options........... 1,050 -- -- --
Tax benefit associated with exercise of certain
options........................................ 267 -- -- --
Stock issued through stock purchase plan........ 1,475 -- -- --
Unrealized gain on marketable securities........ -- -- -- --
Net income for the year......................... -- -- -- --
Cumulative translation adjustment............... -- -- -- --
--------------------------------------------------------------------------
Balance at December 27, 1997 $160,701 $ -- $ -- $(476)
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
DEFERRED GAIN/LOSS CUMULATIVE TOTAL
STOCK RETAINED OP TRANSLATION STOCKHOLDERS'
COMPENSATION EARNINGS INVEST ADJUSTMENT EQUITY
------------ -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Sale of warrants for common stock............... -- -- -- -- 10,317
Compensation expense in connection with grant
of stock options............................... -- -- -- -- 528
Stock issued upon exercise of options........... -- -- -- -- 3,490
Stock issued for acquisition.................... -- -- -- -- 3,979
Tax benefit associated with exercise of certain
options........................................ -- -- -- -- 3,522
Amortization of deferred stock compensation..... 179 -- -- -- 179
Conversion of preferred stock................... --
Stock issued through stock purchase plan........ -- -- -- -- 1,126
Unrealized gain on marketable securities........ -- -- (15) -- (15)
Buy back of Treasury Stock...................... -- -- -- -- --
Distributions................................... -- (540) -- -- (540)
Net income for the year......................... -- 14,560 -- -- 14,560
Cumulative translation adjustment............... -- -- -- 200 200
Elimination of duplicate activity for the six
month period ended December 31, 1996
resulting from the change in fiscal year of
entities acquired in poolings-of-interests..... -- -- -- -- --
Net income..................................... -- 169 -- -- 169
Proceeds from issuance of stock, net of
issuance costs................................ -- -- -- -- (6,496)
Sale of warrants to acquire capital stock...... -- -- -- -- (10,317)
Stock issued upon exercise of options.......... -- -- -- -- (997)
Tax benefit associated with the exercise of
stock options................................. -- -- -- -- (879)
Stock issued through stock purchase plan....... -- -- -- -- (361)
Translation adjustment......................... -- -- -- (302) (302)
Unrealized gain on marketable securities....... -- -- 12 -- 12
--------------------------------------------------------------------------
BALANCE AT JUNE 28, 1997 -- 28,782 (21) 163 190,311
Adjustment to add back elimination of the six
month period ended June 30, 1997
resulting from the change in fiscal year of
entities acquired in poolings-of-interests..... -- -- -- -- --
Net income..................................... -- (827) -- -- (827)
Cumulative translation adjustment.............. -- -- -- (146) (146)
Compensation expense in connection with grant
of stock options.............................. -- -- -- -- 750
Stock issued upon exercise of options.......... -- -- -- -- 1,050
Tax benefit associated with exercise of certain
options....................................... -- -- -- -- 267
Stock issued through stock purchase plan....... -- -- -- -- 1,475
Unrealized gain on marketable securities....... -- -- 43 -- 43
Net income for the year........................ -- (5,969) -- -- (5,969)
Cumulative translation adjustment.............. -- -- -- 160 160
--------------------------------------------------------------------------
Balance at December 27, 1997..................... -- 21,986 22 177 187,114
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
RENAISSANCE WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
----------- ----------- ----------- --------------
JUNE 24, JUNE 29, JUNE 28, DECEMBER 27,
----------- ----------- ----------- --------------
1995 1996 1997 1997
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ 8,800 $ 8,003 $ 14,560 $ (5,969)
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
Depreciation and amortization.................................. 1,397 1,902 3,371 4,751
Provision for losses on accounts receivable.................... 290 504 880 1,270
Deferred income taxes.......................................... 544 (636) 3,039 (1,091)
Compensation expense on stock options.......................... 31 31 494 750
Loss on sale of fixed assets................................... 60 -- -- --
Changes in operating assets and liabilities:
Accounts receivable......................................... (20,678) (13,833) (36,649) (25,853)
Other current assets........................................ (650) (698) (1,864) (2,666)
Other assets................................................ (270) (252) (1,071) (3,507)
Accounts payable............................................ 1,552 3,801 (3,609) (4,408)
Accrued expenses............................................ 1,266 6,240 3,312 15,565
Accrued salaries and wages.................................. 670 1,968 (223) 1,082
Income taxes payable........................................ 170 1,688 1,840 (1,295)
Other liabilities........................................... 87 94 -- 187
------------------------------------------------------
Net cash provided by (used for) operating activities.......... (6,731) 8,812 (15,920) (21,184)
------------------------------------------------------
Cash flows from investing activities:
Cash disbursed for acquisitions, net of
cash acquired................................................ (250) -- (41,543) (36,987)
Increase in notes receivable from officers...................... (684) (709) (90) (31)
Repayment of notes receivable from officers..................... -- 2,548 3 458
Increase in notes receivable.................................... (57) (25) (1,564) (26)
Investment in capitalized software.............................. -- -- -- (1,450)
Purchases of marketable securities.............................. (4,855) (46,267) (246,679) (91,926)
Sales of marketable securities.................................. -- 33,194 231,579 114,734
Purchases of fixed assets....................................... (4,673) (4,350) (6,456) (9,678)
------------------------------------------------------
Net cash used for investing activities........................ (10,519) (15,609) (64,750) (24,906)
------------------------------------------------------
Cash flows from financing activities:
Cash proceeds from issuance of common
stock........................................................ 15,652 81,876 67,127 --
Cash payments to repurchase common stock........................ (71) -- (2,000) --
Proceeds from reissuance of treasury stock...................... -- -- 1,920 --
Cash proceeds from exercise of stock options.................... 15 1,181 3,491 1,050
Cash proceeds from stock purchase plan.......................... -- -- 1,135 1,475
Sale of warrants to acquire common stock........................ 1,600 -- -- --
Net borrowings (payments) on line of credit..................... 8,549 (14,778) 1,239 32,234
Proceeds from issuance of long-term debt........................ 1,800 500 -- --
Repayments of short-term borrowings............................. (2,001) (2,145) -- --
Principal payments on long-term debt and
capital lease obligations.................................... (741) (3,679) (2,462) (3,140)
Proceeds from issuance of long-term debt........................ 2,080 2,160 378 4,047
Capital contribution............................................ -- 421 -- --
Distributions................................................... (4,372) (2,958) (540) --
------------------------------------------------------
Net cash provided by financing activities..................... 22,511 62,578 70,288 35,684
------------------------------------------------------
Effect of exchange rates on cash and cash
equivalents................................................. (48) 313 84 169
Addition of activity for Hunter for January to
June 1997 (Note 3).......................................... -- -- -- 200
Elimination of duplicated activity from July
to December (Note 3)........................................ -- (855) (25,057) --
------------------------------------------------------
Net increase (decrease) in cash and cash equivalents............. 5,213 55,239 (35,355) (10,057)
Cash and cash equivalents, beginning of period................... 2,795 8,008 63,247 27,892
------------------------------------------------------
Cash and cash equivalents, end of period......................... $ 8,008 $ 63,247 $ 27,892 $ 17,835
======================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................................... $ 1,331 $ 2,064 $ 802 $ 991
Cash paid for income taxes...................................... $ 2,908 $ 2,060 $ 10,269 $ 10,608
</TABLE>
See additional disclosure of non-cash investing and financing activity in Notes
3, 4, 7, 8, 10 and 15.
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
RENAISSANCE WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Renaissance Worldwide, Inc. ("Renaissance" or the "Company"), formerly known
as The Registry, Inc., is a worldwide provider of integrated business and
information technology ("IT") consulting services to organizations with complex
IT operations in a broad range of industries. The Company's offerings are
categorized into three business units: Strategy, Solutions and Services. The
Strategy Business Unit provides management consulting and technology integration
services in connection with performance support systems. The Solutions Business
Unit provides IT solutions design and implementation services. The Services
Business Unit provides IT professionals on a contract basis. The Company's
primary locations are in the United States with subsidiaries throughout
Europe and Asia. See Note 17.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying financial statements include the accounts of Renaissance
Worldwide, Inc. and its wholly-owned subsidiaries. On November 26, 1996,
November 27, 1996, July 31, 1997, and November 26, 1997, the Company completed
the acquisitions of Application Resources, Inc. ("ARI"), Shamrock Computer
Resources, Ltd. ("SCR"), Renaissance Solutions, Inc. ("RSI"), and The Hunter
Group, Inc. ("Hunter"), respectively. On December 31, 1996, RSI completed the
acquisition of International Systems Services Corporation. These transactions
have been accounted for as poolings-of-interests and, therefore, the
accompanying financial statements have been retroactively restated to reflect
the financial position and results of operations and cash flows of each of these
entities with the Company for all periods presented (see Note 3). In addition,
the accompanying financial statements include the accounts of several entities
acquired in purchase transactions, subsequent to their respective acquisition
dates (see Note 4), as well as the accounts of a real estate trust (the "Trust")
which is substantially controlled by the Company, subsequent to the
renegotiation of certain lease terms on September 19, 1995 (see Note 15). All
material intercompany balances and transactions have been eliminated.
Fiscal Year
Effective with this transition report, the Company changed its fiscal year
from the last Saturday in June to the last Saturday in December. RSI, ARI and
SCR previously utilized a December 31 year end. Upon acquisition, RSI, ARI and
SCR changed their fiscal year ends to the last Saturday in June to conform to
the Company's previous fiscal year. Hunter previously utilized a December 31
year end. Upon acquisition, Hunter changed its fiscal year end to the last
Saturday in December to conform to the Company's fiscal year (see Note 3).
The transition period ended December 27, 1997 reflects the results of
operations and cash flows for the six months then ended for the Company and all
of its subsidiaries. The results of operations and of cash flows for the years
ended June 24, 1995, June 29, 1996 and June 28, 1997 are for 52 weeks, 53 weeks
and 52 weeks, respectively.
The unaudited results of operations for the six month period ended December
28, 1996 included revenues of $187,381,000, cost of revenues of $131,259,000,
selling, general and administrative expenses (including acquisition-related
expenses) of $52,119,000, income from operations of $4,003,000, income before
taxes of $6,794,000, and net income of $778,000. Earnings per share-basic for
the period was $0.02. Earnings per share-diluted for the period was $0.02. In
the opinion of management, the above unaudited amounts include all adjustments,
consisting solely of normal recurring adjustments, necessary to present fairly
the Company's consolidated results of operations for the six months ended
December 28, 1996.
Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The Company's cash
equivalents consist primarily of short term federal notes and money market
securities bearing interest at a weighted average rate of approximately 5.6% at
December 27, 1997. The investments are carried at cost plus accrued interest,
which approximates market value. The Company considers such securities to be
classified as "available-for-sale".
Revenue Recognition
The Company's revenue is primarily composed of fees for consulting services .
The majority of the Company's revenue is from contracts on a time and materials
basis and is recognized as the services are performed. The remainder of the
Company's contracts are on a fixed-price basis, and revenue from those contracts
is recognized using the percentage of completion method based upon the number of
labor hours incurred compared to the total estimated
35
<PAGE>
hours at estimated realizable rates. Under the percentage of completion method,
the Company must estimate the percentage of completion of each project at the
end of each financial reporting period. Estimates are subject to adjustment as a
project progresses to reflect changes in projected completion costs or dates.
Revenues are reported net of reimbursable expenses which are typically billed
and collected from clients. Losses, if any, are provided for in the period in
which the loss is determined. Amounts received in excess of revenue recognized
are recorded as deferred revenue.
The Company also licenses certain of its intellectual property. Revenue is
recognized on license agreements when the Company has completed all of its
significant contractual obligations and the license fees are non-refundable.
During the six months ended December 27, 1997, the Company recognized $2.5
million of revenue for the license of intellectual property in exchange for a
software license.
Accounts Receivable, Concentration of Credit Risk and Uncertainties
The Company is subject to credit risk through trade receivables. Credit risk
with respect to trade receivables is mitigated by the diversification of
the Company's operations, as well as its large client base and its geographical
dispersion. The Company performs ongoing evaluations of its receivables and may
obtain retainers at the onset of significant fixed price client engagements.
Collateral is not required for time and material contracts. In management's
opinion, the Company has provided sufficient provisions to prevent a significant
impact of credit losses to the financial statements. The failure of the Company
to complete a fixed price project to the client's satisfaction within the fixed
price exposes the Company to potentially unrecoverable cost overruns.
Fees on fixed-price contracts are generally billable to clients upon the
achievement of specified milestones. Unbilled revenue was $3,682,000, $4,060,000
and $6,799,000 at June 29, 1996, June 28, 1997, and December 27, 1997,
respectively.
No single customer accounted for more than 10% of revenues or more than 10% of
accounts receivable for any period presented.
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:
Buildings and improvements........ 31 1/2 years
Computer equipment................ 5 years
Furniture and equipment........... 5 to 7 years
Motor vehicles.................... 5 years
Leasehold improvements............ lesser of lease term or 10 years
36
<PAGE>
Advertising Costs
Advertising costs are recorded as expense when incurred. There were no
advertising costs recorded as assets at June 29, 1996, June 28, 1997 or December
27, 1997.
Software Development Costs
The Company has capitalized certain software development costs under the
provisions of Statement of Financial Accounting Standards No. 86, "Accounting
for the Cost of Computer Software to be Sold, Leased, or Otherwise Marketed"
("SFAS 86"). Capitalization of software development costs begins upon the
establishment of technological feasibility, as defined in SFAS 86, and ceases
upon the general release of the related product to the public. The software is
generally utilized in conjunction with the Company's consulting services.
Capitalized software development costs are amortized over the shorter of (a)
the ratio which current period revenues for the software product bear to total
projected revenues, or (b) a straight-line basis over 1 to 2 years.
Unamortized software development costs totaled $1,225,000 at December 27, 1997,
which are included in other assets in the accompanying balance sheet. There were
no such capitalized costs at June 29, 1996 or June 28, 1997. Amortization of
software development costs totaled $250,000 in the six months ended December 27,
1997.
The establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs requires considerable
judgment by management with respect to certain external facts, including
technological feasibility, anticipated future revenues, estimated economic lives
and changes in software technology.
The Company has also capitalized costs associated with certain software being
developed for internal use. Such costs represent the direct costs of employees
associated with the design, development, implementation and testing of projects
which management believes will be used productively by the Company.
Capitalization commences when the initial product design has been completed and
management has committed the appropriate resources to the project, and ceases
upon implementation of the software, on a module by module basis.
Such costs are included within fixed assets in the accompanying balance sheet.
Capitalized costs totalled $458,000 and $1,722,000 at June 28, 1997 and December
27, 1997, 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.
Certain of the Company's subsidiaries 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 stockholders. These elections were subsequently
terminated upon acquisition by the Company and the net deferred tax asset or
liability as of the date of acquisition has been included in the provision for
income taxes in the period of acquisition.
Certain of the Company's subsidiaries had previously utilized the cash method
of accounting for income taxes. Upon acquisition by the Company, these
subsidiaries converted to the accrual method of accounting for income taxes.
Stock-Based Compensation
The Company accounts for employee awards under its stock plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. The Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), for disclosure purposes only (Note 11).
37
<PAGE>
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 June 29, 1996, June 28, 1997 and December 27, 1997 and the
reported amounts of revenues and expenses for the three years in the period
ended June 28, 1997 and the six month period ended December 27, 1997. Actual
results could differ from those estimates.
Goodwill and Other Intangible Assets
As described in Note 4, the Company amortizes goodwill and intangible assets
arising from purchase acquisitions on a straight-line basis over a period of 10
to 30 years. Goodwill is evaluated for consideration of potential impairment
based on the operating results and forecasted cash flows of the acquired entity.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified
to conform to the current period presentation.
Translation of Foreign Currencies
The functional currency of the Company's subsidiaries is the local currency.
Assets and liabilities are translated into U.S. dollars at exchange rates in
effect at the balance sheet date; income and expense items and cash flows are
translated at average exchange rates for the period. Cumulative net translation
adjustments are included in stockholders' equity. Gains and losses resulting
from foreign currency transactions, not significant in amount, are included in
the results of operations as other income (expense).
Net Income Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 specifies modifications to the calculation of earnings per
share from that previously used by the Company. Under SFAS 128, "basic earnings
per share" is calculated based upon the weighted average number of common shares
actually outstanding, and "diluted earnings per share" is calculated based upon
the weighted average number of common shares and dilutive potential common stock
outstanding. Potential common stock includes stock options and warrants,
calculated using the treasury stock method, and the assumed conversion of ARI's
preferred stock (see Note 10). However, potential common stock has been excluded
from the calculation of diluted earnings per share for the six months ended
December 27, 1997, as its effect would be anti-dilutive.
The Company adopted SFAS 128 and Securities and Exchange Commission Staff
Accounting Bulletin No. 98, which provides new guidance with respect to earnings
per share computations in the periods preceding a company's initial public
offering, in the second quarter of the transition period ended December 27, 1997
and has restated all prior periods in its financial statements.
A reconciliation of the weighted average number of common shares outstanding
is as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
-------------------------------- Ended
June 24, June 29, June 28, December
1995 1996 1997 27, 1997
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding -- basic 36,307 38,415 46,017 49,982
Assumed exercise of stock options,
using the treasury stock method 690 2,642 3,552 --
Assumed exercise of warrants,
using the treasury stock method 100 104 -- --
Assumed conversion of ARI's
preferred stock 1,447 1,232 559 --
-------- -------- -------- --------
Weighted average number of common
and potential common shares
outstanding -- diluted 38,544 42,393 50,128 49,982
======== ======== ======== ========
</TABLE>
Recently Enacted Accounting Standards
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
standards for the reporting of comprehensive income in a company's full set of
financial statements, and is effective for fiscal years beginning after December
15, 1997.
38
<PAGE>
Comprehensive income is defined in SFAS 130 as the change in equity (net
assets) of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. Comprehensive income reported
by an entity will include both net income and other comprehensive income.
Classifications within other comprehensive income could include foreign currency
items, minimum pension liability adjustments, and unrealized gains and losses on
certain investments in debt and equity securities. SFAS 130 will affect the
Company's reporting of unrealized gains and losses on marketable securities, as
well as the reporting of translation adjustments resulting from certain
investments in foreign subsidiaries. Such disclosures of comprehensive income
will be in addition to existing reporting of net income. The Company will adopt
this statement as required.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 is effective for fiscal years beginning after December
15, 1997 and requires restatement of disclosures for all periods presented.
SFAS 131 requires that companies disclose information about operating segments
in annual and interim financial statements. SFAS 131 utilizes the "management
approach" in determining what constitutes an operating segment. An operating
segment is defined in SFAS 131 as a business component:
. which engages in business activities from which it may earn revenues and
incur expenses;
. whose operating results are regularly reviewed by a chief operating decision
maker to make decisions about resources to be allocated to the segment and
assess its performance; and
. for which discrete financial information is available.
SFAS 131 requires that a company disclose information about operating segments
that meet any of the following thresholds:
. its reported revenue, including both customer and intersegment sales, is
greater than or equal to 10% of combined revenue
. the absolute amount of its reported profit or loss is greater than 10% or
more of the absolute amount of (1) the combined reported profit of all segments
that did not report a loss or (2) the combined reported losses of all segments
that did not report a loss,
. its assets are greater than or equal to 10% or more of combined assets of all
operating segments.
The adoption of SFAS 131 will not impact the Company's financial position,
results of operations or cash flows. Management has determined that the
adoption of SFAS 131 will not materially differ from the Company's current
presentation of operating segments in Note 17.
