<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1998
REGISTRATION STATEMENT NO. 333-52075
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
LAMALIE ASSOCIATES, INC.
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
FLORIDA 8741 59-2776441
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
200 PARK AVENUE, SUITE 3100
NEW YORK, NEW YORK 10166-0136
(212) 953-7900
(Address, including zip code, and telephone number including area code, of
Registrant's principal executive offices)
---------------------
JACK P. WISSMAN, EXECUTIVE VICE PRESIDENT
LAMALIE ASSOCIATES, INC.
3903 NORTHDALE BOULEVARD
TAMPA, FLORIDA 33624
(813) 961-7494
(Name, address, including zip code, and telephone number including area code, of
agent for service)
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
RICHARD M. LEISNER, ESQUIRE HELEN N. KAMINSKI, ESQUIRE
TRENAM, KEMKER, SCHARF, BARKIN NEAL, GERBER & EISENBERG
FRYE, O'NEILL & MULLIS TWO NORTH LASALLE STREET
P.O. BOX 1102 SUITE 2200
TAMPA, FLORIDA 33601-1102 CHICAGO, ILLINOIS 60602
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 9, 1998
PROSPECTUS
3,000,000 SHARES
(LAI WARD HOWELL(TM) LOGO)
LAMALIE ASSOCIATES, INC.
COMMON STOCK
---------------------------
Of the 3,000,000 shares of Common Stock offered hereby, 2,089,540 shares
are being offered by Lamalie Associates, Inc. ("LAI" or the "Company") and
910,460 shares are being offered by certain stockholders of the Company named
herein (the "Selling Stockholders"). The Company will not receive any proceeds
from the sale of Common Stock by the Selling Stockholders. See "Principal and
Selling Stockholders."
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "LAIX." On May 6, 1998, the last reported sale price of the Company's
Common Stock on the Nasdaq National Market was $21.50 per share. See "Price
Range of Common Stock."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION DISCUSSED
UNDER THE CAPTION "RISK FACTORS" AT PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNTS(1) COMPANY(2) STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total(3)........................... $ $ $ $
=======================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses, estimated at $400,000, all of which are payable
by the Company.
(3) The Company has granted to the several Underwriters a 30-day option to
purchase up to 450,000 additional shares of Common Stock, on the same terms
and conditions as set forth above, to cover over-allotments, if any. If this
option is exercised in full, the total Price to Public, Underwriting
Discounts and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
---------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the certificates representing shares of Common Stock will be made on
or about , 1998 through the Depository Trust Company or at the
offices of Robert W. Baird & Co. Incorporated, Milwaukee, Wisconsin.
ROBERT W. BAIRD & CO.
INCORPORATED
THE ROBINSON-HUMPHREY
COMPANY
J.C. BRADFORD & CO.
THE DATE OF THIS PROSPECTUS IS JUNE , 1998
<PAGE> 3
Inside front cover page of the prospectus:
Left hand column contains the following one sentence description of LAI.
"LAI Ward Howell is one of the largest and fastest growing executive search
firms in the world. Our global search consultancy offers in-depth expertise in
key industry sectors and specialized functional areas." The right hand column
lists LAI's eight practice groups and functional group. The text is superimposed
over a picture, that continues on the inside back cover of a hemisphere of a
globe on a light blue background.
At the bottom of the page, typed on a white background, is the following
text:
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes that the Underwriters' over-allotment option will not be
exercised and reflects financial and other data of acquired companies only from
the dates of acquisition. All references in this Prospectus to fiscal years are
to LAI's fiscal years ended on the last day of February each year (e.g., fiscal
1998 refers to LAI's fiscal year ended February 28, 1998). Unless the context
otherwise requires, references to the "Company" or "LAI" are to Lamalie
Associates, Inc. and its subsidiaries.
THE COMPANY
LAI is one of the largest and fastest growing executive search firms in the
world. LAI provides consulting services aimed specifically at solving its
clients' leadership needs by identifying, evaluating and recommending qualified
candidates for senior level positions. The Company, which conducts business
under the name "LAI Ward Howell," principally serves Fortune 500 and large
private companies. LAI provides executive search services exclusively on a
retained basis, and charges a fee typically equal to one-third of the first year
cash compensation for the position being filled. During fiscal 1998, the average
first year cash compensation for positions being filled by LAI was approximately
$226,000.
Industry
Revenue in the global executive search industry has grown at a 17% compound
annual growth rate from approximately $3.5 billion in 1993 to approximately $6.5
billion in 1997. The industry is expected to continue to grow at a 15% annual
rate with global revenue projected to reach $10.0 billion by the year 2000. LAI
believes that a number of favorable trends are generating significant growth in
the executive search industry, including: (i) a greater demand for managers with
broad leadership skills, (ii) the rapid growth in outsourcing non-core
activities, (iii) the growth in the number and scope of multinational
businesses, (iv) an increase in executive turnover and (v) an increase in
executive compensation levels. The executive search industry is highly
fragmented, consisting of more than 4,000 firms worldwide. Retained search firms
generally are compensated for an assignment whether or not they are successful
in placing a recommended candidate, while contingency search firms are not
compensated for an assignment unless they place a recommended candidate.
Business
LAI's objective is to be a global leader in providing comprehensive
consulting services aimed specifically at solving its clients' senior leadership
needs. To achieve this objective, LAI has developed a knowledge-based search
practice organized around eight industry groups and one functional group. The
industry groups execute searches for clients in the following business sectors:
automotive; communications, entertainment and technology; consumer products and
services; energy and natural resources; financial services; health care and
pharmaceuticals; industrial; and insurance and risk management. The functional
group executes searches for specific functional positions, including board of
directors, human resources and legal. These practice groups enable LAI's
consultants to better understand each client's business strategy and industry
and position LAI as a consulting partner to its clients. LAI's clients are among
the most prominent companies in their industries and include General Motors,
Lucent Technologies, PepsiCo, Enron, Lehman Brothers, Bristol-Myers Squibb,
AlliedSignal and Prudential. LAI emphasizes long-term relationships with
clients, rather than one-time projects or assignments, and has represented the
foregoing clients for an average of 14 years. More than 65% of the Company's
fiscal 1998 fee revenue was attributable to companies for which LAI conducted
one or more searches during the prior two fiscal years.
3
<PAGE> 5
LAI's knowledge-based practice consists of 114 consultants supported by 116
associates, researchers and information technology ("IT") professionals as of
April 30, 1998. In order to readily identify the universe of qualified executive
candidates, search consultants must understand a client's business practices,
strategies, culture, industry and competitors. LAI's associates, researchers and
IT professionals support the Company's consultants by, among other things,
gathering and analyzing information obtained from numerous electronic databases,
trade journals and directories, the Internet and other sources. LAI's research
staff is organized by practice group, with most researchers specializing in one
or two specific industries. LAI also maintains a proprietary database containing
professional information on more than 100,000 executive candidates. Consultants
can query this database on a variety of attributes, including demographic
information, work experience, compensation and personal interview results. LAI's
wide area computer network provides remote document sharing and data search
capabilities, groupware features and real-time updates on ongoing search
engagements. LAI's support functions are coordinated from its Tampa, Florida
office. LAI believes that its industry specialization and technological
capabilities enable it to consistently provide superior research and,
ultimately, deliver higher quality search results to its clients.
LAI has been successful in attracting and retaining some of the most
productive executive search consultants in the industry, as measured by fee
revenue per consultant. The Company attributes its success to its premium
reputation, performance-based compensation system, entrepreneurial culture and
commitment to providing strong research, technology and administrative support.
The Company has increased its staff from 36 consultants located in seven
domestic offices at the end of fiscal 1993 to 114 consultants located in 17
domestic offices and one international office as of May 1998. The Company has
experienced an average annual turnover rate among its consultants of less than
8% over the last five fiscal years. Most of LAI's consultants held senior level
positions with leading companies in LAI's targeted industry sectors and many had
experience in the executive search business prior to joining LAI. The Company's
Practice Leaders and Managing Partners have an average of more than 14 years
experience in the executive search business. In addition, LAI believes its
status as a public company provides a further competitive advantage in
attracting and retaining highly qualified consultants. Common Stock and stock
options are broadly held among LAI's consultants, and the Company believes that
this equity ownership fosters a team-oriented working environment and aligns the
interests of its consultants with the Company's investors.
Strategy
LAI believes that several competitive factors distinguish it from other
executive search firms. These factors include (i) a focus on knowledge-based
practice groups, which enables LAI's consultants to provide more specialized
services and position LAI as a partner to its clients, (ii) a consultative
approach that emphasizes a thorough understanding of each client's
organizational structure, history, culture, strategic objectives and leadership
needs, (iii) a commitment to improving consultant productivity through the use
of industry focused research and innovative technology, (iv) an ability to
attract, motivate and retain some of the most productive search consultants in
the industry, (v) an entrepreneurial environment based on broad equity ownership
by consultants, a performance-based compensation system and stock incentive
plans and (vi) an ability to aggressively pursue acquisitions on a global scale
using its publicly traded stock, stock options and a well capitalized balance
sheet.
LAI believes that global search fulfillment capabilities are critical to
attracting and retaining multinational clients. To better leverage its
knowledge-based expertise and technological capabilities, capitalize on its
existing relationships with multinational clients and ensure the quality and
consistency of its services, LAI recently initiated an international strategy of
directly owning offices in major business and financial centers around the
world. In May 1998, LAI opened an office in London, England and is currently
targeting other major markets in which to establish offices. In international
markets where LAI does not own an office, it will continue to provide clients
with search fulfillment capabilities by using existing and developing new
referral
4
<PAGE> 6
relationships with executive search firms located in those markets. Through
these referral relationships, LAI executes domestic search assignments on behalf
of non-U.S. executive search firms and refers to such firms international search
assignments for LAI's domestic clients.
Recent Acquisitions
LAI recently completed two acquisitions which have significantly expanded
the Company's practice group coverage, provided broader geographic reach and
enhanced the Company's competitive position. On February 27, 1998, LAI completed
the acquisition of Ward Howell International, Inc. ("WHI"), which was the ninth
largest executive search firm in the United States with fee revenue of $26.5
million for the year ended December 31, 1997. On January 2, 1998, LAI completed
the acquisition of Chartwell Partners International, Inc. ("CPI"), a prominent
executive search firm based in California specializing primarily in the
financial services industry. CPI had fee revenue of $3.4 million for the year
ended December 31, 1997. The acquisitions of WHI and CPI strengthened LAI's
existing practice groups, particularly in the areas of financial services,
health care and technology, and added new practice groups in the areas of
automotive, insurance, and media and entertainment. These acquisitions also have
expanded the Company's domestic office network, adding six new offices and
providing an active presence on the West Coast with offices in Los Angeles, San
Francisco and Phoenix.
LAI is a Florida corporation. Its headquarters are located at 200 Park
Avenue, Suite 3100, New York, NY 10166-0136, and its telephone number is (212)
953-7900. The Company's World Wide Web address is www.laix.com.
THE OFFERING
Common Stock offered by the Company..... 2,089,540 shares
Common Stock offered by the Selling
Stockholders............................ 910,460 shares
Common Stock to be outstanding after the
Offering................................ 7,761,956 shares(1)
Use of Proceeds......................... For general corporate purposes,
including additional acquisitions
and opening new offices in major
business and financial centers
around the world; computer software
and hardware purchases, upgrades
and enhancements; and working
capital. See "Use of Proceeds."
Nasdaq National Market symbol........... LAIX
- ---------------
(1) Does not include 1,192,115 shares of Common Stock issuable on the exercise
of stock options outstanding as of May 29, 1998. See "Management -- Director
Compensation" and "Management -- Incentive and Benefit Plans."
5
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
---------------------------------------------------------------
PRO
FORMA
1994 1995 1996 1997 1998 1998(1)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Fee revenue, net............................. $ 21,144 $ 28,262 $ 35,088 $ 46,437 $ 61,803 $ 91,730
Compensation and benefits.................... 17,725 23,991 30,693 39,928 46,513 69,053
General and administrative expenses.......... 2,080 2,333 4,467 6,685 8,680 13,736
-------- -------- -------- -------- -------- --------
Operating income (loss)...................... 1,339 1,938 (72) (176) 6,610 8,941
Net interest income (expense)................ 14 (6) (40) (376) 197 (649)
-------- -------- -------- -------- -------- --------
Income (loss) before provision for income
taxes...................................... 1,353 1,932 (112) (552) 6,807 8,292
Provision for income taxes................... 97 671 90 15 2,927 3,807
-------- -------- -------- -------- -------- --------
Net income (loss)................... $ 1,256 $ 1,261 $ (202) $ (567) $ 3,880 $ 4,485
======== ======== ======== ======== ======== ========
Diluted earnings per share................... $ 0.82
========
Pro forma net income (loss)(2)............... $ 785 $ 1,121 $ (202) $ (567) $ 3,880 $ 4,485
======== ======== ======== ======== ======== ========
Pro forma diluted earnings per share......... $ 0.90
========
Diluted weighted average shares
outstanding................................ 4,751 4,961
OTHER DATA:
Number of consultants employed as of fiscal
year end................................... 38 46 54 62 111
Average fee revenue per consultant employed
during entire fiscal year.................. $602,000 $689,000 $706,000 $740,000 $989,000
Average cash compensation of positions
filled(3).................................. $172,000 $180,000 $196,000 $226,000 $226,000
</TABLE>
<TABLE>
<CAPTION>
AS OF
FEBRUARY 28, 1998
------------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 9,815 $ 52,036
Total assets................................................ 88,916 131,137
Total long-term debt........................................ 9,125 9,125
Total stockholders' equity.................................. 35,471 77,692
</TABLE>
- ---------------
(1) The unaudited pro forma financial information for the year ended February
28, 1998 (i) reflects the results of operations of LAI as if the
acquisitions of WHI and CPI were completed on March 1, 1997, (ii) assumes
that the WHI and CPI consultants were paid according to the LAI consultant
compensation plan, the effect of which was to decrease compensation and
benefits expense and increase operating income by approximately $3.6
million, (iii) reflects an increase in goodwill amortization and a decrease
in net interest income as a result of the two acquisitions and (iv) was
prepared using the historical audited financial statements of WHI and CPI
for the year ended December 31, 1997. See Unaudited Pro Forma Combined
Statement of Operations.
(2) For periods prior to November 1, 1994, the Company had elected to be taxed
as an S corporation for federal and certain state income tax purposes. The
pro forma net income (loss) for each period shown reflects a provision for
income taxes as if the Company were a C corporation for income tax purposes
during such periods at an assumed effective tax rate of 42%.
(3) Represents the average first year cash compensation of positions for which
LAI conducted searches during the fiscal year.
(4) Adjusted to give effect to the sale of 2,089,540 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
6
<PAGE> 8
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, as well as the other information in this Prospectus, before
investing in shares of the Common Stock offered hereby. This Prospectus contains
certain forward-looking statements that involve risks and uncertainties. Future
events and the Company's actual results could differ materially from the results
reflected in these forward-looking statements.
DEPENDENCE ON ATTRACTING AND RETAINING QUALIFIED EXECUTIVE SEARCH CONSULTANTS
LAI's success depends upon its ability to attract and retain qualified
executive search consultants who possess the skills and experience necessary to
fulfill its clients' executive search needs. Competition for qualified
consultants is intense and many firms in LAI's industry have experienced high
consultant turnover rates. There can be no assurance that LAI will continue to
be successful in identifying and hiring consultants with substantial experience
and established client relationships. LAI believes it has been able to attract
and retain highly qualified, productive executive search consultants as a result
of its premium reputation and its performance-based consultant compensation,
which LAI believes is among the highest in the industry as a percentage of fee
revenue generated. Although consultants are paid base salaries, a significant
portion of most consultants' compensation consists of incentive compensation
that is dependent primarily upon the amount of fee revenue they generate. The
majority of LAI's executive search consultants are not subject to any
employment, noncompetition or similar agreement. Any reduction in LAI's
compensation levels or any decline in the market price of LAI's Common Stock
could impair LAI's ability to retain existing or attract additional qualified
consultants. Any such occurrence could have a material adverse effect on LAI's
business, financial condition and results of operations. See "-- Portability of
Client Relationships" and "Business -- Business Strategy."
PORTABILITY OF CLIENT RELATIONSHIPS
LAI's success depends upon the ability of its executive search consultants
to develop and maintain strong, long-term relationships with its clients.
Usually, only one or two consultants have primary responsibility for a client
relationship. When a consultant leaves one search firm and joins another,
clients that have established relationships with the departing consultant may
move their business to the consultant's new employer. The loss of one or more
clients is more likely to occur if the departing consultant enjoys widespread
name recognition or has developed a reputation as a specialist in executing
searches in a particular industry. Although client portability historically has
not caused significant problems for LAI, the failure to retain its most
productive consultants or maintain the quality of service to which its clients
are accustomed, and the ability of a departing consultant to move business to
his or her new employer, could have a material adverse effect on LAI's business,
financial condition and results of operations. See "-- Dependence on Attracting
and Retaining Qualified Executive Search Consultants," "Business -- Services"
and "Business -- Marketing and Clients."