3. ACQUISITION OF SUBSIDIARIES - POOLING OF INTERESTS
Transition Period Poolings of Interest
On July 31, 1997, pursuant to an Agreement and Plan of Merger dated May 19,
1997, the Company, through a wholly-owned subsidiary, acquired RSI. RSI provides
management consulting and client/server systems integration services, primarily
for large corporations. Pursuant to the agreement, each outstanding share of RSI
common stock was converted into the right to receive 1.6 shares of Renaissance
common stock. Renaissance also assumed outstanding options for the purchase of
RSI common stock at the same conversion ratio. Immediately prior to the
acquisition, there were 9,573,204 shares of RSI common stock and options to
purchase 1,364,895 shares of RSI common stock outstanding.
On November 26, 1997, the Company, through a wholly-owned subsidiary, acquired
Hunter. Hunter provides management consulting, systems implementation and
education services to organization seeking to deploy enterprise software
applications, including enterprise resource planning ("ERP") software
applications. Pursuant to the agreement, each outstanding share of Hunter common
stock was converted into the right to receive 19.9086 shares of Renaissance
common stock. Renaissance also assumed outstanding options for the purchase of
Hunter common stock at the same conversion ratio. Immediately prior to the
acquisition, there were 300,000 shares of Hunter common stock and options to
purchase 59,133 shares of Hunter
39
<PAGE>
common stock outstanding. In addition, in conjunction with the acquisition of
Hunter, Renaissance issued 328,578 shares of Common Stock in exchange for a
residual equity interest in Hunter held by a third party.
In total, 21,647,012 shares of Renaissance common stock were exchanged for all
of the outstanding common stock of RSI and Hunter. In addition, outstanding
stock options to purchase RSI and Hunter common stock were converted into
options to purchase 3,361,088 shares of Renaissance's common stock. These
transactions have been accounted for as poolings-of-interests and, therefore,
all prior period financial statements presented have been restated as if the
acquisitions took place at the beginning of such periods.
RSI had a calendar year end and the results of operations for the year ended
December 31, 1995 and December 31, 1996 were combined with the results of
operations for Renaissance's fiscal years ended June 24, 1995 and June 29, 1996,
respectively. Additionally, the financial position of RSI as of December 31,
1995 and 1996 has been combined with the Company's financial position as of June
24, 1995 and June 29, 1996, respectively. In order to conform RSI's year end to
Renaissance's fiscal year end, the consolidated statement of income for fiscal
1997 includes six months (July to December 1996) for RSI which has also been
included in the consolidated statement of income for the fiscal year ended June
29, 1996. An adjustment has been made to retained earnings in fiscal 1997 to
eliminate the duplication of net income of RSI for such six month period.
Hunter had a calendar year end and the results of operations for the year
ended December 31, 1994, December 31, 1995 and December 31, 1996 were combined
with the results of operations for Renaissance's fiscal years ended June 24,
1995, June 29, 1996 and June 28, 1997, respectively. Additionally, the financial
position of Hunter as of December 31, 1994, 1995 and 1996 has been combined with
the Company's financial position as of June 24, 1995, June 29, 1996, and June
28, 1997, respectively. In order to conform Hunter's year end to Renaissance's
fiscal year end, the consolidated statement of income omits six months (January
to June 1997) for Hunter. An adjustment has been made to retained earnings in
the transition period ended December 27, 1997 to add back the net loss for
Hunter for such six month period.
Fiscal 1997 Poolings of Interest
On November 26, 1996, pursuant to an Agreement and Plan of Merger dated
October 30, 1996, the Company, through a wholly-owned subsidiary, acquired ARI.
ARI is an information technology consulting firm performing services similar to
those of the Company. Pursuant to the agreement, each outstanding share of ARI
capital stock was converted into the right to receive .548856 shares of the
Company's Common Stock. The Company also assumed outstanding options for the
purchase of ARI common stock at the same conversion ratio. Immediately prior to
the acquisition, there were 5,217,000 shares of ARI common stock and options to
purchase 794,000 shares of ARI common stock outstanding.
On November 27, 1996, pursuant to an Agreement and Plan of Merger dated
November 2, 1996, the Company, through a wholly-owned subsidiary, acquired SCR.
SCR is an information technology consulting firm performing services similar to
those of the Company. Pursuant to the agreement, each outstanding share of SCR
common stock was converted into the right to receive 273.539 shares of the
Company's Common Stock. Pursuant to the provisions of the Iowa Business
Corporation Act (the "IBCA"), a stockholder of SCR holding 352 shares of SCR
common stock perfected dissenters' rights under the IBCA and was paid $2,000,000
in redemption of such shares.
On December 31, 1996, the Company, through its RSI subsidiary, acquired
International Systems Services Corporation, a Connecticut corporation ("ISS").
ISS is a consulting firm providing business and management consulting services.
Pursuant to the agreement, all of the outstanding capital stock of ISS was
acquired in exchange for 1,310,000 shares of RSI Common stock (equal to
2,096,000 shares of the Company's Common Stock pursuant to the July 31, 1997
merger of RSI with the Company).
In total, 6,797,548 shares of the Company's Common Stock were exchanged for
all of the outstanding common stock of ARI, SCR and ISS. In addition,
outstanding stock options to purchase ARI common stock were converted into
options to purchase 435,810 shares of the Company's Common Stock. These
transactions (collectively referred to as the "Fiscal 1997 Poolings of
Interest") have been accounted for as poolings-of-interests and, therefore, all
prior period financial statements presented have been restated as if the
acquisitions took place at the beginnings of such periods.
ARI and SCR each had a calendar year end and the results of operations for ARI
and SCR for the year ended December 31, 1995 have been combined with the results
of operations for the Company's fiscal year
40
<PAGE>
ended June 24, 1995. Additionally, the financial position of ARI and SCR as of
December 31, 1995 has been combined with the Company's financial position as of
June 24, 1995. In order to conform ARI and SCR's year end to the Company's
fiscal year end, the consolidated statement of income for fiscal 1996 includes
six months (July to December 1995) for both companies which are also included in
the consolidated statement of income for the fiscal year ended June 24, 1995.
There were no material transactions between the Company, ARI, SCR, ISS, RSI or
Hunter during any of the periods presented. No material adjustments to net
assets or results of operations were necessary to conform the accounting
practices of ARI, SCR, ISS, RSI or Hunter to that of the Company. Certain
reclassifications were made to the financial statements of ARI, SCR, ISS, RSI
and Hunter to conform with the Company's classifications. All costs associated
with the acquisitions have been expensed as incurred.
Separate results of operations for the periods prior to the acquisitions of
ARI, SCR, ISS, RSI and Hunter by the Company were as follows:
<TABLE>
<CAPTION>
(in thousands)
Year Ended
---------------------------------------------------
June 24, June 29, June 28, 1997
1995 1996
<S> <C> <C> <C>
Revenue
Renaissance Worldwide, Inc. $ 98,687 $ 145,588 $ 324,766(a)
Application Resources, Inc. 29,870 37,615
Shamrock Computer Resources, Ltd. 25,428 33,675
International Systems Services Corporation 12,935 17,666
Renaissance Solutions, Inc. 22,601 34,784 64,277(b)
The Hunter Group, Inc. 10,712 19,554 39,215
------------ ------------- ---------------
Combined $ 200,233 $ 288,882 $ 428,258
------------ ------------- ---------------
Net Income (Loss)
Renaissance Worldwide, Inc. $ 326 $ 2,543 $ 10,900(a)
Application Resources, Inc. 1,273 1,228
Shamrock Computer Resources, Ltd. 2,193 2,861
International Systems Services Corporation 159 (704)
Renaissance Solutions, Inc. 3676 2,474 3,217(b)
The Hunter Group, Inc. 1,173 (399) 443
------------ ------------- ---------------
Combined $ 8,800 $ 8,003 $ 14,560
------------ ------------- ---------------
Other Changes in Stockholders' Equity
Renaissance Worldwide, Inc. $ - $ 33,003 $ 51,027(a)
Application Resources, Inc. (317) 3
Shamrock Computer Resources, Ltd. (665) (1,416)
International Systems Services Corporation - -
Renaissance Solutions, Inc. 13,813 48,815 26,917(b)
The Hunter Group, Inc. (250) 1 285
------------ ------------- ---------------
Combined $ 12,581 $ 80,406 $ 78,229
------------ ------------- ---------------
</TABLE>
(a) Includes the results of ARI and SCR, which were acquired by the Company
during the year ended June 28, 1997
(b) Includes the results of ISS, which was acquired by RSI during the year
ended June 28, 1997
41
<PAGE>
4. ACQUISITION OF SUBSIDIARIES - PURCHASES
Transition Period Purchases
- ---------------------------
McClain Group, Inc. On July 16, 1997, the Company, through a wholly owned
subsidiary, acquired all of the outstanding stock of McClain Group, Inc., a
Virginia corporation ("McClain"), for $15.4 million in cash. McClain is an
information technology management consulting firm based in Richmond, Virginia.
McClain provides IT consulting and project management services.
Technomics Consultants International, Inc. On July 25, 1997, RSI, through a
wholly-owned subsidiary, acquired all of the outstanding stock of Technomics
Consultants International, Inc., an Illinois corporation ("Technomics"), for
$2.0 million in cash and up to $5.2 million in contingent consideration.
Technomics is a management consulting firm based in Chicago, Illinois with
offices in London, England; Hong Kong; Bombay, India; Tokyo, Japan; Ho Chi Minh
City, Vietnam; Shanghai, PRC and Singapore.
Eligibility Management Systems, Inc. On August 27, 1997, the Company, acquired
all of the outstanding stock of Eligibility Management Systems, a Florida
corporation ("EMS") that provides implementation services to state government
agencies and municipalities, for $19.0 million in cash, of which $15.0 million
was payable at the time of closing and $4.0 million is payable over the next two
years. An additional $4.0 million in consideration may be payable subject to
certain earnout arrangements.
Cambridge Software Group. On December 19, 1997, the Company acquired all of
the outstanding stock of Cambridge Software Group, a Massachusetts corporation
("CSG") that provides IT solutions services, for $1.1 million in cash. An
additional $3.4 million in consideration may be payable subject to certain
earnout arrangements.
The acquisitions of McClain, Technomics, EMS and CSG are collectively referred
to as the "Transition Period Acquisitions". The aggregate purchase price and
related costs associated with the Transition Period Acquisitions was $38.1
million, which has been allocated to the assets acquired and liabilities assumed
as follows:
<TABLE>
<S> <C>
Cash $ 773,000
Accounts Receivable, net 2,770,000
Fixed Assets, net 168,000
Other Assets, excluding goodwill and
other intangible assets 193,000
Accounts Payable 1,645,000
Debt and Line of Credit 261,000
Accrued Expenses and Other Liabilities 995,000
Income Taxes Payable and Deferred Tax Liabilities 54,000
</TABLE>
Fiscal 1997 Purchases
During the fiscal year ended June 28, 1997, the Company acquired five
companies: Morris Information Systems, Sun-Tek Consultants, Inc., Sterling
Information Group, James Duncan & Associates ("JDA"), and Connexus Consulting
Group, Inc. In addition, during fiscal year 1997, prior to the merger with the
Company, RSI acquired two companies: COBA Consulting Limited ("COBA UK") and
C.M. Management Systems Ltd., Inc. ("COBA-Boston"). These acquisitions are
collectively referred to as the "Fiscal 1997 Acquisitions". The aggregate
purchase price and related costs associated with the Fiscal 1997 Acquisitions
was $37,950,000 plus 266,528 shares
42
<PAGE>
of the Company's common stock, which has been allocated to the assets acquired
and liabilities assumed as follows:
<TABLE>
<S> <C>
Cash $ 1,646,000
Accounts Receivable, net $10,663,000
Fixed Assets, net $ 1,298,000
Other Assets, excluding goodwill and other intangible assets $ 309,000
Accounts Payable $ 4,454,000
Debt and Line of Credit $ 1,872,000
Accrued Expenses and Other Liabilities $ 4,688,000
Income Taxes Payable and Deferred Tax Liabilities $ 636,000
</TABLE>
In connection with, the Fiscal 1997 Acquisitions, the Company may pay
contingent consideration of up to $32.3 million based on certain earn-out
arrangements. Such amounts, if paid, will be recorded as additional purchase
price. The acquisition agreement of COBA-Boston contained certain change of
control provisions which were triggered upon the acquisition of RSI by
Renaissance. This resulted in the acceleration of $9,250,000 of contingent
consideration, which has been accrued and is included in accrued expenses at
December 27, 1997.
The allocation of the purchase price for certain of the Transition Period
Acquisitions and Fiscal 1997 Acquisitions is preliminary and subject to change
based upon the completion of valuation analyses of certain acquired assets.
The pro forma results of operations, assuming that the acquisition of the
Transition Period Acquisitions and Fiscal 1997 Acquisitions occurred at the
beginning of the year ended June 28, 1997 or the six months ended December 27,
1997, would not materially differ from the Company's reported results of
operations.
5. MARKETABLE SECURITIES
Marketable securities are classified as available for sale and consist of U.S.
Treasury Notes, Federal Agency Bonds and Corporate Bonds having maturity dates
of more than three months, which are stated at fair value. Aggregate net
unrealized holding gains/(losses) of $ (18,000) , $ (21,000) and $ 22,000 at
June 29, 1996, June 28, 1997 and December 27, 1997, respectively, have been
included as a separate component of stockholders' equity in the accompanying
consolidated balance sheet. Certain information with respect to the Company's
marketable securities as of June 29, 1996, June 28, 1997, and December 27, 1997
is presented below:
<TABLE>
<CAPTION>
(in thousands)
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Security Type Cost Gains Losses Value
JUNE 29, 1996
<S> <C> <C> <C> <C>
U.S. Treasury Notes $ 9,973 $ 13 $ - $ 9,986
Federal Agency Bonds 6,308 - 32 6,276
Corporate Bonds 1,647 1 - 1,648
--------------- ---------------- --------------- ------------
$17,928 $ 14 $ 32 $17,910
=============== ================ =============== ============
<CAPTION>
JUNE 28, 1997
<S> <C> <C> <C> <C>
U.S. Treasury Notes $ 4,331 $ - $ 18 $ 4,313
Federal Agency Bonds 16,688 - 17 16,671
Commercial Paper 7,677 14 - 7,691
--------------- ---------------- --------------- ------------
$28,696 $ 14 $ 35 $28,675
=============== ================ =============== ============
<CAPTION>
DECEMBER 27, 1997
<S> <C> <C> <C> <C>
U.S. Treasury Notes $ 4,331 $ 13 $ - $ 4,344
Federal Agency Bonds 1,514 9 - 1,523
--------------- ---------------- --------------- ------------
$ 5,845 $ 22 $ - $ 5,867
=============== ================ =============== ============
</TABLE>
The fair values of marketable securities by contractual maturity are shown
below. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations without call or
prepayment penalties.
43
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
June 29, June 28, December 27,
1996 1997 1997
<S> <C> <C> <C>
Due in one year or less $ 7,138 $21,787 $2,057
Due after one through three years 10,772 6,888 3,810
------- ------- ------
Total $17,910 $28,675 $5,867
------- ------- ------
</TABLE>
6. COMBINED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
June 29, June 28, December 27,
1996 1997 1997
<S> <C> <C> <C>
Fixed Assets:
Land $ 360,000 $ 360,000 $ 360,000
Building 1,439,000 1,439,000 1,439,000
Computer equipment and software 8,398,000 12,961,000 20,851,000
Furniture and Equipment 4,892,000 6,673,000 7,598,000
Motor Vehicles 19,000 115,000 87,000
Leasehold and building improvements 1,364,000 1,718,000 3,812,000
----------- ----------- -----------
Total fixed assets 16,472,000 23,266,000 34,147,000
Less: accumulated depreciation and 5,015,000 6,220,000 9,725,000
amortization ----------- ----------- -----------
Net fixed assets $11,457,000 $17,046,000 $24,422,000
=========== =========== ===========
Other Accrued Expenses
Accrued employee benefits $ 2,826,000 $ 5,277,000 $ 6,133,000
Accrued commissions and bonuses 2,502,000 3,334,000 7,323,000
Accrued acquisition costs -- 1,169,000 3,655,000
Accrued contingent consideration -- 3,466,000 14,305,000
Other accrued expenses 4,577,000 4,863,000 9,172,000
----------- ----------- -----------
$ 9,905,000 $18,109,000 $40,588,000
=========== =========== ===========
</TABLE>
7. NOTES RECEIVABLE AND RELATED PARTY TRANSACTIONS
At June 28, 1997 and December 27, 1997, notes receivable include
$1,500,000 due on April 24, 1998 from an unrelated third party corporation.
This note bears interest at the LIBOR rate plus 2.5% (8.22% at June 28, 1997 and
8.16% at December 27, 1997), which is payable quarterly. This note is secured
by an interest in all of the assets of the corporation subject to a prior
security interest under the corporation's bank debt and line of credit, and the
personal guarantee of the corporation's majority stockholder.
Notes receivable from officers represents notes due from various senior
officers of the Company and bear interest at the prime rate (8.25% at June 29,
1996, 8.5% at June 28, 1997 and 8.5% at December 27, 1997).
Notes receivable from stockholders of $476,000 at June 29, 1996, June 28, 1997
and December 27, 1997, which are included as a reduction of stockholders' equity
in the accompanying balance sheet, include promissory notes from two of ARI's
officers totaling $226,000 for the exercise of stock options bearing interest
at a variable rate based upon federal income tax requirements (approximately 6%
at June 29, 1996, 6.5% at June 28, 1997 and 6.0% at December 27, 1997), and two
demand notes from an individual who was the sole stockholder of Hunter
totaling $250,000, which accrue interest at 5%.
During the year ended June 28, 1997, the Company entered into a contract with
an entity controlled by the president of the Company to utilize an airplane for
corporate travel purposes. The Company pays for such usage on a per-flight
basis at a rate which management believes approximates market prices. Total
amounts incurred to this
44
<PAGE>
entity during the year ended June 28, 1997 and the six months ended December 27,
1997 were $100,000 and $267,000, respectively.
At June 29, 1996, ISS had a $500,000 promissory note payable on demand to its
president. This loan was repaid in full in January 1997.
8. FINANCING ARRANGEMENTS
Lines of Credit
Renaissance: In March 1996, Renaissance terminated its previous line of credit
- -----------
and replaced it with a line of credit from a different bank. The new line of
credit ("Renaissance 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 June 29, 1996, 9.0% at June 28, 1997 and
9.0% at December 27, 1997) or the LIBOR rate plus 2.5% (8.00% at June 29, 1996,
8.64% at June 28, 1997 and 8.16% at December 27, 1997), at the option of the
Company. The Renaissance Line of Credit is collateralized by all of the assets
of the Company, excluding the assets of the Trust, contains certain
restrictions, including limitations on the amount of distributions which can be
made to stockholders, 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. On December 4, 1997, the
Renaissance Line of Credit was amended to allow a maximum borrowing of
$50,000,000 and to include the accounts receivable of certain recent
acquisitions in the borrowing base calculations.
ARI: ARI had a line of credit arrangement with a bank which allowed ARI to
- ---
borrow the lesser of $1,750,000 or 60% of eligible accounts receivable, as
defined, at an interest rate equal to the bank's prime rate plus .50% (8.75% at
June 29, 1996). There were no amounts outstanding under this line at June 29,
1996. The line of credit was secured by all of the assets of ARI, contained
certain restrictions, including limitations on the amount of distributions which
could be made to stockholders, purchases of fixed assets, and new indebtedness,
and required maintenance of certain financial covenants. On November 26, 1996,
in conjunction with the acquisition of ARI by the Company (see Note 3), ARI
terminated its line of credit arrangement.
SCR: SCR had a credit arrangement with a bank consisting of a committed line of
- ---
credit totaling $2,500,000, of which $625,000 was unused as of June 29, 1996,
and a discretionary equipment line of $500,000. The line of credit carried
interest at the bank's prime rate (8.25% at June 29, 1996) and was
collateralized by substantially all of the assets of SCR. The equipment line
carried an interest rate equal to the bank's prime rate plus .50% (8.75% at June
29, 1996). The sum of the outstanding balances on the line of credit and the
equipment line could not exceed a borrowing base of 80% of eligible accounts
receivable, as defined, up to a maximum total borrowing of $3,000,000. At June
29, 1996, $7,000 of the equipment line was used. Monthly principal payments of
$3,000, including interest, were due through August 1996 on this line. The
equipment line was secured by a first priority security interest in the related
equipment purchased with the loan proceeds. Both credit arrangements were
guaranteed by SCR's former stockholders and required a commitment fee of .25%
per annum on the unused portion. Additionally, the credit arrangements
contained certain restrictions, including limitations on new indebtedness, and
required maintenance of certain financial covenants. On November 27, 1996, in
connection with the acquisition of SCR by the Company (see Note 3), SCR
terminated its credit arrangements.
JDA: In June 1997, the Company entered into a line of credit agreement with a
- ----
foreign bank to provide an overdraft facility of 1,400,000 British Sterling to
its James Duncan subsidiary. This facility matures on January 31, 1998 and is
secured by a $2,000,000 standby letter of credit from a U.S. bank. The Company
is required to maintain this level of cash in this bank. There was $1,485,000
and $1,514,000 drawn on this facility as of June 28, and December 27, 1997,
respectively. Interest is payable quarterly at the bank's base rate plus 0.875%
(7.35% at June 28, 1997 and 8.125% at December 27, 1997) for amounts up to
1,000,000 British Sterling and the bank's base rate plus 2.0% for amounts over
this level.
45
<PAGE>
Hunter: In 1995, Hunter entered into a revolving credit facility (the "Hunter
- -------
Facility") with a financial institution that is collateralized by all accounts
receivable of Hunter. The Hunter Facility was limited to the lesser of
$3,000,000 or 85% of aggregate accounts receivable, and bore interest at the
lower of the bank's prime rate or 2.5% above the 30 day LIBOR rate (8.35% at
June 29, 1996).
In 1996, the Hunter Facility was converted to a demand note with an original
expiration date of April 30, 1997, subsequently extended until June 30, 1997.
The demand note was limited to the lesser of $3,600,000 or a formula for
eligible accounts receivable. The note bore interest at 3.5% above LIBOR
(9.875% at June 28, 1997).
As of June 29, 1996 and June 28, 1997, the unused portion of the note and line
amounted to $1,950,000 and $2,040,000, respectively. The Hunter Facility had an
unused commitment fee of 0.375% during calendar 1995. This fee was removed upon
conversion to a demand note in 1996.
Effective June 30, 1997, the Hunter Facility was amended and the availability
under the Hunter Facility was increased to the lesser of $8,000,000 or a
formula for eligible accounts receivable. The Hunter Facility bears interest at
the lower of the bank's prime rate or 2.5% over the 30-day LIBOR rate (8.64 % at
June 28, 1997 and 8.16% at December 27, 1997), plus an additional 0.75% fee per
month based on the monthly maximum loan amount. The Hunter Facility has an
unused commitment fee of 0.40% per month. The Hunter Facility is collateralized
by the receivables, equipment and all other property of Hunter.
RSI: At June 29, 1996, RSI had a $3,500,000 unsecured revolving credit
- ----
agreement with a bank expiring on June 1, 1997. Interest was payable at the
bank's corporate rate (8.5% at June 29, 1996). The loan agreement included
various financial and other covenants including maintenance of minimum levels of
tangible net worth and quarterly profitability. There were no amounts
outstanding under the line at June 29, 1996. This line expired on June 1, 1997.
RSI has a British Pound Sterling 425,000 ($655,000) revolving line of credit
with a UK bank. There were no amounts outstanding under the line at June 29,
1996, June 28, 1997 or December 27, 1997.
ISS had a $500,000 working capital line of credit collateralized by ISS
accounts receivable which expired on April 27, 1997. Interest was payable at
prime (8.25% at June 29, 1996). Borrowings under the line were $500,000 as
of June 29, 1996.
LONG-TERM DEBT
Long term debt consists of the following:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997 December 27, 1997
<S> <C> <C> <C>
Note payable due August 31, 1996 $ 7,000 $ - $ -
Note payable due December 1997 - 129,000 129,000
Note payable due April 30, 1998 - - 108,000
Notes payable due November 30, 1998 625,000 375,000 250,000
Note payable due November 30, 1998 - 113,000 37,000
Notes payable due August 1, 1999 - - 3,748,000
Notes payable due June 30, 2000 216,000 167,000 167,000
Note payable due December 28, 2000 782,000 - -
9.375% term loan due August 27, 2010 1,406,000 1,387,000 1,378,000
6.75% term loan due April 1, 2013 690,000 663,000 651,000
------------------------------------------------------------------
3,726,000 2,834,000 6,468,000
Less: Current portion 1,126,000 550,000 2,866,000
------------------------------------------------------------------
$2,600,000 $2,284,000 $3,602,000
------------------------------------------------------------------
</TABLE>
46
<PAGE>
The note payable due August 31, 1996 was payable to a bank, under the line of
credit described above, in monthly installments of $3,000, including interest at
the bank's prime rate plus .50% (8.75% at June 29, 1996).
The note payable due December 1997 resulted from Renaissance's acquisition
of James Duncan and Associates in December 1996 (see Note 4). These notes were
paid in full via stock to the principal employees of JDA in January 1998.
Note payable due April 30, 1998 relates to an acquisition made by a subsidiary
prior to its acquisition by the Company. The note is unsecured and non-interest
bearing.
The notes payable due November 30, 1998 resulted from Renaissance's
acquisition of the former Axiom Consulting Group, Inc. in November 1994. 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 note payable due November 30, 1998 is due to a former executive of Hunter.
The note is unsecured and non-interest bearing and due in installments of
$40,000 paid in January 1997 and four semi-annual installments of $18,000
beginning in May 1997.
The notes payable due June 30, 2000 resulted from ARI's repurchase of 510,436
shares of common stock and 465,000 shares of preferred stock from certain of its
stockholders in June 1995 at a price of $0.12 and $0.325 per share,
respectively. These repurchased shares have been excluded from the number of
shares issued and outstanding on the accompanying consolidated balance sheet. In
conjunction with this transaction, ARI issued $261,000 in promissory notes,
recorded as long-term debt on the accompanying balance sheet, due through June
30, 2000 in five equal installments of $63,000, including interest of 6.83%,
with the first payment due in June 1996. These notes are unsecured.
The notes payable due August 1, 1999 resulted from Renaissance's acquisition
of EMS in August 1997. The notes are unsecured and payable to the former
stockholders of EMS. $300,000 was paid in December 1997, $1,748,000 was paid in
January 1998, $1,000,000 is payable in two semi-annual installments beginning
August 1998 and an additional $1,000,000 is payable in August 1999.
The note payable due December 28, 2000 was payable to a bank of ISS and was
repaid in full subsequent to the 1996 fiscal year end. The note bore interest
at prime (8.25% at June 29, 1996) and was due in equal installments through
December 28, 2000.
The term loan due August 27, 2010 is payable to a bank in monthly installments
of $12,000, including interest, and is collateralized by certain property of the
Trust and the personal guarantee of Renaissance's president and significant
stockholder.
The term loan due April 1, 2013 is payable in semi-annual installments of
$34,000, including interest, and is secured by a mortgage on the land and
building of the Trust and the assignment of a life insurance policy on
Renaissance's president and significant stockholder.
Aggregate maturities of long-term debt are as follows at December 27, 1997:
<TABLE>
<S> <C>
1998.................................. $2,866,000
1999.................................. 1,604,000
2000.................................. 110,000
2001.................................. 55,000
2002.................................. 60,000
Thereafter............................ 1,773,000
----------
Total 6,468,000
==========
</TABLE>
47
<PAGE>
Notes Payable to Officers
ISS had a $500,000 promissory note, payable on demand to its president bearing
interest at 5.8%. This note was repaid in full in January 1997.
48
<PAGE>
9. INCOME TAXES
Prior to April 11, 1995, January 1, 1996, November 29, 1996, December 31,
1996, RSI, America's Registry, SCR, and ISS, respectively, had each 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 stockholders and reported on their personal
tax returns.
RSI's election to be treated as an S Corporation terminated effective with the
closing of RSI's initial public offering. The cumulative effect of the
temporary differences between financial accounting and income tax reporting was
not material.
America's Registry's, SCR's and ISS's election to be treated as an S
Corporation terminated in conjunction with the acquisition of all of the common
stock of America's Registry, SCR and ISS by the Company. As a result, the
income or loss of America's Registry commencing on January 1, 1996, the income
or loss of SCR commencing on November 27, 1996 and the income or loss of ISS
commencing on December 31, 1996 is subject to corporate income tax, and is
included in the income tax provision (benefit) described below.
At the time of conversion of America's Registry 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 America's Registry 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.
At the time of the conversion of SCR from an S Corporation to a C Corporation,
a net deferred tax asset of $403,000 was recorded through the income tax
provision on November 27, 1996. The deferred tax asset was comprised
principally of certain accrued expenses and allowances which are recognized in
different periods for financial and tax reporting.
At the time of conversion of ISS from an S Corporation to a C Corporation, a
net deferred tax liability of $1,002,000 was recorded through the income tax
provision on December 31, 1996. This deferred tax liability was comprised
principally of the effect of converting from the cash basis to the accrual
basis for tax reporting purposes.
Since its inception, Hunter has reported its financial results for income tax
purposes using the cash method of accounting. Upon acquisition by Renaissance,
Hunter changed its method of accounting for income tax reporting purposes from
the cash method to the accrual method. As a result, substantially all of the
deferred tax liability related to Hunter accumulated on the balance sheet will
become due and payable over a four-year period.
49
<PAGE>
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 24, 1995 JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C> <C>
Current:
Federal $2,237,000 $ 6,227,000 $11,531,000 $ 6,124,000
State 816,000 1,650,000 2,656,000 1,471,000
Foreign - - 1,150,000 1,566,000
------------ ------------- -------------- ------------
3,053,000 7,877,000 15,337,000 9,161,000
Deferred:
Federal 456,000 (1,846,000) (577,000) (1,152,000)
State 88,000 (460,000) (122,000) (244,000)
------------ ------------- -------------- ------------
544,000 (2,306,000) (699,000) (1,396,000)
Change in tax status of RSI,
America's Registry, SCR and
ISS - 1,644,000 599,000 -
------------ ------------- -------------- ------------
$3,597,000 $ 7,215,000 $15,237,000 $ 7,765,000
------------ ------------- -------------- ------------
</TABLE>
Pretax income (loss) is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 24, 1995 JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C> <C>
Domestic $11,806,000 $14,991,000 $26,791,000 $(1,617,000)
Foreign 591,000 228,000 3,006,000 3,413,000
----------- ----------- ----------- -----------
TOTAL $12,397,000 $15,219,000 $29,797,000 $ 1,796,000
----------- ----------- ----------- -----------
</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 June 29, 1996, June 28, 1997 and
December 27, 1997:
<TABLE>
<CAPTION>
JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 392,000 $ 433,000 $ 45,000
Allowance for doubtful accounts 107,000 700,000 1,211,000
Accrued acquisition costs 557,000 - -
Accounts payable and accrued expenses 447,000 997,000 2,342,000
Other 395,000 875,000 1,440,000
Valuation allowance (108,000) (131,000) -
-------------- ------------ ----------
Total gross deferred tax assets 1,790,000 2,874,000 5,038,000
-------------- ------------ ----------
Deferred tax liabilities:
Conversion from cash to accrual basis 2,996,000 3,173,000 2,106,000
Prepaid expenses 82,000 31,000 18,000
Fixed assets 225,000 499,000 278,000
Other - 228,000 2,240,000
-------------- ------------ ----------
Total gross deferred tax
liabilities 3,303,000 3,931,000 4,642,000
-------------- ------------ ----------
Net deferred tax asset
(liability) $(1,513,000) $(1,057,000) $ 396,000
============== ============ ==========
</TABLE>
As of December 27, 1997, the Company has $110,000 of net operating loss
carryforwards which may be used to offset future federal and state taxable
income. The carryforwards expire in 2009. An ownership change, as defined in the
Internal Revenue Code, may limit the amount of net operating loss that can be
utilized annually
50
<PAGE>
to offset future taxable income.
Income taxes computed using the federal statutory income tax rate differs form
Renaissance's effective tax rate primarily due to the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 24, 1995 JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C> <C>
Statutory U.S. Federal tax rate 35.0% 35.0% 35.0% 35.0%
State taxes, net of federal tax
benefit 4.9 4.5 5.5 43.2
Income from America's Registry,
SCR, and ISS not taxable for
corporate income tax purposes (10.5) (9.2) (2.1) -
Non-deductible expenses 0.3 5.4 8.9 322.4
Amortization of goodwill not
deductible for corporate income
tax purposes 0.2 0.2 0.8 9.7
Foreign income taxed at different
rates - 0.7 0.3 20.1
Change in tax status of America's
Registry, SCR and ISS - 11.7 1.8 -
Other (0.9) (0.9) 0.9 1.9
--------- -------- ----- ------
Effective tax rate 29.0% 47.4% 51.1% 432.3%
========= ======== ===== ======
</TABLE>
Non-deductible expenses during the year ended June 24, 1995 primarily relate
to meals and entertainment expenses. Non-deductible expenses during the years
ended June 29, 1996 and June 28, 1997 and six months ended December 27, 1997
primarily relate to certain costs incurred in connection with the acquisitions
of ARI, SCR, ISS, RSI and Hunter.
Undistributed earnings of certain foreign subsidiaries aggregated
approximately $3.5 million on December 27, 1997, which under existing law, will
not be subject to U.S. tax until distributed as dividends. Since the earnings
have been or are intended to be indefinitely reinvested in foreign operations,
no provision has been made for any U.S. taxes that may be applicable thereto.
Furthermore, any taxes paid to foreign governments on those earnings may be used
in whole or in part as credits against the U.S. tax on any dividends distributed
from such earnings. It is not practicable to estimate the amount of unrecognized
deferred U.S. taxes on these undistributed earnings.
10. STOCKHOLDERS' EQUITY
Preferred Stock, $.10 par value
On April 10, 1996, Renaissance's then sole stockholder authorized 1,000,000
shares of preferred stock, $.10 par value. Preferred stock may be issued in one
or more series at the discretion of the Board of Directors of Renaissance
(without shareholder 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 Renaissance's common stock.
Preferred Stock, no par value
Renaissance's wholly-owned subsidiary, ARI, was authorized to issue 5,000,000
shares of preferred stock, of which 3,000,000 shares were designated as Series A
Preferred Stock (the "Series A Preferred Stock"). The remaining preferred stock
may have been issued from time to time in one or more additional series at the
discretion of the Board of Directors. Shares of Series A Preferred Stock were
non-redeemable and had a liquidation preference of $.79 per share plus any
declared but unpaid dividends.
51
<PAGE>
Each share of Series A Preferred Stock was convertible into the number of
shares of common stock that results from dividing the conversion price in effect
at the time of conversion into $.79 for each share of Series A Preferred Stock
being converted. The conversion price of the Series A Preferred Stock was
initially $.1084 per share, subject to adjustment for stock splits, dividends,
distributions, and combinations. At June 29, 1996, all shares of Series A
Preferred Stock were convertible into .548856 shares of Renaissance's Common
Stock based on a conversion price of $.1084 per share.
On November 26, 1996, in conjunction with the acquisition of ARI by
Renaissance (see Note 3), all of the outstanding shares of Series A Preferred
Stock were converted into 1,434,160 shares of Common Stock.
RSI Preferred Stock, $.01 par value
Renaissance's wholly-owned subsidiary, RSI authorized 2,000,000 shares, $.01
par value per share preferred stock. RSI's Board of Directors was authorized,
without shareholder approval, to issue such shares of preferred stock in one or
more series, with such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as the Board of Directors may determine.
Stock Split and Authorized Shares
On July 30, 1997, Renaissance's stockholders approved an increase to
99,000,000 in the number of authorized shares of Common Stock of Renaissance. On
February 12, 1998, Renaissance announced a 2-for-1 stock split, effected as a
dividend, on the Common Stock of Renaissance. Shareholders of record on March 2,
1998 will participate in the stock split, which took place on March 24, 1998.
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.
Sale of Common and Preferred Stock
On November 19, 1996, ARI sold 55,000 units to an unrelated investor for net
proceeds of $2,607,000. Each unit consisted of shares of ARI's Series A
Preferred Stock and 1.0978 shares of Renaissance's Common Stock, for a total of
165,000 shares of Series A Preferred Stock and 60,374 shares of Common Stock.
Public Offerings of Common Stock
On June 10, 1996, Renaissance completed its initial public offering for the
sale of 4,460,000 shares of common stock, which included 660,000 shares in
respect of the underwriters' over-allotment option. Renaissance received
$34,498,000 from the sale of the shares, net of the underwriting discounts and
expenses associated with the offering. Additionally, Renaissance had previously
incurred $294,000 of costs related to the initial public offering that were
deferred in previous years which were also charged against the proceeds of the
offering. Net proceeds were used to repay all outstanding indebtedness under
Renaissance's credit facility and certain term loans.
On February 26, 1997, Renaissance completed a secondary public offering for
the sale of 2,468,332 shares of Common Stock, including the reissuance of the
treasury shares acquired in conjunction with the acquisition of SCR (see Note
3). Renaissance received approximately $48,340,000 from the sale of the shares,
net of the underwriting discounts and expenses associated with the offering.
The excess of the cost of the treasury stock over the net reissuance price has
been charged to retained earnings. Net proceeds were used to repay all
outstanding indebtedness under Renaissance's credit facility.
On April 11, 1995, RSI completed its initial public offering of Common Stock,
whereby RSI issued 2,240,000 shares of Common Stock and an additional 1,416,000
shares were sold by existing stockholders of RSI. The net proceeds from the sale
of the shares by RSI were approximately $15,636,000 after deducting offering
expenses of $1,291,000. Approximately $1,872,000 of the net proceeds were used
to repay a note due to Gemini, and $3,426,000 of the net proceeds were used to
repay notes payable to RSI's stockholders incurred by RSI in connection with the
payment of partnership distributions in January and March 1995. Simultaneously
with the closing of the offering RSI also sold warrants to Gemini to acquire
1,018,560 shares of Common Stock.
52
<PAGE>
On May 17, 1996, RSI completed a follow-on public offering, whereby RSI issued
1,443,400 shares of Common Stock and existing shareholders sold 1,036,000 shares
of Common Stock. The net proceeds from the sale of shares by RSI were
approximately $28,263,000, after deducting offering expenses of $225,000.
On November 18, 1996, RSI completed an additional offering. The transaction
included 344,240 shares sold by the Company and 1,679,760 shares sold by
existing shareholders, including shares acquired by Gemini upon exercise of the
Gemini Warrants (below). The net proceeds of the offering were $6,495,000, after
deducting offering expenses of $353,000.