RISKS OF GROWTH THROUGH ACQUISITIONS
A key component of LAI's growth strategy is to acquire executive search
firms that expand the breadth of its practice groups and strategically extend
the Company's geographic presence. Since January 1, 1998, LAI has acquired two
executive search firms, thereby adding an aggregate of 37 consultants and a net
total of six offices. As a result of the disparate corporate cultures of
executive search firms, there can be no assurance that LAI will be able to (i)
successfully integrate the acquired firms into its existing operations while
maintaining the high quality of LAI's services and its unique corporate culture,
(ii) retain and motivate key consultants previously associated with acquired
firms or (iii) realize the expected levels of revenue and productivity of such
acquisitions. Growth through acquisitions also could adversely affect LAI's
business and financial
7
<PAGE> 9
condition by diverting management's attention from the Company's executive
search business; exacerbating LAI's blocking conflicts; decreasing LAI's
profitability as a result of incurring liabilities that were not known at the
time of acquisition or creating tax and accounting problems. There also can be
no assurance that LAI will be successful in identifying suitable acquisition
candidates or completing any acquisitions of such firms.
MANAGEMENT OF GROWTH
The Company currently is experiencing rapid growth that could strain the
Company's managerial, financial, administrative and operational resources. To
effectively manage its growth, the Company may be required to improve its
internal operational processes and controls, expand its technological and
financial systems, assimilate divergent corporate cultures of acquired executive
search firms, eliminate or consolidate redundant capabilities, and maintain the
consistency and high quality of its services. Moreover, the Company may open
offices in new locations, which would entail certain startup costs. If the
Company is unable to manage its growth effectively, the Company's business,
financial condition and results of operations could be materially adversely
affected. See "Business -- Growth Strategy."
COMPETITION
The executive search industry is extremely competitive and highly
fragmented. Some of LAI's competitors possess greater resources and greater name
recognition than LAI. There are limited barriers to entry into the executive
search industry and new executive search firms continue to enter the market.
Many executive search firms have a smaller client base than LAI and therefore
may be subject to fewer blocking restraints than LAI. See "-- Blocking
Arrangements." In addition, a client will sometimes request a discounted search
fee when the client offers the prospect of multiple search engagements or in
exchange for designating a search firm as the client's "preferred provider" of
search services. Such pricing pressure may constitute an additional competitive
factor. The Company competes for search assignments with the human resources and
recruiting personnel employed by some of its clients and prospective clients.
There can be no assurance that LAI will be able to continue to compete
effectively with existing or potential competitors or that significant clients
or prospective clients of LAI will not decide to perform search services using
in-house personnel. See "Business -- Competition."
BLOCKING ARRANGEMENTS
Executive search firms frequently agree to refrain, for a specified period
of time, from recruiting employees of a client and possibly affiliates of such
client, when conducting searches on behalf of other clients (a "blocking"
arrangement). Blocking arrangements generally remain in effect for one or two
years. However, the duration and scope of the blocking or "off limits" period,
including whether it covers all operations or only certain divisions of the
client, generally depend on factors such as the length of the client
relationship, the number of searches to be performed by the executive search
firm and the amount of fee revenue generated or expected to be generated by the
executive search firm. Some of LAI's clients are recognized as industry leaders
and/or employ a significant number of qualified executives who are potential
recruitment candidates for other companies in those clients' industries. LAI's
inability to recruit employees of such industry leading clients may make it
difficult for LAI to obtain search assignments from, or to fulfill search
assignments for, other companies while employees of such industry leading
clients are off limits. As LAI's client base grows and as LAI acquires
additional executive search firms, blocking arrangements increasingly may impede
LAI's growth or its ability to attract and serve new clients, which could have a
material adverse effect on LAI's business, financial condition and results of
operations. See "Business -- Marketing and Clients."
8
<PAGE> 10
RISKS OF INTERNATIONAL OPERATIONS
LAI recently opened an office in London, England and is pursuing further
international expansion. LAI is subject to certain risks that are inherent in
conducting international business, such as exposure to currency fluctuations,
difficulties in integrating and standardizing operational procedures and
corporate cultures, potentially adverse tax consequences, difficulties in
staffing and managing foreign operations and the burden of complying with a wide
variety of foreign laws and regulations. There can be no assurance that one or
more of such risks will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Growth
Strategy."
RELIANCE ON INFORMATION PROCESSING SYSTEMS
LAI's success depends in large part upon its ability to gather, store,
retrieve and process substantial amounts of information. To achieve its
operational goals and to remain competitive, LAI believes that it must continue
to automate its search execution process and further improve its information
processing system, which may require the acquisition of equipment and the
acquisition or development, either internally or through independent
consultants, of new proprietary software. If LAI does not maintain an
information processing system that provides the capabilities necessary for LAI
to compete effectively, LAI's business, financial condition and results of
operations could be materially adversely affected. Additionally, in the event
the Company experiences an interruption or loss of its information processing
capabilities, through casualty, operating malfunction or otherwise, the
Company's business could be materially adversely affected. See "Use of Proceeds"
and "Business -- Research and Technology."
BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS
The Selling Stockholders, all of whom are consultants, executive officers
and/or directors of the Company, will receive substantial proceeds and certain
other benefits from the Offering. The Selling Stockholders will receive
approximately $18.6 million of the aggregate proceeds of the Offering, net of
underwriting discounts. In addition, the Offering will increase the number of
shares of Common Stock freely traded in the public market. This increased public
float will provide increased liquidity to the Selling Stockholders and to other
existing stockholders of the Company with respect to the shares of Common Stock
they will continue to own after the Offering. See "-- Shares Eligible for Future
Sale" and "Principal and Selling Stockholders."
EXECUTIVE SEARCH LIABILITY RISK
LAI is exposed to potential claims from clients for such matters as
breaching a blocking arrangement or recommending a candidate who later proves to
be unsuitable for the position filled. In addition, employment candidates could
assert claims against LAI for such matters as failure to maintain the
confidentiality of the candidate's employment search or for alleged
discrimination or other employment law violations made by a client of LAI. The
Company maintains professional liability insurance in such amounts and with such
coverage and deductibles as management believes are adequate; however, there can
be no assurance that the Company's insurance will cover all such claims or that
insurance coverage will continue to be available at economically feasible rates.
See "Business -- Insurance."
EFFECT OF ANTI-TAKEOVER PROVISIONS
LAI's Articles of Incorporation and Bylaws and applicable law contain
provisions that could have the effect of inhibiting a non-negotiated merger or
unsolicited change of control of LAI. In particular, LAI's Articles of
Incorporation provide for a staggered Board of Directors, permit the removal of
directors for cause only, and authorize its Board of Directors to issue shares
of preferred stock and fix the rights and preferences
9
<PAGE> 11
thereof, without a vote of its stockholders. Although no shares of preferred
stock currently are outstanding and the Company has no present plans to issue
any shares of preferred stock, the rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future. Certain of these provisions
may delay, deter or prevent a change in control of LAI that stockholders might
consider in their best interests. Moreover, the existence of these provisions
may depress the market price of the Common Stock. See "Description of Capital
Stock."
POSSIBLE VOLATILITY OF STOCK PRICE
Since the Company's initial public offering was completed in July 1997 (the
"Initial Public Offering"), the closing sale price of the Common Stock has
fluctuated between $15.875 per share and $23.25 per share. See "Price Range of
Common Stock." The market price of the Common Stock may be subject to
significant fluctuations in response to various factors, such as quarterly
fluctuations in LAI's operating results, changes in securities analysts'
estimates of LAI's future earnings, LAI's loss of key consultants or clients, or
significant business developments relating to LAI or its competitors. The market
price of the Common Stock also may be affected by the Company's ability to meet
analysts' expectations and any failure to meet such expectations, even if minor,
could have a material adverse effect on the market price of the Common Stock.
The trading volume of the Common Stock has been lower than the trading volume of
publicly traded shares of many other companies, in part because certain LAI
stockholders have agreed not to sell, contract to sell or otherwise dispose of
an aggregate of 2,329,924 shares of Common Stock for certain periods of time,
without the prior written consent of Robert W. Baird & Co. Incorporated. See
"-- Shares Eligible for Future Sale," "Shares Eligible for Future Sale" and
"Underwriting." Because of this reduced trading volume, the market price of
Common Stock may be more susceptible to fluctuation. In addition, the stock
market has experienced a high level of price and volume volatility, and market
prices of equity securities of many companies have experienced wide price
fluctuations not necessarily related to the operating performance of such
companies. These broad market fluctuations may adversely affect the market price
of the Common Stock. In the past, securities class action lawsuits frequently
have been instituted against companies following periods of volatility in the
market price of such companies' securities. If any such litigation is instigated
against the Company, it could result in substantial costs to the Company and a
diversion of management's attention and resources, which could have a material
adverse effect on the Company's business, results of operations or financial
condition.
ABSENCE OF DIVIDENDS
LAI does not anticipate paying cash dividends on its Common Stock at any
time in the foreseeable future. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, there will be 7,761,956 shares of Common
Stock outstanding (8,211,956 if the Underwriters' over-allotment option is
exercised in full), substantially all of which will be freely tradable without
restriction. In addition, an aggregate of 1,192,115 shares of Common Stock are
or will be issuable upon exercise of stock options currently outstanding under
LAI's 1997 Omnibus Stock and Incentive Plan and 1998 Omnibus Stock and Incentive
Plan (the "Employee Stock Plans") and Non-Employee Directors' Stock Plan (the
"Directors' Stock Plan"), which shares, upon issuance, also will be freely
tradable without restriction. Sales of such shares in the public market, or the
perception that such sales may occur, could adversely affect the market price of
the Common Stock or impair LAI's ability to raise additional capital in the
future through the sale of equity securities. Certain existing stockholders of
LAI have agreed not to sell, contract to sell or otherwise dispose of an
aggregate of 426,000 shares of Common Stock until at least July 2, 1999; an
additional 25,707 shares until at least January 2, 2000; an additional 189,677
10
<PAGE> 12
shares until at least February 27, 2000; and an additional 1,688,540 shares
until at least June 10, 2000 (two years after the date of this Prospectus),
without the prior written consent of Robert W. Baird & Co. Incorporated. See
"-- Possible Volatility of Stock Price." In addition, the Selling Stockholders
and LAI's executive officers and directors have agreed not to sell, contract to
sell or otherwise dispose of any shares of Common Stock for a period of 90 days
after the date of this Prospectus without the prior written consent of Robert W.
Baird & Co. Incorporated. Additionally, the Company has agreed for a period of
90 days after the date of this Prospectus, not to sell, contract to sell or
otherwise dispose of any shares of Common Stock without the prior written
consent of Robert W. Baird & Co. Incorporated, other than shares of Common Stock
issued in the Offering, under its 1997 Employee Stock Purchase Plan, or upon
exercise of stock options granted pursuant to the Employee Stock Plans or the
Directors' Stock Plan. See "Management -- Incentive and Benefit Plans," "Shares
Eligible for Future Sale" and "Underwriting."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to LAI from the sale of the 2,089,540 shares of Common
Stock offered hereby, after deducting the underwriting discounts and estimated
offering expenses, are estimated to be approximately $42.2 million ($51.4
million if the Underwriters' over-allotment option is exercised in full). The
Company will not receive any proceeds from the sale by the Selling Stockholders
of shares of Common Stock in the Offering.
LAI intends to use the net proceeds of the Offering to further implement
the Company's expansion strategy, which includes both additional acquisitions
and opening new offices in major business and financial centers around the
world. The Company also intends to use a portion of the net proceeds of the
Offering for computer software and hardware purchases, upgrades and enhancements
and for general corporate purposes, including working capital. Pending such
uses, LAI intends to invest the net proceeds from the Offering in short-term,
investment grade securities, certificates of deposit or direct guaranteed
obligations of the United States government.
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the periods indicated, the range of
high and low closing sale prices for the Common Stock, as reported on the Nasdaq
National Market since trading began on July 2, 1997, the date of the Company's
Initial Public Offering, at $12.00 per share, under the symbol LAIX.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1998:
Second Quarter (from July 2, 1997).......................... $21.250 $15.875
Third Quarter............................................... 22.875 17.750
Fourth Quarter.............................................. 21.250 16.375
FISCAL YEAR 1999:
First Quarter (through May 6, 1998)......................... $23.250 $19.500
</TABLE>
On May 6, 1998, the last reported sales price of the Common Stock on the
Nasdaq National Market was $21.50 per share. As of May 6, 1998, there were
approximately 145 holders of record of the Common Stock.
DIVIDEND POLICY
LAI has not paid dividends in fiscal 1997, 1998 or 1999 and does not intend
to pay any cash dividends for the foreseeable future but instead intends to
retain earnings, if any, for the future operation and expansion of LAI's
business. Any determination to pay dividends in the future will be at the
discretion of the Company's Board of Directors and will be dependent upon LAI's
results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors deemed relevant by the
Board of Directors. Moreover, the Company's credit facilities prohibit payment
of dividends without the consent of the lender.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of LAI as of February 28,
1998, and as adjusted to reflect the application of the estimated net proceeds
from the issuance and sale by the Company of the 2,089,540 shares of Common
Stock offered hereby as described in "Use of Proceeds." The table reflects the
Company's recent acquisitions of WHI and CPI and should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF
FEBRUARY 28, 1998
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long term debt........................ $ 3,070 $ 3,070
======= =======
Long-term debt, less current maturities..................... $ 6,055 $ 6,055
------- -------
Stockholders' equity(1):
Preferred stock, $0.01 par value, 3,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock, $0.01 par value, 35,000,000 shares
authorized; 5,576,446 shares issued and outstanding;
7,665,986 shares as adjusted........................... 56 77
Additional paid-in capital................................ 32,873 75,073
Retained earnings......................................... 2,542 2,542
------- -------
Total stockholders' equity........................ 35,471 77,692
------- -------
Total capitalization......................... $41,526 $83,747
======= =======
</TABLE>
- ---------------
(1) Excludes 1,211,615 shares of Common Stock issuable on the exercise of
outstanding stock options.
13
<PAGE> 15
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
The following table sets forth selected financial and other data of LAI for
fiscal years ended February 1994 through 1998 and as of the last day of each of
those fiscal years. The Statement of Operations Data for, and Balance Sheet Data
as of the end of, fiscal 1995 through 1998, are derived from the audited
Consolidated Financial Statements of the Company. The Statement of Operations
and Other Data for, and Balance Sheet Data as of the end of, fiscal 1994 are
derived from the unaudited Consolidated Financial Statements of the Company and,
in the opinion of management, include all adjustments (consisting of normal and
recurring adjustments) necessary to present fairly the results of operations and
financial position of the Company for such periods and as of such dates. The
financial data shown below should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
--------------------------------------------------------------
PRO
FORMA
1994 1995 1996 1997 1998 1998(1)
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Fee revenue, net............................. $ 21,144 $ 28,262 $ 35,088 $ 46,437 $ 61,803 $91,730
Compensation and benefits.................... 17,725 23,991 30,693 39,928 46,513 69,053
General and administrative expenses.......... 2,080 2,333 4,467 6,685 8,680 13,736
-------- -------- -------- -------- -------- -------
Operating income (loss).................... 1,339 1,938 (72) (176) 6,610 8,941
Net interest income (expense)................ 14 (6) (40) (376) 197 (649)
-------- -------- -------- -------- -------- -------
Income (loss) before provision for income
taxes.................................... 1,353 1,932 (112) (552) 6,807 8,292
Provision for income taxes................... 97 671 90 15 2,927 3,807
-------- -------- -------- -------- -------- -------
Net income (loss)................... $ 1,256 $ 1,261 $ (202) $ (567) $ 3,880 $ 4,485
======== ======== ======== ======== ======== =======
Diluted earnings per share................... $ 0.82
========
Pro forma net income (loss)(2)............... $ 785 $ 1,121 $ (202) $ (567) $ 3,880 $ 4,485
======== ======== ======== ======== ======== =======
Pro forma diluted earnings per share......... $ 0.90
=======
Diluted weighted average shares
outstanding................................ 4,751 4,961
OTHER DATA:
Number of consultants employed as of fiscal
year end................................... 38 46 54 62 111
Average fee revenue per consultant employed
during entire fiscal year.................. $602,000 $689,000 $706,000 $740,000 $989,000
Average cash compensation of positions filled
(3)........................................ $172,000 $180,000 $196,000 $226,000 $226,000
</TABLE>
<TABLE>
<CAPTION>
AS OF FEBRUARY 28 OR 29,
----------------------------------------------
1994 1995 1996 1997 1998
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................... $1,723 $ 1,439 $ (485) $ 617 $ 9,815
Total assets................................................ 9,885 12,193 18,300 25,561 88,916
Total long-term debt........................................ 264 143 63 2,037 9,125
Total stockholders' equity.................................. 2,121 2,325 2,509 2,627 35,471
</TABLE>
- ---------------
(1) The unaudited pro forma financial information for the year ended February
28, 1998 (i) reflects the results of operations of LAI as if the
acquisitions of WHI and CPI were completed on March 1, 1997, (ii) assumes
that the WHI and CPI consultants were paid according to the LAI consultant
compensation plan, the effect of which was to decrease compensation and
benefits expense and increase operating income by approximately $3.6
million, (iii) reflects an increase in goodwill amortization and a decrease
in net interest income as a result of the two acquisitions and (iv) was
prepared using the historical audited financial statements of WHI and CPI
for the year ended December 31, 1997. See Unaudited Pro Forma Combined
Statement of Operations.