Gemini Warrants
RSI sold two warrants (together, the "Gemini Warrants") to Gemini upon the
closing of RSI's initial public offering for an aggregate purchase price of
$1,600,000. One warrant was exercisable through April 11, 1998 for up to
501,760 shares of Common Stock at an exercise price equal to $8.125 per
share. The second warrant was exercisable through November 1, 1999 for up to
512,000 shares of Common Stock at an exercise price equal to $12.1875 per
share. In November 1996, Gemini exercised the warrants and RSI received
proceeds from the exercise of $10,317,000.
Reorganization of RSI and Partnership Distributions
From December 1, 1993 through April 3, 1995 the business of RSI was conducted
under a limited partnership, Renaissance Strategy Group Limited Partnership
("RSI Partnership"). This partnership was dissolved in April 1995 subsequent to
the conversion of the partnership units into common stock and stock options of
RSI. In January and March 1995, the RSI Partnership declared and made
partnership distributions totaling $3,426,000, evidenced by delivery of RSI's
promissory notes which were paid with proceeds from RSI's initial public
offering. Distributions in excess of earnings were reclassified to paid in
capital pursuant to Securities and Exchange Commission Staff Accounting Bulletin
Topic 4:B.
11. STOCK PLANS
STOCK OPTION PLANS
1996 Stock Plan
This plan, adopted in March 1996, 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 3,200,000 shares of common stock. In January
1997, Renaissance's Board of Directors, subject to stockholder approval which
was received on July 30, 1997, voted to increase the number of shares of Common
Stock authorized under this plan to 7,200,000. In addition, in May 1997 and
December 1997, the Board of Directors authorized a total of 4,000,000 additional
shares of Common Stock available under this plan for non-qualified stock options
to be issued to employees of businesses that Renaissance acquires. 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 Renaissance'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 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
Renaissance's common stock (provided that such shares tendered have been held
for at least six months) or may borrow money from Renaissance 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 ten 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.
53
<PAGE>
1996 Eligible Directors' Stock Plan
This plan authorizes the grant of an option to purchase 40,000 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 Renaissance'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 200,000 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 ten years after the date of grant. The plan will terminate in
March 2006.
In April and May 1996, options to purchase 40,000 shares each of common stock
at an exercise price of $5.50 and $6.50 per share, respectively, were granted
to newly-elected directors.
Transactions under the 1996 Stock Plan and the Eligible Directors' Stock Plan
are summarized as follows:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997 December 27, 1997
Weighted Weighted Weighted
Number of Average Number of Average Number of Average
Options Exercise Options Exercise Options Exercise
Price Price Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period - - 2,390,000 $ 5.61 5,146,050 $13.62
Granted 2,421,500 $5.61 3,168,468 $19.51 3,964,206 $22.28
Exercised - - (175,018) $ 5.83 (59,780) $ 5.70
Canceled (31,500) $5.61 (237,400) $17.35 (438,220) $19.57
---------------------------------------------------------------------------------------
Outstanding at end of period 2,390,000 $5.61 5,146,050 $13.62 8,612,256 $17.37
=======================================================================================
Exercisable at end of year - $ - 315,250 $ 5.85 683,970 $ 5.74
Weighted average fair value of $1.53 $11.44 $13.32
options granted during the period
Options available for future grant 1,010,000 4,078,932 2,552,946
</TABLE>
The following table summarizes information about stock options outstanding at
December 27, 1997 under the 1996 Stock Plan and the 1996 Eligible Director's
Stock Plan:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS AVERAGE
EXERCISE PRICES DECEMBER 27, 1997 CONTRACTUAL LIFE EXERCISE PRICE OF DECEMBER 27, 1997 EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$5.50 - $8.00 2,085,470 8.21 $ 5.64 675,170 $ 5.57
$13.50 - $17.50 1,549,000 9.25 $17.46 3,200 $13.50
$20.38 - $21.00 101,000 9.19 $20.99 800 $20.38
$21.88 - $22.13 3,474,550 9.71 $22.01 4,800 $22.07
$22.63 - $23.32 1,265,236 9.68 $22.74 - -
$24.07 - $26.00 137,000 9.52 $24.89 - -
---------------------------------------------------------------------------------------------
$5.50 - $26.00 8,612,256 9.25 $17.37 683,970 $ 5.74
=============================================================================================
</TABLE>
Options granted to date under these plans are exercisable ratably over a
period of four to five years.
1995 RSI Equity Incentive Plan
In January 1995, RSI's Board of Directors adopted and the stockholders
approved the 1995 Equity Incentive Plan (the "RSI Equity Plan"). Under the
terms of the RSI Equity Plan, the Company is authorized to make awards of
restricted stock and to grant incentive and non-statutory options to employees
of, and consultants and advisors to
54
<PAGE>
the Company to purchase shares of the common stock of the Company. A total of
1,760,000 shares of Common Stock may be issued upon exercise of options granted
or awards made under the RSI Equity Plan. Options granted through December 27,
1997 generally vest in either four or five equal annual installments commencing
on the first anniversary of the optionee's date of hire.
On September 18, 1996, the RSI Board of Directors adopted, and on November 15,
1996, the stockholders of RSI approved an amendment to the 1995 Equity Incentive
Plan increasing the number of shares of Common Stock available for issuance
under the RSI Equity Plan to 3,360,000.
1995 RSI Director Stock Option Plan
In January 1995, the RSI Board of Directors adopted and the RSI stockholders
approved the 1995 Director Stock Option Plan (the "RSI Director Plan"), which
became effective on the closing of RSI's initial public offering. Under the
terms of the RSI Director Plan, the directors of RSI who are not employees of
the Company are eligible to receive non-statutory options to purchase shares of
Common Stock. A total of 80,000 shares of Common Stock may be issued upon
exercise of options granted under the RSI Director Plan. Options to purchase
40,000 shares of Common Stock have been granted to the two eligible directors.
The exercise price of options granted under the RSI Director Plan was equal to
the closing price of the Common Stock on the date of grant.
A summary of activity under the RSI Equity Plan and RSI Director Plan is as
follows:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997 December 27, 1997
Weighted Weighted Weighted
Number of Average Number of Average Number of Average
Options Exercise Options Exercise Options Exercise
Price Price Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 1,182,908 $ 7.13 1,856,952 $13.95 2,154,558 $18.09
Elimination of duplicate activity
from July to December (376,368)
Granted 1,150,400 18.34 1,588,678 21.38 440,876 23.88
Exercised (273,940) 6.61 (405,706) 6.86 (31,574) 12.44
Canceled (202,416) 6.61 (508,998) 8.47 (251,706) 21.96
---------------------------------------------------------------------------------------
Outstanding at end of period 1,856,952 $13.95 2,154,558 $18.09 2,312,154 $18.85
=======================================================================================
Exercisable at end of year 163,638 $ 7.69 159,968 $ 9.80 164,240 $11.12
Weighted average fair value of
options granted during the period $10.04 $12.50 $13.97
Options available for future grant 1,583,048 1,028,090 927,814
</TABLE>
The following table summarizes information about stock options outstanding at
December 27, 1997 under the RSI Equity Plan and RSI Director Plan:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF EXERCISE OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS AVERAGE
PRICES DECEMBER 27, 1997 CONTRACTUAL LIFE EXERCISE PRICE OF DECEMBER 27, EXERCISE PRICE
1997
<S> <C> <C> <C> <C> <C>
$5.00 - $8.91 426,454 7.59 $ 7.58 84,366 $ 6.77
$9.22 - $12.82 131,956 7.85 11.75 34,546 11.75
$14.22 - $15.82 401,166 8.98 15.73 992 14.52
$16.25 - $17.97 132,472 8.62 16.98 26,184 16.96
$18.28 - $20.94 48,160 8.55 18.95 8,820 18.94
$21.02 - $22.94 231,196 9.58 22.86 1,332 22.38
$23.13 - $25.00 452,282 9.17 23.87 6,400 23.86
$25.39 - $27.97 488,468 9.19 27.12 1,600 26.09
---------------------------------------------------------------------------------------
$5.00 - $27.97 2,312,154 8.77 $18.85 164,240 $11.12
=======================================================================================
</TABLE>
55
<PAGE>
SCR Option
On April 1, 1993, SCR granted a non-qualifying stock option to a key employee
to purchase 96,286 shares of common stock at an exercise price of $0.00365 per
share. The option had a nine-year vesting period, subject to acceleration for
certain events (such as the sale, merger or liquidation of SCR, or an initial
public offering), and an expiration date of April 1, 2002. Compensation expense
of $281,000, which represented the excess of the estimated fair value of the
stock on the date of grant over the exercise price, was being recognized over
the nine-year vesting period. The unrecognized portion of the compensation
expense was recorded as a reduction of stockholders' equity in the accompanying
balance sheet. Effective November 27, 1996, the stock option was exercised in
accordance with the acceleration clause of the option agreement in connection
with the acquisition of SCR by Renaissance as described in Note 3, and the
remaining unamortized balance of deferred stock compensation of $164,000 was
recorded as expense at that time.
1994 ARI Stock Plan
In 1994, ARI adopted the 1994 Stock Option Plan (the "1994 ARI Plan"), under
which 823,284 shares of common stock were reserved for issuance to eligible
employees, directors and consultants upon the exercise of stock options. ARI
also had outstanding options to purchase 14,818 shares of common stock and
27,000 shares of Series A Preferred Stock which were granted prior to the
adoption of the 1994 ARI Plan. Stock options were granted at prices determined
by ARI's former Board of Directors and generally may not be less than 100% and
85%, for incentive and nonstatutory options, respectively, of the estimated fair
value of the related shares on the date of grant. Options granted under the
1994 ARI Plan are for a period not to exceed ten years, are exercisable
beginning generally one year after the date of grant and vest ratably over a
maximum period of five years following the date of grant.
Options which expire or are canceled shall become available for reissuance
under the 1994 ARI Plan. The 1994 ARI Plan provides for an unvested share
repurchase option on behalf of ARI. In the event an optionee ceases to be
eligible under the 1994 ARI Plan for any reason, shares acquired through the
exercise of an option which have not yet vested may be repurchased by ARI at the
higher of the option exercise price or the value of the stock being purchased on
the date of termination. All stock options granted to ARI's former management
employees fully vested in the event of a change of control, as defined by the
ARI Board of Directors.
Renaissance does not intend to grant any further options under the 1994 ARI
Plan.
Transactions under the 1994 ARI Plan are summarized as follows:
<TABLE>
<CAPTION>
June 24, 1995 June 29, 1996
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Options Price Options Price
<S> <C> <C> <C> <C>
Outstanding at beginning of period 302,970 $0.08 376,516 $0.12
Elimination of duplicated activity
from July to December 1,646 $0.12
Granted 197,588 $0.12 82,328 $0.12
Exercised (67,508) $0.03 (37,870) $0.12
Canceled (56,534) $0.04 (1,648) $0.12
Conversion of Series A Preferred
Stock options to Common Stock
options - - - -
--------------------------------------------------------
Outstanding at end of period 376,516 $0.12 420,972 $0.12
========================================================
Exercisable at end of year 65,534 $0.10 94,098 $0.10
Weighted average fair value of
options granted during the period $0.01 $0.01
Options available for future grant 474,212 391,884
</TABLE>
<TABLE>
<CAPTION>
June 28, 1997 December 27, 1997
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Options Price Options Price
<S> <C> <C> <C>
Outstanding at beginning of period 420,972 $0.12 548 $0.12
Elimination of duplicated activity - - - -
from July to December
Granted - - - -
Exercised (435,242) $0.14 (548) $0.12
Canceled - - - -
Conversion of Series A Preferred
Stock options to Common Stock
options 14,818 $0.66 - -
------------------------------------------------------
Outstanding at end of period 548 $0.12 - -
======================================================
Exercisable at end of year 548 $0.12 - -
Weighted average fair value of
options granted during the period - -
Options available for future grant 391,884 391,884
</TABLE>
56
<PAGE>
ARI also had options to purchase 27,000 shares of Series A Preferred Stock
outstanding at June 24, 1995 and June 29, 1996. On November 26, 1996, in
conjunction with the acquisition of ARI by Renaissance, all options to purchase
Series A Preferred Stock were converted into options to purchase 14,818 shares
of Common Stock. Additionally, all options outstanding under the 1994 ARI Plan
vested upon the date of the acquisition.
1991 Hunter Employee Non-qualified Stock Option Plan
In 1991, Hunter adopted the 1991 Employee Non-Qualified Stock Option Plan (the
"Hunter Employee Non-Qualified Stock Option Plan") to provide long term
performance incentives to Hunter employees. All options granted are non-
qualified options. The Hunter Board of Directors determines the option price,
which may be different than the fair market value of the Common Stock at the
date of option grant. Hunter has reserved 1,990,860 shares for issuance under
the Hunter Employee Non-Qualified Stock Option Plan. Options vest and expire as
determined at the grant date by the Hunter Board of Directors, provided that no
options may be exercised later than ten years after the grant of the option.
A summary of activity under the Hunter Employee Non-Qualified Stock Option
Plan is as follows:
<TABLE>
<CAPTION>
June 29, 1996 June 28, 1997 December 27, 1997
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 600,722 $0.23 875,899 $0.40 926,865 $ 0.60
Addition of activity from January -
to June 1997 - - - 248,559 11.00
Granted 275,177 $0.77 178,122 1.41 15,927 20.88
Exercised - - (18,913) 0.71 - -
Canceled - - (108,243) 0.81 (14,095) 11.00
---------------------------------------------------------------------------------------
Outstanding at end of period 875,899 $0.40 926,865 $0.60 1,177,256 $ 2.87
=======================================================================================
Exercisable at end of year 600,722 $0.24 709,463 $0.43 838,220 $ 1.21
Weighted average fair value of
options granted during the period $1.03 $1.85 $21.63
Options available for future grant
1,114,961 1,045,082 794,691
</TABLE>
The following table summarizes information about stock options outstanding at
December 27, 1997 under the Hunter Employee Non-Qualified Stock Option Plan:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AS OF CONTRACTUAL LIFE EXERCISE AS OF DECEMBER 27, EXERCISE
PRICES DECEMBER 27, PRICE 1997 PRICE
1997
<S> <C> <C> <C> <C> <C>
$0.21 - $0.99 835,305 2.87 $ 0.40 710,866 $ 0.32
$1.14 - $1.99 91,560 6.50 $ 1.74 67,788 $ 1.92
$11.00 - $20.88 250,290 3.78 $11.63 59,566 $11.00
----------------------------------------------------------------------------------
1,177,155 3.35 2.75 838,220 2.72
==================================================================================
</TABLE>
57
<PAGE>
A former officer of Hunter exercised options to purchase 18,913 shares of
Common Stock in October 1996. Upon ceasing employment, Hunter promised to pay
this individual $113,000 instead of issuing shares. This promise was evidenced
in January 1997 by a $113,000 non-interest bearing note (see Note 8). The amount
of the note, which is included as compensation expense, was based on Hunter's
estimate of fair market value of the underlying stock at the time of his
exercise.
Shares Reserved for Future Issuance
A total of 16,305,869 shares of Renaissance Common Stock has been reserved for
issuance under Renaissance's various stock plans at December 27, 1997.
STOCK PURCHASE PLANS
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 Renaissance's common stock. An aggregate of
600,000 shares of common stock has been reserved for issuance under this plan.
In December 1997, the stockholders approved an additional 600,000 shares of
Common Stock to be reserved under the Plan. The plan permits eligible employees
to purchase up to 400 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. For the June 1996, January 1997 and July 1997
offerings, employees were eligible to participate if they have been employed by
Renaissance for at least eighteen months. Commencing with the January 1998
offering, employees are eligible to participate upon employment by Renaissance.
Shares are purchased at 85% of the lower of the fair market value of
Renaissance'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 commenced on June 5,
1996, the effective date of the registration statement covering Renaissance's
initial public offering. 56,178 and 46,510 shares of Common Stock were issued
under this plan during the year ended June 28, 1997 and the six month period
ended December 27, 1997, respectively at an issuance price of $7.23 and $19.55,
respectively. The plan will terminate in March 2006.
1995 RSI Employee Stock Purchase Plan
In January 1995, RSI's Board of Directors adopted and the shareholders
approved the 1995 Employee Stock Purchase Plan (the "RSI Purchase Plan"), which
became effective on the closing of RSI's initial public offering. The RSI
Purchase Plan authorizes the issuance of up to a total 720,000 shares of Common
Stock to participating employees. Under the terms of the RSI Purchase Plan, the
purchase price is an amount equal to 85% of the fair market value per share of
the Common Stock on either the first day or the last day of the offering period,
whichever is lower. 67,432 shares, 55,245 shares and 27,160 shares were issued
under the RSI Purchase Plan during the years ended June 29, 1996, June 28, 1997
and the six months ended December 27, 1997 at a weighted average price of $9.16,
$13.21, and $24.57, respectively. The weighted average fair value of the 1996,
1997, and December 1997 awards under the RSI Purchase Plan were $1.61, $4.77,
and $11.79, respectively.
Accounting Treatment
Renaissance applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. Compensation is
recognized for the difference between the exercise price of options granted and
the estimated fair value of the related shares on the date of grant, and is
recorded over the vesting period. No compensation was recorded on grants made in
any of the three years in the period ended June 28, 1997 or in the six month
period ended December 27, 1997. Amortization of compensation expense totaled
$31,000, $31,000, $494 and $750,000 in the years ended June 24, 1995, June 29,
1996 and June 28, 1997 and in the six months ended December 27, 1997,
respectively. The benefit of tax deductions associated with the exercise of non-
qualified stock options in excess of the amount of compensation recorded for
financial reporting purposes is recorded as a credit to additional paid-in
capital.
In October 1995, the FASB issued Statement of Financial Accounting Standards
123 ("SFAS 123") "Accounting for Stock-Based Compensation", SFAS 123 is
effective for periods beginning after December 15, 1995. SFAS 123 requires that
companies either recognize compensation expense for grants of stock options and
other equity instruments based on fair value, or provide pro forma disclosure of
net income and earnings per share in the notes to the financial statements.
Renaissance adopted the disclosure provisions only of SFAS 123 in fiscal 1997.
Had compensation cost of Renaissance's stock-based compensation plans been
determined based on the fair value at the grant dates as calculated in
accordance with SFAS 123. Renaissance's pro forma net income and
58
<PAGE>
earnings per share for the years ended June 29, 1996, and June 28, 1997 and the
six months ended December 27, 1997 would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
As Reported Pro Forma
Six Months Six Months
Year Ended Year Ended Ended Year Ended Year Ended Ended
June 29, June 28, December June 29, June 28, December
1996 1997 27, 1997 1996 1997 27, 1997
<S> <C> <C> <C> <C> <C> <C>
Net Income $8,003 $14,560 $(5,969) $6,212 $8,148 $(15,695)
Net Income
per Share-
Basic $ 0.20 $ 0.31 $ (0.12) $ 0.16 $ 0.17 $ (0.31)
Net Income
per Share-
Diluted $ 0.19 $ 0.29 $ (0.12) $ 0.15 $ 0.16 $ (0.31)
</TABLE>
Because options vest over several years and this pro forma disclosure only
reflects grants made in the last three fiscal periods, the effects of applying
SFAS 123 in this pro forma disclosure are not likely to be representative of the
effects on reported net income for future years.
The fair market value of each stock option granted during the year ended June
29, 1996 was estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions: an expected life of 3-4 years,
expected volatility of 0% for Hunter and Renaissance (pre IPO Periods and 62%
for RSI%, a dividend yield of 0% and risk-free interest rates of 5.8 to 6.4%.