(2) For periods prior to November 1, 1994, the Company had elected to be taxed
as an S corporation for federal and certain state income tax purposes. The
pro forma net income (loss) for each period shown reflects a provision for
income taxes as if the Company were a C corporation for income tax purposes
during such periods at an assumed effective tax rate of 42%.
(3) Represents the average first year cash compensation of positions for which
LAI conducted searches during the fiscal year.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains certain forward-looking statements that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Such statements
include those regarding future financial results, successfully implementing and
continuing growth strategies and business strategies, attracting, motivating and
retaining executive search consultants, maintaining favorable long-term client
relationships, future capital requirements and the effects of completing
acquisitions. Because such statements involve risks and uncertainties, actual
actions and strategies and the timing and expected results thereof may differ
materially from those expressed or implied by such forward-looking statements,
and the Company's future results, performance or achievements could differ
materially from those expressed in, or implied by, any such forward-looking
statements. Factors that could cause or contribute to such material differences
include, but are not limited to, those discussed under "Risk Factors." The
following presentation of management's discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the Company's Consolidated Financial Statements, the Notes thereto and other
financial information included herein.
OVERVIEW
LAI is one of the largest and fastest growing executive search firms in the
world. The Company derives substantially all of its revenue from fees for
professional services, which are billed exclusively on a retained basis. LAI's
fees typically equal one-third of the anticipated first year cash compensation
for the positions being filled. If the actual compensation package for a
successfully placed candidate varies from the amount anticipated at the time of
the engagement, an appropriate adjustment may be made to LAI's search fee. The
Company recognizes fee revenue as clients are billed, generally over a 60 to 90
day period following the acceptance of a search assignment. In addition, clients
usually are required to reimburse LAI for out-of-pocket expenses incurred in the
search process.
LAI's fee revenue has grown from $21.1 million in fiscal 1994 to $61.8
million in fiscal 1998, representing a compound annual growth rate of
approximately 31%. LAI's fee revenue for fiscal 1998, on a pro forma combined
basis assuming the acquisitions of WHI and CPI were completed on March 1, 1997,
was $91.7 million. This growth has been achieved by (i) increasing the number of
consultants at existing offices, (ii) improving fee revenue per consultant and
(iii) opening and acquiring new offices. Since its Initial Public Offering on
July 1, 1997, the Company has completed two acquisitions, which added a net
total of six offices and 37 consultants. See "-- Acquisitions." The Company also
opened new offices in Boston, Massachusetts and Stamford, Connecticut in fiscal
1997, and in Pittsburgh, Pennsylvania in fiscal 1998. Including acquisitions,
the Company added a net total of 65 consultants during the three-year period
ended February 28, 1998, representing a 141% increase to its consulting staff.
Fee revenue per consultant employed for an entire fiscal year was approximately
$706,000, $740,000 and $989,000 for fiscal 1996, 1997 and 1998, respectively.
This improvement was due to greater consultant productivity, an increased mix of
more senior level executive searches and to an overall rise in executive
compensation. The average first year cash compensation of positions for which
LAI conducted searches in fiscal 1996, 1997 and 1998 was approximately $196,000,
$226,000, and $226,000, respectively.
The largest component of the Company's operating expenses consists of
compensation and benefits paid to its executive search consultants, executive
officers and administrative and support personnel. LAI believes it has been able
to attract and retain some of the most productive executive search consultants
in the industry as a result of its premium reputation, its performance-based
consultant compensation system and its status as a public company, which
provides consultants with the opportunity to build wealth through direct equity
ownership and participation in the Company's stock incentive plans. Compensation
and benefits expense represented approximately 75.3% of fee revenue in fiscal
1998. The Company believes the compensation and
15
<PAGE> 17
benefits it pays to its consultants, as a percentage of fee revenue generated,
is among the highest in the industry.
General and administrative expenses consist of occupancy expense associated
with the Company's leased premises, costs associated with the Company's
investments in information technology and marketing and other general office
expenses. LAI benefits from the reduced costs associated with locating a
majority of its administrative support operations in Tampa, Florida. In
addition, the Company believes that all of its systems are year 2000 compliant.
ACQUISITIONS
As part of its growth strategy, the Company expects to continue to pursue
strategic acquisitions as an efficient way to increase its number of
consultants, expand its client base, strengthen and expand its practice group
coverage and broaden its geographic reach in both domestic and international
markets. Since the Initial Public Offering on July 1, 1997, the Company
completed two acquisitions, which were recorded under the purchase method of
accounting. The Company amortizes goodwill over 30 years.
WHI Acquisition. LAI completed the acquisition of WHI on February 27,
1998. WHI was the ninth largest executive search firm in the United States with
fee revenue of $26.5 million for the year ended December 31, 1997. WHI's fee
revenue grew at a 21.5% compound annual growth rate from $10.0 million in 1992
to $26.5 million in 1997. LAI acquired WHI for approximately $19.5 million. The
purchase consideration consisted of (i) approximately $8.8 million in cash, (ii)
$7.6 million in subordinated promissory notes payable over three years, accruing
interest on the unpaid balance at the rate of 5.0% per annum and (iii)
approximately 190,000 shares of Common Stock.
CPI Acquisition. LAI completed the acquisition of CPI on January 2, 1998.
CPI was a prominent executive search firm based in California that specialized
primarily in the financial services industry. CPI's fee revenue was $3.4 million
for the year ended December 31, 1997. The Company acquired CPI for approximately
$3.1 million. The purchase consideration consisted of (i) approximately $1.4
million in cash, (ii) a convertible subordinated promissory note of the Company
in the principal amount of $1.25 million payable over three years, accruing
interest on the unpaid balance at the rate of 6.75% per annum and convertible
into shares of Common Stock at each anniversary date at the prices specified in
the asset purchase agreement and (iii) approximately 26,000 shares of Common
Stock.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma combined statement of operations for the year ended
February 28, 1998 reflects the results of operations of LAI assuming the
acquisitions of WHI and CPI were completed on March 1, 1997. The historical
audited financial statements of WHI and CPI for the year ended December 31, 1997
were used in preparing the unaudited pro forma combined statement of operations.
See Unaudited Pro Forma Combined Statement of Operations.
The unaudited pro forma combined financial information assumes that the WHI
and CPI consultants were paid according to LAI's consultant compensation plan,
which decreased compensation and benefits expense and increased operating income
by approximately $3.6 million. The unaudited pro forma combined statement of
operations also reflects an increase in goodwill amortization of approximately
$810,000 and a decrease in net interest income of approximately $960,000 as a
result of the two acquisitions. The unaudited pro forma combined statement of
operations does not reflect (i) expected cost savings which may be achieved
through facilities, technology and general and administrative integration or
(ii) expected costs of planned upgrades to WHI's and CPI's management
information systems. Such items are not reflected because they are not factually
determinable or estimable.
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
Statement of Operations Data as a percentage of fee revenue:
<TABLE>
<CAPTION>
PERCENTAGE OF FEE
REVENUE
---------------------
YEAR ENDED
FEBRUARY 28 OR 29,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Fee revenue, net............................................ 100.0% 100.0% 100.0%
Compensation and benefits................................... 87.5 86.0 75.3
General and administrative expenses......................... 12.7 14.4 14.0
----- ----- -----
Operating income (loss)..................................... (0.2) (0.4) 10.7
Net interest income (expense)............................... (0.1) (0.8) 0.3
----- ----- -----
Income (loss) before provision for income taxes............. (0.3) (1.2) 11.0
Provision for income taxes.................................. 0.3 -- 4.7
----- ----- -----
Net income (loss)........................................... (0.6)% (1.2)% 6.3%
===== ===== =====
</TABLE>
FISCAL 1998 COMPARED WITH FISCAL 1997
Fee revenue. Fee revenue increased $15.4 million, or 33.1%, to $61.8
million for fiscal 1998 from $46.4 million for fiscal 1997. The increase in fee
revenue was primarily a result of an increase in the number of consultants and
an increase in the average fee revenue per consultant. At the end of fiscal
1998, the Company employed a total of 111 consultants, which represents a net
increase of 49 consultants since the beginning of fiscal 1998 and reflects the
37 consultants added in connection with the acquisitions of WHI on February 27,
1998 and CPI on January 2, 1998. The average fee revenue per consultant employed
for the entirety of the periods being compared increased 33.6% to $989,000 in
fiscal 1998 from $740,000 in fiscal 1997.
Compensation and benefits. Compensation and benefits increased $6.6
million, or 16.5%, to $46.5 million for fiscal 1998 from $39.9 million for
fiscal 1997. The increase was primarily due to compensation and benefits
associated with the growth in the number of consultants and the increase in fee
revenue per consultant. As a percentage of fee revenue, compensation and
benefits decreased to 75.3% for fiscal 1998 from 86.0% for fiscal 1997 primarily
due to a decrease in cash compensation paid to consultants in connection with
the Company's adoption of a revised compensation plan for consultants effective
March 1, 1997. The decrease in compensation and benefits as a percentage of fee
revenue also was due to spreading compensation and benefits for LAI's
administrative and support staff, which are primarily fixed, over a greater fee
revenue base.
General and administrative expenses. General and administrative expenses
increased $2.0 million, or 29.8%, to $8.7 million for fiscal 1998 from $6.7
million for fiscal 1997. These changes were the result of additional
infrastructure costs related to business expansion, including increased
occupancy and IT expenses. As a percentage of fee revenue, general and
administrative expenses decreased to 14.0% for fiscal 1998 from 14.4% for fiscal
1997.
Operating income (loss). Operating income was $6.6 million for fiscal
1998, as compared to a loss of $176,000 for fiscal 1997. This change was
primarily the result of an increase in fee revenue and decreases in compensation
and benefits and general and administrative expenses as a percentage of fee
revenue.
Net interest income (expense). The Company received net interest income of
$197,000 for fiscal 1998, as compared to net interest expense incurred of
$376,000 for fiscal 1997. This change was a result of the Company repaying all
outstanding indebtedness under its credit facilities with proceeds from the
issuance of
17
<PAGE> 19
Common Stock during the Initial Public Offering, as well as investment earnings
from the remaining net proceeds.
Provision for income taxes. The effective tax rate for fiscal 1998 of
43.0% varied from the statutory rate of 34.0% due to state and local income
taxes and because certain expenses, including a portion of meals, entertainment
and dues expense and premiums on keyperson life insurance policies, are
non-deductible for income tax purposes.
FISCAL 1997 COMPARED WITH FISCAL 1996
Fee revenue. Fee revenue increased $11.3 million, or 32.3%, to $46.4
million for fiscal 1997 from $35.1 million for fiscal 1996. The increase in fee
revenue was primarily a result of an increase in the number of consultants and
an increase in the average fee revenue per consultant. At the end of fiscal
1997, the Company employed a total of 62 consultants, which represents a net
increase of 8 consultants since the beginning of fiscal 1997. The average fee
revenue per consultant employed for the entirety of the periods being compared
increased 4.8% to $740,000 in fiscal 1997 from $706,000 in fiscal 1996. The
average first year cash compensation of positions for which LAI conducted
searches increased by 15.3% to $226,000 in fiscal 1997 from $196,000 in fiscal
1996. During fiscal 1997, LAI opened two new offices, which generated
approximately $1.7 million of fee revenue.
Compensation and benefits. Compensation and benefits increased $9.2
million, or 30.1%, to $39.9 million for fiscal 1997 from $30.7 million for
fiscal 1996. The increase was primarily due to compensation and benefits
associated with the growth in the number of consultants and the increase in fee
revenue per consultant. As a percentage of fee revenue, compensation and
benefits decreased to 86.0% for fiscal 1997 from 87.5% for fiscal 1996 primarily
due to spreading compensation and benefits for LAI's administrative and support
staff, which are primarily fixed, over a greater fee revenue base.
General and administrative expenses. General and administrative expenses
increased $2.2 million, or 49.7%, to $6.7 million for fiscal 1997 from $4.5
million for fiscal 1996. As a percentage of fee revenue, general and
administrative expenses increased to 14.4% for fiscal 1997 from 12.7% for fiscal
1996. These increases were primarily due to increases in occupancy costs
associated with lease renewals at three of LAI's offices and the opening of two
new offices in Stamford, Connecticut and Boston, Massachusetts, as well as an
increase in marketing expenses to implement a program to enhance LAI's name
recognition.
Operating income (loss). Operating loss increased $104,000 to $176,000 for
fiscal 1997 from $72,000 for fiscal 1996, and as a percentage of fee revenue to
0.4% for fiscal 1997 from 0.2% for fiscal 1996. These increases were primarily
due to the increase in general and administrative expenses, partially offset by
lower compensation and benefits as a percentage of fee revenue.
Net interest income (expense). Net interest expense increased $336,000 to
$376,000 for fiscal 1997 from $40,000 for fiscal 1996. The increase constitutes
interest expense on indebtedness incurred to fund leasehold improvements at two
of LAI's offices, as well as interest on compensation deferred pursuant to the
Company's deferred compensation plan. See "Management -- Incentive and Benefit
Plans."
Provision for income taxes. The effective tax rate for fiscal 1997 of
(2.8)% varied from the statutory rate of 35.0% due to state and local income
taxes and because certain expenses, including a portion of meals, entertainment
and dues expense and premiums on keyperson life insurance policies, are
non-deductible for income tax purposes.
18
<PAGE> 20
UNAUDITED QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information of the Company for fiscal 1997 and fiscal 1998. This information has
been prepared on the same basis as the audited Consolidated Financial Statements
contained elsewhere in this Prospectus and, in the opinion of management,
includes all adjustments, consisting solely of normal and recurring adjustments,
necessary for the fair presentation of the information for the periods
presented. The financial data shown below should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. Results for any previous
fiscal quarter are not necessarily indicative of results for the full year or
for any future quarter.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------------
MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28,
1996 1996 1996 1997 1997 1997 1997 1998
-------- ---------- ------------ ------------ -------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fee revenue, net..... $11,107 $11,506 $11,706 $12,118 $13,725 $16,773 $15,349 $15,956
Operating income
(loss)............. 131 216 (200) (323) 1,377 1,745 1,701 1,787
Net income (loss).... (5) 8 (244) (326) 702 1,016 1,056 1,106
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company relies primarily upon cash flows from operations and available
borrowings under its credit facilities to finance its operations. During fiscal
1996, 1997 and 1998, cash flows from operations were $1.6 million, $(653,000)
and $2.9 million, respectively. To provide additional liquidity, during fiscal
1998 the Company obtained a commitment letter for credit facilities providing
for maximum borrowings of $15.0 million. In May 1998, this commitment was
increased to $25.0 million. Borrowings under this facility will bear interest at
variable rates. See Note 4 to Consolidated Financial Statements.
Capital expenditures totaled approximately $2.5 million, $1.8 million and
$2.2 million for fiscal 1996, 1997 and 1998, respectively. These expenditures
consisted primarily of purchases of office equipment, upgrades to information
systems and leasehold improvements. Investments in whole life insurance policies
intended to fund the Company's deferred compensation plan were $779,000, $1.0
million and $2.1 million in fiscal 1996, 1997 and 1998, respectively.
Cash provided by financing activities was approximately $23.6 million
during fiscal 1998, including $24.7 million from the sale of Common Stock in the
Company's Initial Public Offering. During fiscal 1998 the Company issued $8.8
million of subordinated debt in connection with the WHI and CPI acquisitions.
Cash provided by financing activities was approximately $2.7 million during
fiscal 1997, which included $1.7 million of net borrowings under a term loan and
$926,000 in proceeds from sales of Common Stock (net of Common Stock
repurchases) to newly hired and promoted consultants as part of LAI's strategy
to increase the breadth of stock ownership among its consultants. During fiscal
1996, cash provided by financing activities was approximately $416,000,
consisting primarily of proceeds from sales of Common Stock (net of Common Stock
repurchases) to newly hired and promoted consultants.
The Company believes that funds from operations, its expanded credit
facilities and the net proceeds of the Offering will be sufficient to meet its
anticipated working capital, capital expenditure, debt repayment and general
corporate requirements on both a short-term basis (i.e., during the twelve
months following the Offering) and a long-term basis (i.e., after such twelve
month period).
19
<PAGE> 21
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for
financial statements for periods beginning after December 15, 1997. Management
believes the effect of adopting SFAS 130 would not have a material impact on the
accompanying consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. Management has not yet determined the effect
of adopting SFAS 131.