The fair market value of each stock option granted during the year ended June
28, 1997 was estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions: an expected life of 3-5 years, expected
volatility of 43% to 62%, a dividend yield of 0% and risk-free interest rates of
6.3%. The fair market value of each stock option granted during the six months
ended December 27, 1997 was estimated using the Black-Scholes option-pricing
model with the following weighted-average assumptions: an expected life of 5.25
years, expected volatility of 45%, a dividend yield of 0% and risk-free interest
rates of 6.2%.
The fair market value of offerings under the Renaissance stock purchase plan
was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions: an expected life of .5 years,
expected volatility of 43.5%, a dividend yield of 0%, and risk-free interest
rates of 6% in the fiscal years ended June 29, 1996, June 28, 1997 and the six
months ended December 27, 1997.
The fair market value of offerings under the RSI stock purchase plan was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions: an expected life of .5 years,
expected volatility of 62% in fiscal 1996, fiscal 1997, and the six months ended
December 27, 1997, a dividend yield of 0% for all periods, and risk-free
interest rates of 5.63% in the fiscal 1996, 5.27% in fiscal 1997 and 6.0% in the
six months ended December 27, 1997.
12. COMMITMENTS AND CONTINGENCIES
Operating Leases
Renaissance occupies premises under various noncancelable operating leases
which include terms requiring Renaissance to pay a pro-rata portion of increased
operating expenses and real estate taxes. The leases expire on various dates
through October, 2007, and certain of the leases contain options for renewal of
purchase of related equipment.
In January, 1993, TRI entered into a three year lease with a real estate trust
of which the president and significant shareholder of Renaissance is the sole
beneficiary (the "Trust"), which required annual rental payments of $120,000,
payable in equal monthly installments of $10,000. This lease continued to be
amended upon subsequent expansions of the leased area and currently requires
annual payments of $531,000 payable in equal monthly installments of $44,000.
The amended lease term is September 2010. In conjunction with the amendment
59
<PAGE>
of the lease in September 1995, Renaissance began to consolidate the accounts of
the Trust on a prospective basis (see Note 15).
Rent expense for the years ended June 24, 1995, June 29, 1996 (excluding
amounts paid to the Trust after September 19, 1995), and June 28, 1997 and the
six months ended December 27, 1997 was $3,453,000, $4,574,000 $5,855,000 and
$4,650,000, respectively.
Future minimum payments under non-cancelable leases at December 27,
1997 are as follows, excluding amounts payable to the Trust:
<TABLE>
<CAPTION>
OPERATING LEASES CAPITAL LEASES
<S> <C> <C>
1998 $10,160,000 $105,000
1999 8,567,000 39,000
2000 5,629,000
2001 4,519,000
2002 2,893,000
Thereafter 6,024,000
----------- ------------
Total minimum lease payments $37,792,000 144,000
===========
Less - amount representing interest 15,000
------------
Present value of obligations under capital leases $129,000
============
</TABLE>
The cost and accumulated amortization of assets, primarily for office
equipment and software, under capital leases are as follows:
<TABLE>
<CAPTION>
JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C>
Cost $510,000 $ 681,000 $176,000
Accumulated amortization (93,000) (198,000) (59,000)
-------- --------- --------
$417,000 $ 483,000 $117,000
======== ========= ========
</TABLE>
13. EMPLOYEE BENEFIT PLANS
Renaissance provides employee retirement savings plans under Section 401(k) of
the Internal Revenue Code which cover substantially all employees. Under the
terms of the plans, employees may contribute a percentage of their salary up to
a maximum of 10%-20% which is then invested in one or more of several mutual
funds selected by the employee. Renaissance may make contributions to the
Renaissance plan at their discretion; such contributions totaled $309,000,
$562,500, $593,000 and $460,000 for the years ended June 24, 1995, June 29,
1996, and June 28, 1997 and the six months ended December 27, 1997,
respectively.
14. FINANCIAL INSTRUMENTS
Renaissance 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 Renaissance's financial instruments, which include
marketable securities (see Note 5), accounts receivable, notes receivable, line
of credit, accounts payable, accrued salaries and wages, other accrued expenses,
income taxes payable and long-term debt approximate their fair values at
June 29, 1996, June 28, 1997 and December 27, 1997.
15. CONSOLIDATION OF REAL ESTATE TRUST
As described in Note 12, Renaissance leases office space from a real estate
trust, of which the president and significant stockholder of Renaissance is the
sole beneficiary and an officer of Renaissance is the trustee. Effective
September 19, 1995, Renaissance renegotiated its lease with the Trust in
conjunction with a refinancing of the
60
<PAGE>
Trust's mortgage. The modified lease terms expanded the amount of space which
Renaissance occupies, committed Renaissance to rent the facility through the
maturity date of the mortgage loan, and granted Renaissance 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, Renaissance obtained significant control over
the operations of the Trust and assumed a significant portion of the Trust's
obligations. As a result, Renaissance 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)
Notes payable to Renaissance (365,000)
Mortgage loans payable (1,461,000)
------------
$ (111,000)
============
</TABLE>
16. LEGAL SETTLEMENT
In August 1996, ARI received a settlement of $1,625,000 from its insurance
company for payment of defense costs and certain expenses associated with a
previous intellectual property rights matter. This amount, net of related
expenses, has been included in interest and other income in the accompanying
consolidated statement of income.
17. SEGMENT INFORMATION
In the six months ended December 27, 1997, upon the acquisitions of RSI and
Hunter, the Company reorganized the operations under three operating segments:
Strategy, Solutions, and Services. The following represents the revenue and
operating income of each of these segments for the years ended June 24, 1995,
June 29, 1996 and June 28, 1997 and the six months ended December 27, 1997:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
JUNE 24, 1995 JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C> <C>
Revenue:
Strategy $ 22,601 $ 34,785 $ 45,329 $ 37,043
Solutions 24,461 39,868 73,548 69,825
Services 153,171 214,229 309,381 179,069
-------- -------- -------- --------
TOTAL $200,233 $288,882 $428,258 $285,937
======== ======== ======== ========
Income from operations
(excluding acquisition
costs):
Strategy $ 5,157 $ 7,437 $ 6,147 $ 6,896
Solutions 2,342 33 6,212 634
Services 5,591 11,878 21,966 12,621
-------- -------- -------- --------
TOTAL 13,090 19,348 34,325 20,151
Acquisition-related expenses - 3,524 8,268 17,961
Interest and other income
(expense), net (693) (605) 3,740 (394)
-------- -------- -------- --------
Income before taxes $ 12,397 $ 15,219 $ 29,797 $ 1,796
======== ======== ======== ========
Identifiable Assets:
Strategy $ 18,135 $ 59,182 $ 77,482 $ 99,361
Solutions 9,185 23,179 30,697 59,275
Services 37,873 54,101 102,281 133,888
Corporate Assets 4,890 17,910 28,675 5,867
-------- -------- -------- --------
TOTAL $ 70,083 $154,372 $239,135 $298,391
======== ======== ======== ========
</TABLE>
61
<PAGE>
Geographic Information
The following represent the revenue and operating income by geographic area
for the years ended June 24, 1995, June 29, 1996, and June 28, 1997 and the six
months ended December 27, 1997 and the identifiable assets by geographic area as
of these dates:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
JUNE 24, 1995 JUNE 29, 1996 JUNE 28, 1997 DECEMBER 27, 1997
<S> <C> <C> <C> <C>
Revenue:
North America $196,679 $282,450 $404,907 $259,005
Europe 3,554 6,432 22,671 25,231
Other - - 680 1,701
-------- -------- -------- --------
TOTAL $200,233 $288,882 $428,258 $285,937
======== ======== ======== ========
Income from
operations
(excluding
acquisition-related
expenses):
North America $ 12,560 $ 19,126 $ 30,749 $ 17,774
Europe 530 222 3,383 3,088
Other - - 193 (711)
-------- -------- -------- --------
TOTAL 13,090 19,348 34,325 20,151
Acquisition-
related expenses - 3,524 8,268 17,961
Interest and other
income (expenses),
net (693) (605) 3,740 (394)
-------- -------- -------- --------
Income before taxes $ 12,397 $ 15,219 $ 29,797 $ 1,796
-------- -------- -------- --------
Identifiable assets:
North America $ 64,250 $135,137 $192,105 $273,067
Europe 943 1,325 18,288 20,176
Other - - 67 (719)
Corporate assets 4,890 17,910 28,675 5,867
-------- -------- -------- --------
TOTAL $ 70,083 $154,372 $239,135 $298,391
-------- -------- -------- --------
</TABLE>
Corporate assets represent marketable securities invested for all regions. All
other assets are used in the operations of individual entities in the different
segments and geographical areas.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
62
<PAGE>
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT
The information required by this Item is included in Item 1 of this report or
will be included under the captions "Election of Class III Director--Nominee,"
"Election of Class III Director--Other Directors," "Election of Class III
Director--Board Of Directors and Committees," and "Election of Class III
Director--Director Compensation" and "Section 16(a) Beneficial ownership
Reporting Compliance" in the Proxy Statement, and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included under the captions
"Executive Compensation--Summary Compensation Table," "Executive
Compensation--Option Grants in Last Fiscal Year," "Executive Compensation--
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values" and "Executive Compensation--Employment Agreements" in the Proxy
Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be included under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be included under the caption
"Certain Relationships and Related Transactions" in the Proxy Statement and is
incorporated herein by reference.
63
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The financial statements and financial statement schedules filed under
Item 8 as part of this report.
Listed below are all Exhibits filed as part of this Report. Certain Exhibits
are incorporated herein by reference to The Registry's Registration Statement on
Form S-1 (File No. 333-03366), The Registry's Registration Statement on Form S-4
(File No. 333-29755) and RSI's Registration Statement on Form S-1 (File No. 33-
89524).
64
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- --------- ------------------------- ------
<C> <S> <C>
3.1(1) Articles of Organization of Registrant, as amended through
April 11, 1996.
3.2(1) Restated Articles of Organization of Registrant, as filed
in Massachusetts on May 13, 1996.
3.3 Articles of Amendment to Restated Articles of Organization,
filed in Massachusetts on July 30, 1997.
3.4 Articles of Amendment to Restated Articles of Organization,
as filed in Massachusetts on January 7, 1998.
3.5 By-Laws of Registrant, as amended and restated on
November 20, 1997.
4.1(1) Articles 3, 4, 5, and 6 of the Articles of Organization of
Registrant (included in Exhibit 3.2).
4.2 Specimen Stock Certificate.
10.1(1) Leases dated September 19, 1995 between the 189 Wells Avenue
Realty Trust and the Registrant 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.*
10.4(1) Registrant's 1996 Eligible Directors' Stock Plan.*
10.5(1) Accounts Receivable Management and Security Agreement dated
as of February 29, 1996 by and among BNY Financial
Corporation and each of the Registrant, America's
Registry, Inc. and The Registry, Inc. Network Consulting
Practice.
10.6(1) Employment Agreement dated May 1996 between Registrant and
G. Drew Conway.*
10.7(1) Amended and Restated Promissory Note dated May 30, 1996,
payable to Registrant by G. Drew Conway.
10.8(1) Amended and Restated Promissory Note dated May 30, 1996,
payable to Registrant by the 189 Wells Avenue Realty Trust.
10.8(2) Lease Agreement by and between Ladylin Properties Limited
Partnership and RSI, Inc., dated as of November 1, 1993,
as amended.
</TABLE>
65
<PAGE>
<TABLE>
<C> <S> <C>
10.10(3) Registration Rights Agreement dated as of May 19, 1997
among David A. Lubin, Harry M. Lasker, O. Bruce Gupton
and Melissa E. Norton.
10.11 Amendment to Accounts Receivable Management and Security
Agreement with BNY Financial Corporation.
10.12 Registration Rights Agreement, dated as of November 26,
1997, by and among, The Registrant, Terry L. Hunter,
and William M. Mercer Incorporated.
21 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Graves, McKenna, Lundeen & Almquist, P.L.L.P.
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule -- December 27, 1997.
27.2 Restated Financial Data Schedule -- June 28, 1997.
27.3 Restated Financial Data Schedule -- June 29, 1996
27.4 Restated Financial Data Schedule -- June 24, 1995
</TABLE>
- --------------
* Denotes management contract or compensation arrangements.
(1) Filed as an Exhibit to The Registry's Registration Statement on Form S-1
(File No. 333-03366) and incorporated by reference herein.
(2) Filed as an Exhibit to RSI's Registration Statement on Form S-1 (33-89524)
(3) Filed as an Exhibit to The Registry's Registration Statement on Form S-4
(333-29755) and incorporated by reference herein.
(b) Three Current Reports on Form 8-K have been filed during the quarter
ended December 27, 1997. On December 5, 1997, the Company reported under Item 8
the change in its fiscal year from the last Saturday in June to the last
Saturday in December. On December 11, 1997, the Company reported under Item 2
the acquisition of The Hunter Group, Inc. as of November 26, 1997. On December
12, 1997, the Company amended the December 11, 1997 report on Form 8-K to
include consolidated cash flows, which were omitted from the December 11, 1997
report on Form 8-K.
66
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Renaissance Worldwide, Inc.
Date: March 26, 1998
By: /s/ G. Drew Conway
---------------------------------
G. DREW CONWAY
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:
SIGNATURES CAPACITY DATE
---------- -------- ------
/s/ G. Drew Conway
- ------------------------- President, Chief Executive March 26, 1998
G. DREW CONWAY Officer and Chairman of the
Board of Directors (Principal
Executive Officer)
/s/ Robert E. Foley
- ------------------------- Chief Financial Officer and March 26, 1998
ROBERT E. FOLEY Treasurer (Principal Financial
and Accounting Officer)
/s/ Robert P. Badavas
- ------------------------- Director March 26, 1998
ROBERT P. BADAVAS
/s/ Paul C. O'Brien
- ------------------------- Director March 26, 1998
PAUL C. O'BRIEN
67
<PAGE>
SCHEDULE II
RENAISSANCE WORLDWIDE, 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 June 24, 1995.......... $ 536 $ 553 $0 $ 263 $ 826
Year ended June 29, 1996.......... 826 1,190 0 686 1,330
Year ended June 28, 1997 (1)...... 903 1,314 0 434 1,783
Six months ended
December 27, 1997 (2)........... 2,117 3,090 0 1,820 3,387
</TABLE>
(1)Beginning balance adjusted to reflect change in fiscal year end of RSI.
(2)Beginning balance adjusted to reflect change in fiscal year end of Hunter.
S1
<PAGE>
EXHIBIT 3.3
NO.____________
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
G. Drew Conway
We, ________________________________________________________________, *President
Robert E. Foley
and ____________________________________________________________________, *Clerk
The Registry, Inc.
of ____________________________________________________________________________,
(Exact name of corporation)
189 Wells Avenue, Newton, MA 02159
located at ____________________________________________________________________,
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article III
________________________________________________________________________________
Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization July 30 97
were duly adopted at a meeting held on _____________, 19 ____, by vote of:
12, 755,739 Common Stock 14,150,704
____________ shares of _______________________ of __________ shares outstanding
(type, class & series,
if any)
____________ shares of _______________________ of ______ shares outstanding, and
(type, class & series,
if any)
____________ shares of _______________________ of __________ shares outstanding
(type, class & series,
if any)
1**being at least a majority of each type, class or series outstanding and
entitled to vote thereon:
*Delete the inapplicable words. **Delete the inapplicable clause.
1 For amendments adopted pursuant to Chapter 156B, Section 70.
2 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more than
one article may be made on a single sheet so long as each article requiring each
addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: 49,000,000 Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $0.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: 99,000,000 Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $0.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: ____________________________.
30th July 97
SIGNED UNDER THE PENALTIES OF PERJURY, this ______ day of ___________, 19 ____.
/s/ C. Drew Conway
____________________________________________________________________, *President
C. Drew Conway
/s/ Robert E. Foley
________________________________________________________________________, *Clerk
Robert E. Foley
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
================================================================================
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $50,000 having been paid, said articles are deemed to have been filed
with me this 31st day of July 1997.
Effective date: ________________________________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILED IN BY CORPORATION
Photocopy of document to be sent to:
Cynthia A. Bacon, Senior Paralegal
Ropes & Gray
- --------------------------------------------------------------------------------
One International Place
- --------------------------------------------------------------------------------
Boston, MA 02110-2624
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.4
/s/ [SIGNATURE APPEARS HERE]
- -------------------------------
Examiner
/s/ [SIGNATURE APPEARS HERE]
- -------------------------------
Name
Approved
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, G. Drew Conway , *President/
---------------------------------------------
and Richard L. Bugley , *Clerk/
---------------------------------------------
of The Registry, Inc.
----------------------------------------------------------------------------
(Exact name of corporation)
located at 189 Wells Avenue, Newton, Massachusetts 02159
-------------------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article I
- -------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on December
--------
30 , 1997, by vote of:
- --------- --
22,010,142 shares of Common Stock of 25,037,962 shares outstanding.
- ---------- ------------------------ ----------
(type, class & series, if any)
shares of of shares outstanding, and
- ---------- -------------------- ----------
(type, class & series, if any)
shares of of shares outstanding.
- ---------- -------------------- ----------
(type, class & series, if any)
/1/** being at least a majority of each type, class or series outstanding and
entitled to vote thereon:/
*Delete the inapplicable words. **Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B, Section 70.
/2/ For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 X
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article requiring
each addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
That, in connection with the change of the Corporation's name from The Registry,
Inc. to Renaissance Worldwide, Inc., the Corporation's Restated Articles of
Organization, as amended, be further amended by striking out Article I in its
entirety and inserting in lieu thereof the following:
1. The name by which the corporation shall be known is:
Renaissance Worldwide, Inc.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B. Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date:_______________________________________
SIGNED UNDER THE PENALTIES OF PERJURY, this 5th day of January, 1998
/s/ G. Drew Conway
__________________________________________________________,*President
G. Drew Conway
/s/ Richard L. Bugley
__________________________________________________________,*Clerk
Richard L. Bugley
* Delete the inapplicable words.
<PAGE>
[STAMP APPEARS HERE]
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
===========================================
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $200.00 having been paid, said articles are deemed to have been filed
with me this 7th day of January 1998.
Effective date: _______________________________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Cynthia A. Bacon, Senior Paralegal
------------------------------------
Ropes & Gray, One International Pl.
------------------------------------
Boston, MA 02110-2624
------------------------------------
<PAGE>
EXHIBIT 3.5
Adopted effective November 20, 1997
RENAISSANCE WORLDWIDE, INC.
SECOND 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
<PAGE>
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 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.
-2-
<PAGE>
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
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.
-3-
<PAGE>
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.
-----------------------------------------------------
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.
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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 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.
-7-
<PAGE>
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 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 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
-8-
<PAGE>
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 merger. The Board of Directors may decide the manner
-9-
<PAGE>
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
-10-
<PAGE>
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 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.
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<PAGE>
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 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.
-12-
<PAGE>
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 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
-13-
<PAGE>
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 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
-14-
<PAGE>
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 December.
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-
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<PAGE>
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.
-16-
<PAGE>
EXHIBIT 4.2
[RENAISSANCE LOGO]
NUMBER SHARES
- ---------------- RENAISSANCE WORLDWIDE, INC. ---------------
REGI
- ---------------- ---------------
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MA OR NEW YORK, NY
- --------------------------------------------------------------------------------
This Certifies that
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES, NO PAR VALUE PER SHARE,
OF THE COMMON STOCK OF
RENAISSANCE WORLDWIDE, INC. transferable upon the books of the Corporation in
person or by attorney upon surrender of this Certificate properly endorsed or
assigned. This Certificate and the shares represented hereby are subject to the
laws of the Commonwealth of Massachusetts and to the provisions of the Articles
of Organization and the By-Laws of the Corporation as from time to time to
amended. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ [SEAL] /s/
CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER
AND TREASURER AND PRESIDENT
<PAGE>
RENAISSANCE WORLDWIDE, INC.