If February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pension and Other Post Retirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other post retirement benefit plans.
SFAS 132 is effective for fiscal years beginning after December 15, 1997;
earlier application is encouraged. Management has implemented SFAS 132 for the
year ended February 28, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance
for capitalizing and expensing the costs of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management believes the effect
of adopting SOP 98-1 would not have a material impact on the accompanying
consolidated financial statements.
20
<PAGE> 22
BUSINESS
GENERAL
LAI is one of the largest and fastest growing executive search firms in the
world. LAI provides consulting services aimed specifically at solving its
clients' leadership needs by identifying, evaluating and recommending qualified
candidates for senior level positions. The Company, which conducts business
under the name "LAI Ward Howell," principally serves Fortune 500 and large
private companies. LAI provides executive search services exclusively on a
retained basis, and charges a fee typically equal to one-third of the first year
cash compensation for the position being filled.
LAI has developed a knowledge-based search practice organized around eight
industry groups and one functional group. The industry groups execute searches
for clients in the following business sectors: automotive; communications,
entertainment and technology; consumer products and services; energy and natural
resources; financial services; health care and pharmaceuticals; industrial; and
insurance and risk management. The functional group executes searches for
specific functional positions, including board of directors, human resources and
legal. These practice groups enable LAI's consultants to better understand each
client's business strategy and industry and position LAI as a consulting partner
to its clients. LAI's clients are among the most prominent companies in their
industries and include General Motors, Lucent Technologies, PepsiCo, Enron,
Lehman Brothers, Bristol-Myers Squibb, AlliedSignal and Prudential. LAI's fee
revenue has grown from $21.1 million in fiscal 1994 to $61.8 million in fiscal
1998, representing a compound annual growth rate of approximately 31%. This
growth rate compares favorably with the approximately 22% average compound
annual growth rate experienced by LAI's nine largest competitors during the same
period. On a pro forma combined basis assuming the acquisitions of WHI and CPI
were completed on March 1, 1997, LAI's fee revenue for fiscal 1998 was $91.7
million.
EXECUTIVE SEARCH INDUSTRY OVERVIEW
Executive search represents a $6.5 billion global market and is generally
separated into two broad fee-based categories: retained search firms and
contingency search firms. Retained search firms fulfill their clients' senior
leadership needs by identifying, evaluating, assessing and recommending
qualified candidates for senior level positions, typically with cash
compensation of $100,000 and above. Contingency search firms, on the other hand,
focus primarily on mid-level positions with cash compensation of less than
$150,000. Both types of firms normally are paid a fee for their services equal
to approximately one-third of the guaranteed first year cash compensation for
the position being filled.
Retained search firms currently serve the majority of the Fortune 500 as
well as numerous other organizations, including government agencies,
professional organizations and fast-growing entrepreneurial companies. Retained
firms are compensated for an assignment whether or not they are successful in
placing a recommended candidate. Contingency search firms also serve large
corporations; however, their primary focus is on small and medium sized
companies. Unlike retained search firms, contingency search firms are not
compensated for an assignment unless they successfully complete a search and
place a recommended candidate.
According to Kennedy Information, a leading industry publication, revenue
in the executive search industry historically has been divided almost evenly
between retained and contingency search firms; however, retained search firms
are estimated to employ only one-third of the consultants in the industry. Thus,
the average fee revenue per consultant for retained firms is substantially
higher than for contingency firms. Moreover, the predictable revenue stream
associated with a retained search enables a retained firm, such as LAI, to
devote more personnel and greater resources to an assignment than a contingency
search firm whose
21
<PAGE> 23
revenue is not assured. LAI believes this difference in payment structure
enables retained search firms to provide clients with more value-added
consulting services than contingency search firms.
The executive search industry has experienced consistent growth over the
past 20 years. Global executive search industry revenue has grown at a 17%
compound annual growth rate from approximately $3.5 billion in 1993 to
approximately $6.5 billion in 1997. Kennedy Information expects industry growth
to continue at a 15% annual rate, with revenue projected to reach $10.0 billion
by the year 2000.
GLOBAL EXECUTIVE SEARCH INDUSTRY REVENUE
(GRAPH)
The global executive search industry is highly fragmented, consisting of
more than 4,000 firms. In 1997, more than 80% of retained firms and
approximately 90% of contingency firms generated fewer than $2 million in
revenues. The top ten search firms, all of which operate on a retained basis,
accounted for approximately 11% of global industry revenue in 1997. However,
Kennedy Information predicts that these top ten firms will increase their market
share at an accelerating rate as they continue to offer clients increased
geographic reach, broader industry coverage, greater industry expertise and more
sophisticated technology and research support.
LAI believes that a number of trends have caused and will continue to cause
the executive search industry to experience significant growth. These trends
include:
Greater Demand for Managers with Broad Leadership Skills. Many companies
are facing a rapidly changing business environment due to an increase in
domestic and international competition, an increase in deregulation and more
widespread use of technology. The need to respond to this dynamic environment
and remain competitive has caused many companies to set higher standards for
their senior level executives. As these standards become more stringent, more
companies are looking outside their organizations to fill positions
traditionally reserved for internal candidates. The process of identifying and
evaluating executives is becoming increasingly difficult and, as a result, a
growing number of companies are relying on executive search firms to solve their
senior management and leadership needs. According to a study published in 1997
by Coopers &
22
<PAGE> 24
Lybrand HR Advisory Group, nearly two-thirds of the companies surveyed reported
using executive search professionals to recruit and hire senior level
executives.
Rapid Growth in Outsourcing. Many companies are outsourcing non-core
activities to reduce costs and increase efficiencies. These organizations often
engage independent, third party specialists to provide many non-revenue
generating functions that were previously performed in-house. Among the
functions most commonly outsourced are human resource and personnel functions,
including executive recruitment and hiring.
Growth of Multinational Business. The expansion of companies abroad and
the integration of global markets has created a growing demand for international
search capabilities. Consultants located in the country in which a position is
to be filled are often better able to identify candidates and execute searches
due to their familiarity with the local business community and culture and
available pool of executive candidates. Likewise, consultants located in the
country from which the search is originated often will better understand the
client's business strategy and recruitment needs. Executive search firms have
responded by forming affiliations with executive search firms in foreign
countries and by directly acquiring or opening foreign offices. LAI believes
that the ability to complete executive searches on a worldwide basis is an
important factor in attracting and retaining multinational clients.
Increase in Executive Turnover. In the past, it was common for executives
to spend an entire career with one or two organizations. However, in today's
rapidly changing business environment, executives often advance their careers by
working for a number of different organizations in various geographic locations.
Executive turnover has been particularly high in such growth industries as
health care and technology. This increase in executive turnover has intensified
the competition for highly qualified executives and forced many companies to
recruit executives on a more frequent basis.
Increase in Executive Compensation Levels. Compensation levels for
executives have increased considerably over the past several decades. According
to a study published in 1997 by William M. Mercer, Incorporated, the average
annual cash compensation for chief financial, chief executive and chief
operating officers grew at compound annual growth rates of 5.7%, 4.2% and 3.1%,
respectively, between 1992 and 1996. This increase in executive compensation,
among other factors, has caused many companies to be more rigorous in their
hiring practices, often retaining an executive search firm to assist in the
identification and evaluation of qualified candidates. In addition, because fees
for executive search firms are based on the compensation levels for positions
they are engaged to fill, higher executive compensation has translated into
higher executive search fees.
BUSINESS STRATEGY
LAI's objective is to be a global leader in providing comprehensive
consulting services aimed specifically at solving its clients' senior leadership
needs. The key elements of LAI's business strategy include:
Attract, Motivate and Retain High Quality Search Consultants. LAI has been
successful in attracting, motivating and retaining highly productive executive
search consultants as a result of its premium reputation, performance-based
consultant compensation and stock incentive plans. The Company's compensation
system is primarily based on consultant performance, which is measured by the
amount of fee revenue each consultant generates. Management believes that its
performance-based compensation system is among the most competitive in the
industry. LAI's ability to attract talented consultants is demonstrated by the
large number of consultants who previously held senior level positions with
leading companies in LAI's targeted industry sectors. In addition, LAI believes
its status as a public company provides it with a strong competitive advantage
in attracting and retaining highly qualified consultants through ownership of
Common Stock and participation in the Company's stock incentive plans. The
Company believes that equity ownership by its consultants fosters a
team-oriented working environment and aligns the interests of its consultants
with its
23
<PAGE> 25
investors. The Company has experienced an average annual turnover rate among its
consultants of less than 8% over the last five fiscal years.