The Corporation is authorized to issue more than one class of stock. A
statement of the powers, designations, preferences and relative participating,
optional or other special rights of each class and series of stock and the
qualifications, limitations or restrictions thereon will be provided without
charge to each stockholder upon request to the Corporation.
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:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ____________ Custodian _______________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act __________________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
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
INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------ Shares
of the capital 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 Corporation
with full power of substitution in the premises.
Dated, ______________________ ___________________________________________
NOTICE: The signature to this assignment
nust 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 GURANTEED BY AN ELIGIBLE
GURANTOR INSTITUTION (BANKS, STOCKBROKERS, 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>
EXHIBIT 10.2
RENAISSANCE WORLDWIDE, INC.
1996 STOCK PLAN
1. Purpose. The purpose of this 1996 Stock Plan (the "Plan") is to advance
-------
the interests of Renaissance Worldwide, Inc., a Massachusetts corporation (the
"Company"), by strengthening the ability of the Company to attract, retain and
motivate key employees, officers and consultants of or to the Company or any
present or future parent or subsidiary of the Company (the "Company Group") by
providing them with an opportunity to purchase or receive as bonuses stock of
the Company and thereby permitting them to share in the Company's success. It
is intended that this purpose will be effected by granting (i) incentive stock
options ("Incentive Options") which are intended to qualify under the provisions
of Section 422 of the Internal Revenue Code of 1986, as heretofore and hereafter
amended (the "Code"), and non-statutory stock options ("Nonqualified Options")
which are not intended to meet the requirements of Section 422 of the Code and
which are intended to be taxed under Section 83 of the Code (both Incentive
Options and Nonqualified Options shall be collectively referred to as
"Options"), (ii) stock purchase authorizations ("Purchase Authorizations") and
(iii) stock bonus awards ("Bonuses").
2. Effective Date. This Plan was adopted by the Board of Directors of the
--------------
Company (the "Board") on March 6, 1996 and approved by the sole stockholder of
the Company on March 22, 1996 (the "effective date" of the Plan). On January 9,
1997, the Board of Directors of the Company voted to amend the Plan by
increasing the number of shares that may be made subject to Options, Purchase
Authorization or Bonuses by 2,000,000 shares, subject to stockholder approval.
On May 7, 1997, the Board of Directors further amended the Plan by authorizing
an additional 1,000,000 shares to be made exclusively subject to Nonqualified
Options and to be issued only to employees of or consultants to businesses
acquired by the Company or the Company Group.
3. Stock Covered by the Plan. Subject to adjustment as provided in Sections
-------------------------
9 and 10 below, and further subject to stockholder approval as noted in Section
2 above, the shares that may be made subject to Options, Purchase Authorizations
or Bonuses under this Plan (the "Unrestricted Shares") shall not exceed in the
aggregate 3,600,000 shares of the common stock, without par value, of the
Company ("Company Stock") and the number of shares that may be made exclusively
subject to Nonqualified Options under the Plan (the "Restricted Shares and
together with the Unrestricted Shares, the "Shares") and to be issued only to
employees of businesses acquired by the Company or the Company Group shall not
exceed in the aggregate 1,000,000 shares of Company Stock (for an aggregate
number of Shares of 4,600,000 available under the Plan). Any Shares subject to
an Option or Purchase Authorization which for any reason expires or is
terminated unexercised as to such Shares and any Shares reacquired by the
Company pursuant to forfeiture or a repurchase right hereunder may again be the
subject of an Option, Purchase Authorization or Bonus under the Plan; provided,
that Unrestricted Shares may only again be subject to an Option, Purchase or
Bonus under the Plan as permitted herein and that Restricted
<PAGE>
Shares may only again be subject to Nonqualified Options as permitted herein.
The Shares purchased pursuant to Purchase Authorizations or the exercise of
Options under this Plan or issued as Bonuses may, in whole or in part, be either
authorized but unissued Shares or issued Shares reacquired by the Company.
4. Administration. This Plan shall be administered by the Board, whose
--------------
construction and interpretation of the Plan's terms and provisions shall be
final and conclusive. The Board shall have authority, subject to the express
provisions of the Plan, to construe the Plan and the respective Options,
Purchase Authorizations, Bonuses and related agreements, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Options, Purchase Authorizations, Bonuses and
related agreements, and to make all other determinations in the judgement of the
Board necessary or desirable for the administration of the Plan. The Board may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any Option, Purchase Authorization, Bonus, or related agreement in
the manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency. No
director shall be liable for any action or determination made in good faith.
Effective on and as of the date that the Company registers its class of
Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Act"), the Plan shall be administered by a committee (the
"Committee") consisting of not less than two (2) members of the Board, provided
that the Committee may delegate authority to grant Options to any single member
of the Board subject to such guidelines and qualifications as may be from time
to time determined by the Committee. None of the members of the Committee shall
be, or shall have been at any time within one year prior to the date of their
appointment to the Committee (or such lesser period of time during which the
Company's Common Stock has been registered pursuant to Section 12 of the Act), a
person who in the opinion of counsel to the Company is not a "disinterested
person" as such term is used in Rule 16b-3 promulgated under the Act. In
addition, each member of the Committee must be an "outside director" as that
term is used in Treasury Regulation Section 1.162-27(e)(3)(i) under Section
162(m) of the Code. Notwithstanding the previous three sentences, if at any
time after adoption of this Plan, Rule 16b-3 under the Act is amended to no
longer require such a Committee to ensure protection of the Plan under Rule 16b-
3, then the Board shall be entitled to modify the composition of the Committee
or to abolish the Committee and thereafter to administer the Plan itself, in its
sole discretion.
The Committee shall be appointed by, and shall serve at the pleasure of, the
Board and shall have the powers granted to the Board in this Section 4, and on
and after the commencement of the Committee's duties hereunder, all references
(other than in this sentence) to the Board in Sections 4, 5 and 7 of this Plan
or as specified in any agreement associated with this Plan shall mean and relate
to such Committee.
5. Eligible Recipients. Options, Purchase Authorizations and Bonuses may be
-------------------
granted to such key employees, officers, directors or consultants of or to the
Company Group, as are
-2-
<PAGE>
selected by the Board (a "Participant"); provided, however, that only employees
-------- -------
of the Company Group may be granted Incentive Options.
6. Duration of the Plan. This Plan shall terminate ten (10) years from the
--------------------
effective date hereof, unless terminated earlier pursuant to Section 14 below,
and no Options, Purchase Authorizations or Bonuses may be granted or made
thereafter.
7. Terms and Conditions of Options, Purchase Authorizations and Bonuses.
--------------------------------------------------------------------
Options, Purchase Authorizations and Bonuses granted or made under this Plan
shall be evidenced by agreements in such form and containing such terms and
conditions as the Committee shall determine; provided, however, that such
-------- -------
agreements shall evidence among their terms and conditions the following:
a. Price. The purchase price per Share payable upon the exercise of each
-----
Option or the purchase pursuant to each Purchase Authorization granted or
made hereunder shall be determined by the Committee at the time the
Option or Purchase Authorization is granted or made. The purchase price
per Share payable upon the exercise of each Incentive Option granted
hereunder shall not be less than one hundred percent (100%) of the fair
market value per Share of the Common Stock on the day the Incentive
Option is granted (or 110% in the case of Incentive Options to which
paragraph 7(j)(i) applies). The purchase price per Share payable on
exercise of each Nonqualified Option or upon the purchase of Shares
pursuant to each Purchase Authorization granted hereunder shall be not
less than eighty-five percent (85%) of the fair market value per Share of
the Common Stock on the date of the grant. Fair market value shall be
determined in accordance with procedures to be established in good faith
by the Board. Bonus Shares shall be issued in consideration of services
previously rendered, which shall be valued for such purposes by the
Board.
b. Number of Shares. Each agreement shall specify the number of Shares to
----------------
which it pertains. The maximum number of Shares with respect to which
Options may be granted under the Plan to any individual during any single
calendar year shall be 100,000 Shares.
c. Exercise of Options. Each Option shall be exercisable for the full
-------------------
amount or for any part thereof and at such intervals or in such
installments as the Board may determine at the time it grants such
Option; provided, however, that no Option shall be exercisable with
-------- -------
respect to any Shares later than ten (10) years after the date of the
grant of such Option (or five (5) years in the case of Incentive Options
to which paragraph 7(j)(ii) applies). An Option shall be exercisable
only by delivery of a written notice to the Company's Treasurer, or any
other officer of the Company designated by the Board to accept such
notices on its behalf, specifying the number of Shares for which the
Option is exercised and accompanied by either (i) full payment or (ii) if
permitted by the Board, irrevocable instructions to a broker to promptly
-3-
<PAGE>
deliver to the Company full payment in accordance with subparagraph (ii)
of the first sentence of paragraph 7(d) below of the amount necessary to
pay the aggregate exercise price. With respect to an Incentive Option,
the permission of the Board referred to in clause (ii) of the preceding
sentence must be specifically granted at the time the Incentive Option is
granted.
d. Payment. Payment shall be made in full (i) at the time the Option is
-------
exercised, (ii) promptly after the Participant forwards the irrevocable
instructions referred to in paragraph 7(c)(ii) above to the appropriate
broker, if exercise of an Option is made pursuant to paragraph 7(c)(ii)
above, or (iii) at the time the purchase pursuant to a Purchase
Authorization is made. Payment shall be made either (a) in cash, (b) by
check, (c) if permitted by the Board (with respect to an Incentive
Option, such permission to have been granted at the time of the Incentive
Option grant), by delivery and assignment to the Company of shares of
Company stock (provided that such shares have been held by such
Participant for at least 6 months before delivery) having a fair market
value (as determined by the Board) equal to the exercise or purchase
price, (d) if permitted by the Board, stated in the agreement evidencing
the Option or Purchase Authorization, and to the extent permitted by any
applicable law, by the Participant's recourse promissory note, which note
must be due and payable not more than five (5) years after the date the
Option or Purchase Authorization is exercised, or (e) by a combination of
(a), (b), (c) and/or (d). If shares of Company stock are to be used to
pay the exercise price of an Incentive Option, the Company prior to such
payment must be furnished with evidence satisfactory to it that the
acquisition of such shares and their transfer in payment of the exercise
price satisfy the requirements of Section 422 of the Code and other
applicable laws.
e. Withholding Taxes; Delivery of Shares. The Company's obligation to
-------------------------------------
deliver Shares upon exercise of an Option or upon purchase pursuant to a
Purchase Authorization or issuance pursuant to a Bonus shall be subject
to the satisfaction of all applicable federal, state and local income and
employment tax withholding obligations. Without limiting the generality
of the foregoing, the Company shall have the right to deduct from
payments of any kind otherwise due to the Participant any federal, state
or local taxes of any kind required by law to be withheld with respect to
any Shares issued upon exercise of Options or purchased or issued
pursuant to Purchase Authorization or Bonuses. The Participant may elect
to satisfy such obligation(s), in whole or in part, by (i) delivering to
the Company a check for the amount required to be withheld or (ii) if the
Board in its sole discretion approves in any specific or general case,
having the Company withhold Shares or delivering to the Company already-
owned shares of Common Stock, having a value equal to the amount required
to be withheld, as determined by the Board.
f. Non-Transferability. No Option or Purchase Authorization shall be
-------------------
transferable by the Participant otherwise than by will or the laws of
descent or distribution, and each
-4-
<PAGE>
Option or Purchase Authorization shall be exercisable during the
Participant's lifetime only by the Participant; provided, however, that
-------- -------
(i) Nonqualified Options may be transferred pursuant to a qualified
domestic relations order (as defined in Rule 16b-3 under the Act) and
(ii) the Board may grant Nonqualified Options that are transferable
(subject to any terms and conditions imposed by the Board) by the
Participant, either directly or in trust, to one or more members of the
Participant's family, and the Board may amend accordingly the form of
Option Grant attached hereto. Following any transfer permitted pursuant
to this paragraph, of which the Participant has notified the Board in
writing, such option may be exercised by the transferee(s), subject to
all terms and conditions of the Option Grant. For these purposes, the
members of the Participant's family are only the Participant's: (i)
spouse, (ii) lineal descendants; (iii) lineal ancestors; and (iv)
siblings and spouses and children of such siblings.
g. Termination of Options and Purchase Authorizations. The Board is
--------------------------------------------------
authorized, subject to the express provisions of this Plan, to determine
the timing and terms on which an Option or Purchase Authorization granted
or awarded hereunder shall terminate and to alter or amend the form of
Option Agreement attached hereto to effect such determinations.
h. Rights as Stockholders. A Participant shall have no rights as a
----------------------
stockholder with respect to any Shares covered by an Option, Purchase
Authorization or Bonus until the date of issuance of a stock certificate
in the Participant's name for such Shares.
i. Repurchase of Shares by the Company. Any Shares purchased or acquired
-----------------------------------
upon exercise of an Option or pursuant to a Purchase Authorization or
Bonus may in the discretion of the Board be subject to repurchase by or
forfeiture to the Company and to the extent set forth in the option,
purchase or bonus agreement pursuant to which the Shares were purchased
or acquired. Certificates representing Shares subject to such repurchase
or forfeiture may be subject to such escrow and stock legending
provisions as may be set forth in the option, purchase or bonus agreement
pursuant to which the Shares were purchased or acquired.
j. 10% Stockholder. If any Participant to whom an Incentive Option is
---------------
granted pursuant to the provisions of the Plan is on the date of grant
the owner of stock (as determined under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power or value of
all classes of stock of the Company, its parent, if any, or subsidiaries,
then the following special provisions shall be applicable:
i. The exercise price per Share subject to such Option shall not be
less than 110% of the fair market value of each Share on the date of
grant; and
ii. The Option shall not have a term in excess of five years from the
date of grant.
-5-
<PAGE>
k. Confidentiality and Non-Solicitation Agreements. In the sole discretion
-----------------------------------------------
of the Board, each Participant shall be required to execute, prior to or
contemporaneously with the grant of any Option, Purchase Authorization or
Bonus hereunder, the Company's then standard form of agreement relating
to nondisclosure of confidential information, non-solicitation and
related matters.
8. Restrictions on Incentive Options. Incentive Options granted under this
---------------------------------
Plan shall be specifically designated as such and shall be subject to the
additional restriction that the aggregate fair market value, determined as of
the date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this paragraph 8 is granted, the portion of such
Option which is exercisable for Shares in excess of the $100,000 limitation
shall be treated as a Nonqualified Option pursuant to Section 422(d) of the
Code, notwithstanding its original designation as an Incentive Option. In the
event that such Participant is eligible to participate in any other stock
incentive plans of the Company, its parent, if any, or a subsidiary which are
also intended to comply with the provisions of Section 422 of the Code, such
annual limitation shall apply to the aggregate number of Shares for which
options may be granted under all such plans.
9. Stock Dividends; Stock Splits; Stock Combinations; Recapitalizations.
--------------------------------------------------------------------
Appropriate adjustment shall be made by the Board in the maximum number of
Shares subject to the Plan and in the number, kind, and exercise or purchase
price of Shares covered by outstanding Options and Purchase Authorizations
granted hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the effective date of the Plan.
10. Merger; Sale of Assets.
----------------------
a. In the event of a change of the Common Stock resulting from a merger or
similar reorganization as to which the Company is the surviving
corporation, the number and kind of Shares which thereafter may be
purchased pursuant to an Option or Purchase Authorization under the Plan
and the number and kind of Shares then subject to Options or Purchase
Authorizations granted hereunder and the price per Share thereof shall be
appropriately adjusted in such manner as the Board may determine
equitable to prevent dilution or enlargement of the rights available or
granted hereunder.
b. Except as otherwise determined by the Board, a merger or a similar
reorganization which the Company does not survive, or a sale of all or
substantially all of the assets of the Company, shall cause every Option
and Purchase Authorization hereunder to terminate, to the extent not then
exercised, unless any surviving entity agrees to assume the obligations
hereunder; provided, however, that, in the case of such a merger or
similar reorganization, or such a sale of all or substantially all of the
assets of the Company, if there is no such assumption, the Board may
provide that some or all of
-6-
<PAGE>
the unexercised portion of any one or more of the outstanding Options or
Purchase Authorizations and some or all of the Unvested Shares (as
defined in the applicable agreement with the Participant) acquired upon
exercise of any one or more of such Options or Purchase Authorizations or
acceptance of any one or more of the outstanding Bonuses shall be
immediately exercisable and vested or no longer subject to repurchase
rights as of such date prior to such merger, similar reorganization or
sale of assets as the Board determines.
c. If any person or group, other than the Company, any of its subsidiaries
or affiliates or any employee benefit plan of the Company, either
publicly or in a written communication to the Company or to its Board of
Directors, makes a tender or exchange offer or other bona fide offer to
acquire directly or indirectly voting securities under circumstances such
that, immediately after such acquisition, such person or group would
beneficially own voting securities with aggregate voting power
representing 20% or more of the total voting power of the Company, the
Board may in its sole discretion provide that all outstanding options
shall immediately become fully exercisable.
11. Investment Representations; Transfer Restrictions. The Company may
-------------------------------------------------
require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option or to a Purchase Authorization or receipt of Shares as a
Bonus, to give written assurances in substance and form satisfactory to the
Company to the effect that such person is acquiring the Shares for the
Participant's own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate (including without limitation
confirmation that the Participant is aware of any applicable restrictions on
transfer of the Shares, as specified in the by-laws of the Company or otherwise)
in order to comply with federal and applicable state securities laws.
12. Section 16(b) Compliance. With respect to persons subject to Section 16
------------------------
of the Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Act. To the
extent that any provision of the Plan or action by the Board fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Board.
13. Definitions.
-----------
a. The term "employee" shall have, for purposes of this Plan, the meaning
ascribed to "employee" under Section 3401(c) of the Code and the
regulations promulgated thereunder.
b. The term "parent" shall have, for purposes of this Plan, the meaning
ascribed to it under Section 424(e) of the Code and the regulations
promulgated thereunder.
-7-
<PAGE>
c. The term "subsidiary" shall have, for all purposes under this Plan, the
meaning ascribed to it under Section 424(f) of the Code and the
regulations promulgated thereunder.
14. Termination or Amendment of Plan. The Board may at any time terminate
--------------------------------
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the stockholders of the Company, provided:
a. that no such termination or amendment shall adversely affect or impair
any then outstanding Option, Purchase Authorization, Bonus or related
agreement without the consent of the Participant holding such Option,
Purchase Authorization, Bonus or related agreement; and
b. that no such amendment which (i) increases the maximum number of Shares
subject to this Plan (except to the extent provided in Sections 3, 9 and
10) or (ii) increases the benefits accruing to Participants or modifies
the requirements as to eligibility for participation in the Plan (but
only to the extent that either such change would require approval by the
stockholders pursuant to the Code or the regulations thereunder or Rule
16b-3 under the Act) may be made without obtaining, or being conditioned
upon, stockholder approval.
With the written consent of the Participant affected, the Board may amend
outstanding Options, Purchase Authorizations, Bonuses or related agreements in a
manner not inconsistent with the Plan. The Board shall have the right to amend
or modify the terms and provisions of the Plan and of any outstanding Incentive
Options granted under the Plan to the extent necessary to qualify any or all
such Options for such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded incentive stock options under
Section 422 of the Code.
15. Governing Law. This Plan shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the Commonwealth of Massachusetts.
-8-
<PAGE>
EXHIBIT 10.3
RENAISSANCE WORLDWIDE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Effective October 10, 1997)
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of Renaissance Worldwide, Inc. (formerly, The Registry, Inc.1996 Employee
Stock Purchase Plan).
1. Purpose. The purpose of the Plan is to provide employees of the Company
-------
and its Subsidiaries with an opportunity to purchase Common Stock of the
Company. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue
Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent
with the requirements of that section of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock, no par value, of the
------------
Company.
(d) "Company" shall mean Renaissance Worldwide, Inc., a Massachusetts
-------
corporation.
(e) "Compensation" shall mean all base pay, salary, bonuses and
------------
commissions, including payments for overtime and sales commissions.
(f) "Contributions" shall mean all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(g) "Eligible Employee" shall mean any person who is an Employee on the
-----------------
first day of any Offering Period.
(h) "Employee" shall mean any person, including an officer, who is an
--------
employee of the Company or one of its Subsidiaries, as determined
pursuant to Treasury Regulation Section 1.421-7(h) or any successor
thereto.
<PAGE>
(i) "Exercise Date" shall mean the last business day of each Offering
-------------
Period of the Plan.
(j) "Offering Date" shall mean the first business day of each Offering
-------------
Period of the Plan.
(k) "Offering Period" shall mean the period described in Section 4.
---------------
(l) "Plan" shall mean this Employee Stock Purchase Plan, as amended from
----
time to time.
(m) "Subsidiary" shall mean a corporation, domestic or foreign, defined as
----------
such in Section 424(f) of the Code, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a
Subsidiary.
3. Eligibility.
-----------
(a) Except as otherwise provided below, any person who is an Eligible
Employee as of the Offering Date of a given Offering Period shall be
eligible to participate in such Offering Period under the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately
after the grant, such Employee (or any other person whose stock would
be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any
subsidiary of the Company, or (ii) if such option would permit his or
her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) of fair market value of such stock (determined at
the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. Offering Periods. The periods of January 1 to June 30 and July 1 to
----------------
December 31 of each year (or such other time or times as may be determined
by the Board consistent with the requirements of Code (S)423) will each be
termed an "Offering Period." The Plan shall continue until terminated in
accordance with the terms of the Plan. The Board shall have the power to
change the duration and/or the frequency of Offering Periods with respect
to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of
the first Offering Period to be affected by such change.
-2-
<PAGE>
5. Method of Participation. For each Offering Period, an Eligible Employee
-----------------------
may elect to participate in the Plan by executing and delivering to the
Company's Human Resources Department, at such time, in such manner and on
such form as shall be prescribed by the Company, a written subscription
agreement.
6. Payroll Deduction.
-----------------
(a) The written subscription agreement will contain a payroll deduction
authorization that will request withholding at a rate (in whole
percentages) of not less than 1% nor more than 10% from the
participant's Compensation by means of substantially equal payroll
deductions over the Offering Period from payroll periods ending in the
Offering Period.
(b) All payroll deductions made by a participant shall be credited to his
or her account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10, or, on one occasion only during the Offering
Period, may increase or decrease the rate of his or her Contributions
during the Offering Period by completing and filing with the Company a
new subscription agreement at such time as may be determined by the
Company prior to the date on which the change is to be effective. The
change in rate shall be effective as of the beginning of the calendar
quarter following the date of filing of the new subscription
agreement.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions shall be decreased to zero (0%) percent at such
time during any Offering Period which is scheduled to end during the
current calendar year that the aggregate of all payroll deductions
accumulated with respect to such Offering Period and any other
Offering Period ending within the same calendar year equal or exceed
twenty-five thousand dollars ($25,000). Payroll deductions shall re-
commence at the rate provided in such participant's then current
subscription agreement at the beginning of the first Offering Period
which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
-3-
<PAGE>
7. Grant of Option; Option Price.
-----------------------------
(a) On the Offering Date of each Offering Period, each Eligible Employee
participating in such Offering Period shall be granted an option to
purchase on the Exercise Date a maximum of two hundred (200) shares of
the Company's Common Stock (subject to adjustment as provided in
subsection 18(a) hereof) to the extent of the Employee's Contributions
accumulated prior to the Exercise Date. The number of shares within
the above-stated maximum that a participant may acquire shall be
determined by dividing such Employee's Contributions accumulated prior
to such Exercise Date and retained in the participant's account as of
the Exercise Date by the purchase price per share of the Company's
Common Stock (determined under Section 7(b)). The Company will reduce
on a substantially proportionate basis, the number of shares of Common
Stock receivable by each participant upon the exercise of his option
for an Offering Period in the event that the number of shares then
available under the Plan is otherwise insufficient, as provided in
Section 12.
(b) The purchase price per share of the Common Stock issued pursuant to
the exercise of an option (the "Option Price") will be 85% of the fair
market value of the Common Stock at (1) the time of grant of the
option or (2) the time at which the option is deemed exercised,
whichever is less. The fair market value of the Company's Common
Stock on a given date shall be determined by the Board based on (i)
the average of the high and low prices of the Common Stock on such
date on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price of the
Common Stock on the NASDAQ National Market System on such date, if the
Common Stock is not then traded on a national securities exchange; or
(iii) the closing bid price or the average of bid prices last quoted
on such date by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the NASDAQ National
Market System or on a national securities exchange. If the Common
Stock is not publicly traded at the time a right is granted under this
Plan, "fair market value" shall mean the fair market value of the
Common Stock as determined by the Board in its discretion after taking
into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date of the Offering Period, and
the maximum number of shares (including fractional shares) subject to
option (but in no event more than two hundred (200), subject to adjustment
as provided in subsection 18(a) hereof) will be purchased at the applicable
Option Price with the accumulated Contributions in his or her account. The
shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the
-4-
<PAGE>
participant on the Exercise Date. During his or her lifetime, a
participant's option to purchase shares hereunder is exercisable only by
him or her.
9. Delivery. As promptly as practicable after the Exercise Date of each
--------
Offering Period, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option. Any cash remaining to the
credit of a participant's account under the Plan after a purchase by him or
her of shares at the termination of each Offering Period shall be returned
to the participant.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all but not less than all the Contributions
credited to his or her account under the Plan at any time prior to the
Exercise Date of the Offering Period by giving written notice to the
Company. All of the participant's Contributions credited to his or
her account will be paid to him or her promptly after receipt of his
or her notice of withdrawal and his or her option for the current
period will be automatically terminated, and no further Contributions
for the purchase of shares will be made during the Offering Period.
Upon such withdrawal, the balance in his or her withholding account
will be returned to the participant.
(b) In the event that a participant terminates employment for any reason
during the three months beginning with the Offering Date and ending on
the day three (3) months before the Exercise Date, the participant's
option shall terminate, and the Contributions credited to his or her
account will be returned to him or her or, in the case of his or her
death, to his or her designated beneficiary hereunder (or as otherwise
provided in Section 14(b) herein), and the participant or his or her
designated beneficiary, as the case may be, will have no further
rights under the Plan. In the event that a participant terminates
employment for any reason on any date following the day three months
before the Exercise Date, the participant's option shall not, by
reason of such employment termination, terminate, and the
participant's account balance will remain in the Plan and the option
exercised as provided herein, unless the participant earlier withdraws
from the Plan pursuant to subsection 10(a) above.
11. Interest. No interest shall accrue on the Contributions of a participant
--------
in the Plan.
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be six hundred
thousand (600,000) shares, subject to adjustment upon changes in
capitalization of the Company as
-5-
<PAGE>
provided in subsection 18(a) hereof. If the total number of shares
which would otherwise be subject to options granted pursuant to
Section 7(a) on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of all
shares for which options have been exercised or are then outstanding),
the Company shall make a pro rata allocation of the shares remaining
available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable and consistent
with the requirements of Section 423(b)(5) of the Code. In such event,
the Company shall give written notice of such reduction of the number
of shares subject to the option to each Employee affected thereby and
shall similarly reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the
participant and his or her spouse, at the participant's election.
13. Administration of Plan. The Plan will be administered by the Board of
----------------------
Directors (or a committee thereof), which will have the right to determine
any questions which may arise regarding the interpretation and application
of the provisions of the Plan and to make or rescind, administer, and
interpret such rules and regulations as it will deem necessary or
advisable. For example, without limitation, the Board (or its delegee) may
limit the frequency and/or number of changes in the amount withheld during
an Offering Period, permit payroll withholding in excess of the amount
designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or accounting and
crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld
from the participant's Compensation.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to
the end of the Offering Period but prior to delivery to him or her of
such shares and cash.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the
-6-
<PAGE>
executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative
is known to the Company, then to such other person as the Company may
designate. To the extent of any such delivery of shares and/or cash
hereunder, the Company's obligation under the Plan with respect to the
participant shall be discharged.
15. Transferability. Neither Contributions credited to a participant's account
---------------
nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election
to withdraw funds in accordance with Section 10.
16. Use of Funds. All Contributions received or held by the Company under the
------------
Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. Reports. Individual accounts will be maintained for each participant in
-------
the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
------------------------------------------
(a) The number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan
but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by
each option under the Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by
the Company. Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares
of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an option.
-7-
<PAGE>
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, the options granted during such
Offering Period shall terminate and each participant's contributions
shall be returned, unless otherwise provided by the Board. In the
event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation
or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, to shorten the Offering Period
then in progress by setting a new Exercise Date (the "New Exercise
Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of
assets, the Board shall notify each participant in writing, at least
ten (10) days prior to the New Exercise Date, that the Exercise Date
for his or her option has been changed to the New Exercise Date and
that his or her option will be exercised automatically on the New
Exercise Date, unless prior to such date he or she has withdrawn from
the Offering Period as provided in Section 10. For purposes of this
Section, an option granted under the Plan shall be deemed to be
assumed if, following the sale of assets or merger, the option confers
the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property)
received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or
merger was not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with
the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of
Common Stock in the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion but subject to the requirements of Section 423 of the Code,
also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions
of shares of its outstanding Common Stock not covered by subsection
(a) hereof, and in the event of the Company being consolidated with or
merged into any other corporation.
-8-
<PAGE>
(c) In the event of a proposed sale of all or substantially all the assets
or stock of any Subsidiary, the options granted to affected
participants' of such Subsidiary during such Offering Period shall
terminate and each participant's contributions shall be returned,
unless otherwise provided by the Board.
19. Amendment or Termination.
------------------------
(a) The Board reserves the right at any time or times to amend the Plan to
any extent and in any manner it may deem advisable by vote of the
Board; provided, however, that any amendment relating to the aggregate
number of shares which may be issued under the Plan (other than an
adjustment provided for in Section 18) or to the Employees (or class
of Employees) eligible to receive options under the Plan will have no
force or effect unless it will have been approved by the shareholders
within twelve months before or after its adoption. Such amendments
may include, without limitation, (without stockholder consent and
without regard to whether any participant rights may be considered to
have been adversely affected), a change or changes to the duration of
future Offering Periods (subject to Section 4 hereof).
(b) The Plan may be suspended or terminated at any time by the Board of
Directors, but no such suspension or termination will adversely affect
the rights and privileges of holders of the outstanding options. The
Plan will terminate in any case when all or substantially all of the
Common Stock reserved for the purposes of the Plan has been purchased.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell
-9-
<PAGE>
or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned applicable
provisions of law.
22. Term of Plan; Effective Date. The Plan shall become effective upon the
----------------------------
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19.
23. Employment Rights. Nothing contained in the provisions of the Plan will be
-----------------
construed to give any Employee the right to be retained in the employ of
the Company or to interfere with the right of the Company to discharge any
employee at any time.
-10-
<PAGE>
EXHIBIT 10.11
-------------
December 4, 1997
The Registry, Inc.
189 Wells Avenue
Newton, MA 02159
America's Registry, Inc.
189 Wells Avenue
Newton, MA 02159
The Registry, Inc. Network Consulting Practice
157 Portsmouth Avenue
P.O. Box 334
Stratham, NH 03888
Renaissance Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
The Hunter Group, Inc.
100 East Pratt Street, Suite 1600
Baltimore, MD 21202
Shamrock Computer Resources, Ltd.
800 36th Avenue, Suite 101
Moline, IL 61265
Ladies/Gentlemen:
Reference is made to the Accounts Receivable Management and Security
Agreement between us dated February 29, 1996, as supplemented and amended (the
"Agreement"). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Agreement.
It is hereby agreed that, effective as of December 11, 1997, the
Agreement shall be amended in the following manner:
<PAGE>
1. Renaissance Solutions, Inc., The Hunter Group, Inc. and Shamrock
Computer Resources, Ltd. are to become borrowers under the Agreement, and the
introductory paragraph is therefore amended to read in its entirety as follows:
"This Accounts Receivable Management and Security Agreement is made as
of February 29, 1996 by and among BNY Financial Corporation ("Lender"),
having offices at 1290 Avenue of the Americas, New York, New York 10104
and The Registry, Inc. ("TRI") and America's Registry, Inc. ("ARI"), each
having their principal place of business at 189 Wells Avenue, Newton,
Massachusetts 02159, The Registry, Inc. Network Consulting Practice
("TRNCP"), having its principal place of business at 157 Portsmouth
Avenue, P.O. Box 334, Stratham, New Hampshire 03888, Renaissance
Solutions, Inc. ("RSI"), having its principal place of business at Lincoln
North, 55 Old Bedford Road, Lincoln, Massachusetts 01773, The Hunter
Group, Inc. ("THGI"), having its principal place of business at 100 East
Pratt Street, Suite 1600, Baltimore, Maryland 21202 and Shamrock Computer
Resources, Ltd. ("SCRL"), having its principal place of business at 800
36th Avenue, Suite 101, Moline, Illinois 61265 (TRI, ARI, TRNCP, RSI, THGI
and SCRL are hereinafter individually and collectively referred to as the
"Borrower").
2. The de"finition of "Change of Ownership" set forth in Section 1(A) is
amended by deleting the abbreviations and words "TRNCP or ARI into each"
appearing in the last line thereof and substituting the abbreviations, words and
punctuation marks "ARI, TRNCP, RSI, THGI or SCRL into any of the" in their place
and stead.
3. The following sentence is inserted as the end of the first paragraph of
the definition of "Eligible Receivables" set forth in Section 1(A):
"The Receivables of RSI, THGI and SCRL shall not be deemed to be Eligible
Receivables until such time as Lender determines, in its sole discretion,
that such Receivables are not subject to any security interests or liens
other than those granted Lender under this Agreement and the Ancillary
Agreements."
4. This definitions of "Maximum Loan Amount" and "Maximum Revolving
Amount" set forth in Section 1(A) are amended to read in their entirety as
follows:
""Maximum Loan Amount" means $50,000,000."
-------------------
""Maximum Revolving Amount" means $50,000,000"
------------------------
5. Section (2)(l) is amended by deleting the abbreviations, words and
punctuation mark "TRNCP and/or ARI" appearing in the first and second sentences
thereof and substituting the abbreviations, words and punctuations marks "ARI,
TRNCP, RSI, THGI and/or SCRL" in their place and stead.
<PAGE>
6. Section 8(a)(iii) is amended by inserting the abbreviations and
punctuation marks", RSI, THGI, SCRL" after the abbreviation "ARJ" appearing
therein.
7. Section 12(m)(i)(f) and 12(m)(ii) are amended by inserting the
abbreviations and punctuation marks", RSI, THGI, SCRL" after the abbreviation
"ARI" appearing in each section.
8. Section 12(m)(vi) is amended by deleting the abbreviations and words
"ARI or TRNCP can merge into each" and substituting the abbreviations, words and
punctuation marks "ARI, TRNCP, RSI, THGI or SCRL can merge into any of the "in
their place or stead.
It is further agreed that we shall waive all currently existing defaults
(the "Existing Defaults") under the Agreement for a period of ninety (90) days
from the date of this letter. If at the end of such ninety (90) day period, you
and we have not agreed to mutually acceptable revisions of the Agreement, this
waiver shall terminate, and we may thereupon exercise all of our rights and
remedies with respect to the Existing Defaults. This waiver is (a) limited to
the specific purposes and time period for which it is given, and no waiver of
any other term, condition, covenant or any other aspect of the Agreement is
intended or implied, and (b) without prejudice to our other rights and remedies
under the Agreement, all of which are hereby expressly reserved.
Except as hereinabove specifically set forth, the Agreement shall remain
unmodified and in full force and effect in accordance with its terms.
If you are in agreement with the foregoing, please so indicate by
signing and returning to us the enclosed copy of this letter.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Frank Imperato
-----------------------
Title:
READ AND AGREED TO:
THE REGISTRY, INC.
By: /s/ Robert E. Foley
---------------------
Title: CFO
AMERICA'S REGISTRY, INC.
By: /s/ Robert E. Foley
---------------------
Title: CFO
<PAGE>
THE REGISTRY, INC. NETWORK CONSULTING PRACTICE
By: /s/ Robert E. Foley
------------------------
Title: CFO
RENAISSANCE SOLUTIONS, INC.
By: /s/ Robert E. Foley
------------------------
Title: CFO
THE HUNTER GROUP, INC.
By: /s/ Robert E. Foley
------------------------
Title: CFO
SHAMROCK COMPUTER RESOURCES, LTD.
By: /s/ Robert E. Foler
------------------------
Title: CFO
<PAGE>
EXHIBIT 10.12
Conformed Copy
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of November 26, 1997
by and among The Registry, Inc., a Massachusetts corporation (the "Company"),
and the persons listed on Schedule I attached hereto (each a "Holder" and
together the "Holders").
WHEREAS, the Holders have acquired shares of Common Stock in connection
with the merger (the "Merger") of The Hunter Group, Inc., a Maryland
corporation, with a wholly-owned subsidiary of the Company; and
WHEREAS, the Company and the Holders wish to provide certain arrangements
with respect to the registration of shares of Common Stock under the Securities
Act.
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained herein, the parties agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall
--------------------
have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any other
----------
Federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, no par value, of the Company.
------------
"Exchange Act" means 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.
"Majority Holders" means Holders who collectively own a majority of the
----------------
outstanding Registrable Shares or, when used in connection with an offering in
which less than all Holders are participating, holders of a majority of the
Registrable Shares included in such offering.
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registrable Shares" means (a) the shares of Common Stock issued or
------------------
issuable to the Holders in connection with the Merger and (b) any other shares
of Common Stock issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalization, or similar events). Registrable
Shares shall cease to be Registrable Shares when (x) a registration statement
with respect to the sale of such shares shall have become effective under the
Securities
<PAGE>
Act and such shares shall have been disposed of in accordance with the plan of
distribution described therein, (y) they shall have become eligible for resale
pursuant to Rule 144 (without regard to the volume limitations therein) under
the Securities Act or (z) they shall have ceased to be outstanding.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of securities of the
Company for cash (other than a registration statement on Form S-8 or Form S-4,
or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"Securities Act" means the Securities Act of 1933, 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.
"Shares" means shares of the Common Stock.
------
2. REQUIRED REGISTRATIONS.
2.1 Demand Registration. In the event that either of the Holders request,
-------------------
but the Company does not include, that number of Registrable Shares indicated
for such Holder on Schedule I hereto in a Registration Statement declared
effective by the Commission in the first calendar quarter of 1998, then such
Holder may request, in writing, that the Company effect a separate demand
registration of that number of Registrable Shares that when added to the number
of Registrable Shares sold by such Holders in any prior offering, if any, equals
such number set forth on Schedule I opposite such Holder. If the Holders intend
to distribute the Registrable Shares in an underwritten offering, they shall so
advise the Company in their request. In the event such registration is
underwritten, the right of other Holders to participate shall be conditioned on
their participation in such underwriting upon the same terms and conditions.
Upon receipt of any such request, the Company shall promptly give written notice
of such proposed registration to all Holders (and any other person to whom the
Company is obligated to provide such notice) which Holders and other persons
shall have the right, by giving written notice to the Company within 30 days
after the Company provides its notice, to elect to have included in such
registration such of their Registrable Shares or other securities as they may
request; provided that if the underwriter managing the offering determines that,
because of marketing factors all of the Registrable Shares requested to be
registered may not be included in the offering, then all Holders who have
requested registration shall participate in the registration pro rata based on
their total ownership of Registrable Shares; provided, further, however, that if
any shares of Common Stock are to be included in such Registration Statement for
the account of any person other than the Holders, such shares shall be reduced
before any reduction in the number of Registrable Shares requested to be
included by the Holders. The Company shall, as expeditiously as possible, use
its best efforts to effect the registration of all Registrable Shares
-2-
<PAGE>
that have been the subject of the request under this paragraph and shall
maintain the effectiveness of such Registration Statement for a period of 90
days.
2.2 Limitations. The Company shall not be required to effect more than
-----------
one registration pursuant to Section 2.1 above. In addition, the Company shall
not be required to effect any registration within three months after the
effective date of any other Registration Statement of the Company.
2.3 Delay for Good Cause. If at the time of any request to register
--------------------
Registrable Shares pursuant to this Section 2, the Company (i) is engaged or has
firm plans to engage within 90 days of the time of the request in a registered
public offering as to which the Holders may include Registrable Shares pursuant
to Section 3 or (ii) is engaged in any other activity that, in the good faith
determination of the Company's Board of Directors, would be materially adversely
affected by the requested registration, then the Company may at its option
direct that: (x) in the case of clause (i), such request be delayed for a
period not in excess of 90 days from the effective date of such offering or (y)
in the case of clause (ii), such request be delayed for a period not in excess
of 75 days from the date of such request. Such right to delay a request under
Section 2.3 shall not be exercised by the Company more than once in any twelve-
month period.
2.4 Selection of Underwriter. In the case of any registration effected
------------------------
pursuant to this Section 2, the Majority Holders shall have the right to
designate the managing underwriter, subject to the approval of the Company,
which approval may not be unreasonably withheld or delayed.
3. INCIDENTAL REGISTRATION.
3.1 Company Initiated Registration. Whenever the Company proposes to file
------------------------------
a Registration Statement, prior to the declaration of effectiveness of such
Registration Statement it shall give written notice of the filing or the
intended filing to all Holders and, upon the written request of a Holder or
Holders given within 20 days after the Company provides such notice, the Company
shall use its best efforts to cause all Registrable Shares that the Holder or
Holders have requested to register to be included in the Registration Statement;
provided that the Company shall have the right to postpone or withdraw any
proposed registration pursuant to this Section 3.1 without obligation to any
Holder until such registration statement is recommended or refiled where upon
the provisions of this Agreement shall again apply.
3.2 Limitations. In connection with any offering under this Section 3
-----------
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the Holders requesting inclusion
accept the terms of the underwriting (including the terms of the underwriting
agreement, which agreement shall not contain terms inconsistent with the
provisions of this Agreement or provisions which materially favor any selling
stockholder over any Holder) as agreed upon between the Company and the
underwriters selected by it. If in the opinion of the managing underwriter the
registration of all, or part of, the
-3-
<PAGE>
Registrable Shares that Holders have requested to be included would materially
and adversely affect such public offering, then the Company shall be required to
include in the underwriting only that number of Registrable Shares, if any, that
the managing underwriter believes may be sold without causing such adverse
effect. In the event of such a reduction in the number of shares to be included
in the underwriting, all Holders and other persons who have requested
registration shall participate in the underwriting pro rata based upon their
ownership of Company Common Stock and if any such Holder and such other person
would thus be entitled to include more shares than such Holders or such other
persons requested, the excess shall be allocated among such other requesting
Holders and such other persons on the same pro rata basis.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
4.1 Filing. File with the Commission a Registration Statement with
------
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective.
4.2 Amendments and Supplements 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 for a period of not less
than 90 days from the effective date.
4.3 Copies of Prospectus. As expeditiously as possible furnish to each
--------------------
selling 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 selling Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Shares owned by the selling Holder.
4.4 Blue Sky Qualification. As expeditiously as possible use its best
----------------------
efforts to register or qualify the Registrable Shares covered by the
Registration Statement under the securities or Blue Sky laws of such states as
the selling Holder shall reasonably request, and do any and all other acts and
things that may be necessary or desirable to enable the selling Holder to
consummate the public sale or other disposition in such jurisdictions of the
Registrable Shares owned by the selling Holder, as the case may be; provided,
however, that the Company shall not thereby be required to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
4.5 Underwritten Offering. In the event that Registrable Shares are sold
---------------------
pursuant to a Registration Statement in an underwritten offering, enter into an
underwriting agreement containing customary terms, conditions, representations
and warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants
-4-
<PAGE>
and agreements to be performed by such issuer, including without limitation
customary provisions with respect to indemnification by the Company of the
underwriters of such offering.
4.6 Earnings Statement. Use its best efforts to comply with all
------------------
applicable rules and regulations of the Commission and make available to its
security holders, as soon as reasonably practicable, an earnings statement of
the Company (in form complying with the provisions of Rule 158 promulgated under
the Securities Act) covering the period of at least 12 months beginning with the
first month following the effective date of the registration statement.
4.7 Listing. Use its best efforts either to list the Registrable Shares
-------
on a national securities exchange or have them designated as national market
securities by the National Association of Securities Dealers, Inc. ("NASD").
If the Company has delivered preliminary or final prospectuses to the
selling Holder and after having done so the prospectus is amended to comply with
the requirements of the Securities Act, the Company shall promptly notify the
selling Holder and, if requested, the selling Holder shall immediately cease
making offers of Registrable Shares and shall return all prospectuses to the
Company. The Company shall promptly provide the selling Holder with revised
prospectuses and, following receipt of the revised prospectuses, the selling
Holder shall be free to resume making offers of the Registrable Shares.
Each Holder of Registrable Shares included in any registration shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to in this Section 4. In addition, each Holder agrees to
dispose of any Registrable Shares included in any registration only in
accordance with the plan of distribution described in the Registration
Statement.
5. ALLOCATION OF EXPENSES. The Company shall pay the Registration Expenses for
the registrations pursuant to Section 2 and the registrations pursuant to
Section 3. If a registration requested by the Holders pursuant to Section 2.1
is withdrawn at the request of the Holders requesting it (other than as a result
of information concerning the business or financial condition of the Company
that is made known to the Holders after the date on which such registration was
requested) and if the requesting Holders elect not to have such registration
counted as a registration requested under such Section, the requesting Holders
shall pay the Registration Expenses of such registration pro rata in accordance
with the number of their Registrable Shares included in such registration. For
purposes of this Section, the term "Registration Expenses" shall mean all
expenses incurred by the Company in complying with Sections 2 and 3, including,
without limitation, all registration and filing fees, exchange or national
market listing fees, all fees and expenses of complying with securities or blue
sky laws, all fees and expenses associated with filings with the NASD, all
printing expenses, fees and disbursements of counsel for the Company and its
independent public accountants, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts
and selling
-5-
<PAGE>
commissions and fees of counsel for the selling Holders. Such underwriting
discounts and selling commissions shall be borne pro rata by the selling Holders
in accordance with the number of their Registrable Shares taken in the aggregate
included in such registration.
6. INDEMNIFICATION.
6.1 Company Indemnification. In the event of any registration of any of
-----------------------
the Registrable Shares under the Securities Act pursuant to this Agreement, then
to the extent permitted by law, the Company shall indemnify and hold harmless
the seller of such Registrable Shares, each underwriter of such Registrable
Shares and each other person, if any, who controls such seller or underwriter
within the meaning of the Securities Act or the Exchange Act against any losses,
claims, damages, costs, expenses or liabilities, joint or several, (or actions
in respect thereof), to which such seller, underwriter or controlling person may
become subject under the Securities Act, the Exchange Act, state securities laws
or otherwise, insofar as such losses, claims, damages, costs, expenses 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 Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to such
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 statements therein (in the case of a prospectus, in light
of the circumstances under which they were made) not misleading; and the Company
shall reimburse such seller, underwriter and each such controlling person for
any legal or any other expenses reasonably incurred by such seller, underwriter
or controlling person in connection with investigating or defending any such
loss, claim, damage, cost, expense, liability or action; provided, however, that
the Company shall not be liable to any such seller, underwriter or controlling
person in any such case to the extent that any such loss, claim, damage, cost,
expense or liability arises out of or is based upon any untrue statement or
omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller, underwriter or controlling person specifically for
inclusion thereof.
6.2 Seller Indemnification. In the event of any registration of any of
----------------------
the Registrable Shares under the Securities Act pursuant to this Agreement, then
to the extent permitted by law, each seller of Registrable Shares severally and
not jointly, shall indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each person, if any,
who controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, costs,
expenses or liabilities, joint or several, (or actions in respect thereof) to
which the Company, such directors and officers, underwriter or controlling
person may become subject under the Securities Act, Exchange Act, state
securities laws or otherwise, insofar as such losses, claims, damages, costs,
expenses 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
-6-
<PAGE>
such Registrable Shares 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 (in the case of a prospectus, in light of the circumstances under which
they were made) not misleading, if the statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such seller, specifically for inclusion in such
Registration Statement, prospectus, amendment or supplement; provided, however,
that the obligations of such Holder hereunder shall be limited to an amount
equal to the proceeds to such Holder of Registrable Shares sold as contemplated
herein.
6.3 Notice of Claims, etc. Each party entitled to indemnification under
---------------------
this Section 6 (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 (provided that the delay or failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from any obligation or liability except
to the extent that the Indemnifying Party has been actually prejudiced by such
delay or failure), 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 or delayed); 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 6. 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 shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as a
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a general 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.
6.4 Contribution. If for any reason the foregoing indemnification is not
------------
available, or is insufficient to hold harmless an Indemnified Party, other than
by reason of the exceptions provided herein, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such losses, claims, damages, costs, expenses or liabilities in such proportion
as is appropriate to reflect the relative fault of the Holder of Registrable
Shares and the Company as well as any other equitable considerations including
the parties' relative knowledge and access to information concerning the matter
with respect to which any claim is asserted and the opportunity to correct and
prevent any such statement or omission leading to such loss, claim, damage or
liability (or actions in respect thereof), but not including the relative
-7-
<PAGE>
benefits received by the Holders of Registrable Shares on the one hand and the
Company on the other; provided, however, that in any such case (i) no Holder of
Registrable Shares will be required to contribute except to the extent and under
such circumstances as such Holder would be required to provide indemnification
hereunder and then only in an amount not in excess of the net proceeds to it of
all Registrable Shares sold in the registration, and (ii) no person guilty of
fraudulent misrepresentation , within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any person who is not so
guilty.
7. MISCELLANEOUS.
7.1 "Stand-Off" Agreement. In connection with any underwritten public
---------------------
offering, if requested by the Company and the managing underwriter, each Holder
hereby agrees, other than with respect to any Registrable Shares included in
such offering, not to effect any public sale or distribution of any Registrable
Shares, nor engage in any transaction that would result in a public sale or
distribution of securities of the same class as the Registrable Shares for a
specified period of time (not to exceed 90 days) following the effective date of
a Registration Statement; provided, that all persons holding more than five
percent of the outstanding Common Stock (other than mutual funds or other
institutional shareholders) and all officers and directors of the Company enter
into similar agreements. Such agreement shall be in writing in a form
reasonably satisfactory to the Company and such underwriter. The Company may
impose stop-transfer instructions with respect to the Registrable Shares or
other securities subject to the foregoing restriction until the end of the
stand-off period.
7.2 Rule 144 Requirements. With a view to making available to the Holders
---------------------
the benefits of Rule 144 promulgated under the Securities Act and any other rule
or regulation of the Commission that may at any time permit such Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act (at any time after
it has become subject to the reporting requirements of the Exchange Act);
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the closing of
the first sale of securities by the Company pursuant to a Registration
Statement), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as such Holder
-8-
<PAGE>
may reasonably request to avail itself of any similar rule or regulation of the
Commission allowing it to sell any such securities without registration.
7.3 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws principles.
7.4 Entire Agreement; Amendment and Waiver. This Agreement constitutes
--------------------------------------
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof. Neither this Agreement nor any term may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and Holders holding 66 2/3% or more of the Registrable Shares,
but in no event shall any such amendment, waiver, discharge or termination
increase the obligations of any Holder hereunder or reduce the benefits in a
manner that treats Holders differently, except upon the written consent of such
Holder.
7.5 Notices. All notices and other communications required or permitted
-------
under this Agreement shall be in writing and shall be deemed effectively given
upon personal delivery or five days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid, addressed to the
Company at its principal office and to a Holder at its address on the records
maintained by the Company or at such other address as any party may designate by
ten days' prior written notice to the other party.
7.6 Rights; Separability. Unless otherwise expressly provided herein,
--------------------
each Holder's rights hereunder are several rights, not rights jointly held with
any of other Holders. In case any provision of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
7.7 Successors and Assigns. Neither this Agreement nor any of the rights,
----------------------
interests, or obligations hereunder shall be assigned (whether by operation of
law or otherwise) by Holders without the consent of the Company; provided that
the Holders may assign their respective rights hereunder to a Permitted
Transferee without the consent of the Company. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. For
purposes of this Agreement, "Permitted Transferees" means (A) any person who is
the spouse or former spouse of, or any lineal descendant (including adopted
children) of, or any spouse of such lineal descendant (including adopted
children) of, or the grandparent, parent, brother or sister of, or spouse of
such brother or sister of, holder or a Permitted Transferee of such person; (B)
upon the death of Holder or Permitted Transferee of such person, the executors
of the estate of Holder or Permitted Transferee, any of Holder's or Permitted
Transferee's heirs, testamentary trustees, devisees, or legatees; (C) any trust
principally for the benefit of Permitted Transferees (including a charitable
lead or remainder trust); (D) upon the disability of Holder or Permitted
Transferee, any guardian or conservator of Holder or Permitted Transferee;
provided that in each case such transferee assumes and agrees to perform and
becomes a party to this Agreement; or (E) any
-9-
<PAGE>
"affiliate" of any Holder as such term is defined in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
7.8 Titles. The titles of the Sections of this Agreement are for
------
convenience of reference only and are not to be considered in construing this
Agreement.
7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one Agreement.
[The Remainder of This Page Has Intentionally Been Left Blank.]
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first above written.
THE REGISTRY, INC.
By: /s/ G. Drew Conway
-------------------------------------------
Name: G. Drew Conway
Title: President and CEO
HOLDERS:
/s/ Terry L. Hunter
----------------------------------------------
Terry L. Hunter
WILLIAM M. MERCER INCORPORATED
By: /s/ Joseph D. Salerno
-------------------------------------------
Name: Joseph D. Salerno
Title: CFO
-11-
<PAGE>
SCHEDULE I
HOLDERS
Holder Number of Registrable Shares in Q1/98 Offering
- ------ ----------------------------------------------
Terry L. Hunter 1,025,000
William M. Mercer Incorporated 175,000*
________________________________________________
* Approximate. This number may be increased/decreased to reflect the actual
number of shares issued to William M. Mercer Incorporated in connection with the
transaction.
-12-
<PAGE>
EXHIBIT 21
RENAISSANCE WORLDWIDE, INC.
LIST OF SUBSIDIARIES:
Company State/Country of Organization
- ------------
1045795 Ontario, Inc. Ontario, Canada
ARI National Company Massachusetts
America's Registry, Inc. Massachusetts
C.M. Management Systems Ltd. Inc. Massachusetts
Cambridge Software Group, Inc. Massachusetts
COBA Consulting Limited U.K.
COBA Group U.S.A., Ltd. Georgia
COBA-TC, Inc. Delaware
Eligibility Management Systems, Inc. Florida
Hunter Consulting Associates Limited U.K.
Hunter Consulting Associates Pty. Limited Australia
The Hunter Group, Inc. Maryland
The Hunter Group International, Inc. Delaware
The Hunter Group (Singapore) Pte. Ltd. Singapore
International Systems Services Corporation Connecticut
International Systems Services (UK) Limited U.K.
Renaissance Worldwide AB Sweden
The Registry Holding Limited U.K.
The Registry, Inc. Network Consulting Practice New Hampshire
The Registry International, Inc. Delaware
The Registry Limited U.K.
Renaissance Securities Corp. Massachusetts
Renaissance Worldwide Strategy Limited U.K.
Renaissance Worldwide Professionals, Inc. California
Renaissance Worldwide Strategy, Inc. Delaware
Shamrock Computer Resources, Ltd. Iowa
Sterling Information Group, Inc. Delaware
THG Consulting, Inc. Canada
TRI Securities Corp. Massachusetts
Technomic Consultants Inc. Illinois
Technomic Hong Kong Hong Kong
Technomic India* India
Technomic Japan Japan
Technomic Shanghai* Shanghai, PRC
Technomic Singapore* Singapore
Technomic U.K. U.K.
Technomic Vietnam* Vietnam
*Rep. Offices of COBA-TC, Inc.
Rev. 3/4/98
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-17565, 333-33475 and 333-44371) of Renaissance
Worldwide, Inc. (formerly The Registry, Inc.) of our report dated February 12,
1998, except as to the "Stock Split and Authorized Shares" section of Note 10
which is as of March 24, 1998, appearing on page 26 of this Transition Report on
Form 10-K.
Price Waterhouse LLP
Boston, Massachusetts
March 26, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-17565, 333-33475 and 333-44371) of Renaissance
Worldwide, Inc. (formerly The Registry, Inc.) of our report dated December 13,
1996 appearing on page 27 of this Transition Report on Form 10-K.
Graves, McKenna, Lundeen & Almquist, PLLP
Minneapolis, Minnesota
March 26, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
333-17565, 333-33475 and 333-44371 of Renaissance Worldwide, Inc. (formerly
known as The Registry, Inc.) on Forms S-8 of our report dated February 28, 1997
(which expresses an unqualified opinion and includes an explanatory paragraph
relating to the accounting for an acquisition as a pooling-of-interests)
appearing in this Transition Report on Form 10-K of Renaissance Worldwide, Inc.
Deloitte & Touche LLP
Boston, Massachusetts
March 27, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Renaissance Worldwide, Inc. (formerly known as The Registry, Inc.) on Forms S-8
(Files No.333-17565, 333-33475 and 333-44371), of our report dated February 14,
1997, except for Note 3 as to which the date is September 30, 1997, and Note
11, as to which the date is November 26, 1997, on our audits of the consolidated
financial statements of The Hunter Group, Inc. and Subsidiaries as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996, which report is included in this Transition Report on Form 10-K.
Coopers & Lybrand L.L.P.
Baltimore, Maryland
March 26, 1998
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<NET-INCOME> (5,969)
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<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUN-25-1995
<PERIOD-END> JUN-29-1996
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<SECURITIES> 17,910
<RECEIVABLES> 58,951
<ALLOWANCES> (1,330)
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<CURRENT-ASSETS> 141,524
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<TOTAL-ASSETS> 154,372
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<PERIOD-START> JUN-23-1994
<PERIOD-END> JUN-24-1995
<CASH> 6,204
<SECURITIES> 4,890
<RECEIVABLES> 30,209
<ALLOWANCES> (753)
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<CURRENT-ASSETS> 51,067
<PP&E> 8,774
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<TOTAL-ASSETS> 59,699
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