Build on Knowledge-Based Practice Groups. LAI believes a thorough
understanding of both its clients and the industries in which they operate are
among the most significant factors in obtaining and completing search
assignments. Accordingly, LAI has developed a knowledge-based search practice
organized around eight industry groups and one functional group. The industry
groups execute searches for clients in the following business sectors:
automotive; communications, entertainment and technology; consumer products and
services; energy and natural resources; financial services; health care and
pharmaceuticals; industrial; and insurance and risk management. The functional
group executes searches for specific functional positions, including board of
directors, human resources and legal. Each practice group is coordinated under
the direction of a Practice Leader who establishes the marketing and search
strategies for that practice group. LAI intends to continue to build its
existing and expand into new practice groups by (i) hiring consultants with
substantial experience and significant client relationships in the Company's
targeted industry sectors and (ii) completing strategic acquisitions. The
acquisitions of WHI and CPI strengthened LAI's existing practice groups,
particularly in the areas of financial services, health care and technology, and
added new practice groups in the areas of automotive, insurance, and media and
entertainment.
Build Long-Term, Consultative Relationships. LAI strives to develop
long-term relationships by becoming a consulting partner with its clients. To
position itself as a consulting partner, the Company works closely with clients
to gain an in-depth understanding of their unique organizational structure,
history, operations, culture, strategic objectives and leadership needs. In
addition, the Company's focus on knowledge-based practice groups enables its
consultants to provide more specialized and efficient service to LAI's clients.
Each of LAI's 30 largest clients, based on fiscal 1998 fee revenue, had been a
client for an average of approximately seven years as of February 28, 1998. More
than 65% of the Company's fiscal 1998 fee revenue was attributable to companies
for which LAI conducted one or more searches during the prior two fiscal years.
Capitalize on Research and Technology. LAI believes that its industry
specialization and technological capabilities enable it to consistently provide
superior research and, ultimately, deliver higher quality search results to its
clients. LAI's 116 associates, researchers and IT professionals provide timely
industry, company and compensation information to consultants using numerous
information sources. LAI also maintains a proprietary database containing
professional information on more than 100,000 executive candidates. Consultants
can query this database on a variety of attributes, including demographic
information, work experience, compensation and personal interview results. LAI's
wide area computer network provides remote document sharing and data search
capabilities, groupware features and real-time updates on ongoing search
engagements.
Reduce Search Cycle Times. LAI believes that the ability to reduce the
time required to perform a search ("cycle time") will be a key differentiating
factor among executive search firms in the future. In an effort to reduce its
average cycle time, LAI is investing in technology upgrades, refining its
research process, strengthening its knowledge-based practice groups and closely
evaluating each step of the placement process. Reduced cycle times would enable
LAI's consultants to complete more assignments in a given period of time,
resulting in increased client satisfaction, higher fee revenue per consultant
and enhanced profitability.
24
<PAGE> 26
GROWTH STRATEGY
LAI has competed successfully in the executive search industry and has
capitalized on the growing demand for executive search services. LAI's fee
revenue has increased from $21.1 million in fiscal 1994 to $61.8 million in
fiscal 1998, representing a compound annual growth rate of 31%. On a pro forma
basis assuming the acquisitions of WHI and CPI were completed on March 1, 1997,
LAI's fee revenue was $91.7 million in fiscal 1998. LAI's growth has been
achieved by increasing the number of consultants at existing offices, improving
fee revenue per consultant, opening new offices and successfully executing and
integrating strategic acquisitions. LAI intends to continue to extend the reach,
breadth and penetration of its services both domestically and internationally
through internal and external growth. The key elements of LAI's growth strategy
include:
Leverage Existing and Develop New Client Relationships. LAI intends to
increase fee revenue by obtaining additional search engagements from existing
clients and by developing relationships with new clients. LAI focuses on
accounts from which it obtains, or believes it can obtain, a significant number
of search assignments ("focused accounts"). LAI invests significant resources in
its focused accounts to better understand their business strategies and culture
and eventually position the Company as a consulting partner to its clients.
Accordingly, LAI emphasizes long-term relationships with its clients, rather
than one-time projects or assignments. Consultants also spend substantial time
marketing LAI's services to carefully selected prospective clients within their
practice groups. Search assignments often are awarded after a small number of
search firms are invited to make presentations to a prospective client's senior
management or Board of Directors. In fiscal 1998, LAI obtained search
engagements from a majority of the presentations in which it participated. The
Company attributes its success to its knowledge-based practice groups and
consultative approach as well as the premium reputation LAI has developed.
Expand Existing and Selectively Open New Offices. LAI has added and
intends to continue adding experienced, highly qualified executive search
consultants to its practice. The Managing Partner of each office is responsible
for recruiting new consultants to LAI, and a significant factor in determining
the Managing Partner's compensation is the success of these efforts. During
fiscal 1998, LAI added a net total of 12 consultants to new and existing
offices, excluding consultants added in connection with the acquisitions of WHI
and CPI. LAI also continually evaluates the desirability of opening new offices.
Since early 1997, the Company has opened offices in Boston, Massachusetts;
Stamford, Connecticut; Pittsburgh, Pennsylvania; Austin, Texas and London,
England.
Consolidate Fragmented Industry; Leverage Public Company Status. LAI
believes that acquisitions provide an efficient, cost-effective method to
increase the Company's number of consultants, expand its client base, strengthen
and expand its practice group coverage and broaden its geographic reach. Given
the highly fragmented nature of the executive search industry, the Company
believes numerous acquisition opportunities exist. In addition, LAI believes its
status as the only U.S. based publicly traded company focused exclusively on
executive search makes it an attractive consolidation partner and provides it
with an acquisition currency and the financial flexibility to effectively pursue
this aspect of its growth strategy. LAI completed two acquisitions in fiscal
1998 and is actively pursuing additional acquisitions in strategic locations
throughout the world.
Penetrate International Markets. Revenue in the global executive search
industry has grown at a 17% compound annual growth rate from approximately $3.5
billion in 1993 to approximately $6.5 billion in 1997 and includes more than
4,000 search firms. The industry is expected to continue to grow at a 15% annual
rate with global revenue projected to reach $10.0 billion by the year 2000. LAI
believes that global search fulfillment capabilities are critical to attracting
and retaining multinational clients. Historically, LAI has offered its clients
global search fulfillment capabilities through its membership in Amrop
International, an international alliance of independent search firms. However,
to better leverage its knowledge-based expertise
25
<PAGE> 27
and technological capabilities, capitalize on its existing relationships with
multinational clients and ensure the quality and consistency of its services,
LAI recently initiated an international strategy of directly owning offices in
major business and financial centers around the world. In May 1998, LAI opened
an office in London, England and is currently targeting other major markets in
which to establish offices. In international markets where LAI does not own an
office, it will continue to provide clients with search fulfillment capabilities
by using existing and developing new referral relationships with executive
search firms located in those markets. Through these referral relationships, LAI
executes domestic search assignments on behalf of non-U.S. executive search
firms and refers to such firms international search assignments for LAI's
domestic clients.
Since continuing as a member of Amrop International was incompatible with
the Company's international expansion strategy, LAI announced its withdrawal
from Amrop International in May 1998. Searches derived from membership in Amrop
International accounted for approximately 3% of LAI's fiscal 1998 fee revenue.
However, LAI has built strong referral relationships with many Amrop members
throughout the world and expects to maintain these relationships to continue
providing clients with global search fulfillment capabilities in markets where
LAI does not directly own an office. LAI believes that its global search
capabilities will be enhanced by its strategy of direct ownership of
international offices.
SERVICES
LAI provides executive search services exclusively on a retained search
basis for Fortune 500 and large private companies. The Company typically is
retained to identify candidates to fill its clients' senior leadership
positions, which range from brand managers and controllers to chief operating
and chief executive officers. The average first year cash compensation of
positions for which LAI conducted searches in fiscal 1998 was approximately
$226,000.
LAI serves its clients in a consultative capacity by (i) assessing the
client's existing management capabilities, corporate culture and business
strategies, (ii) evaluating the client's industry position and major
competition, (iii) determining the relevant business experience, skills and
personal characteristics that a qualified candidate should possess, (iv)
identifying, contacting and interviewing potential candidates, (v) developing
detailed candidate reports and making recommendations to the client regarding
the most qualified candidates, (vi) advising the client with respect to
appropriate compensation and benefits and (vii) monitoring the quality of its
search procedures with client surveys and other client feedback mechanisms.
In providing high quality executive search services, the Company uses a
team-oriented approach rather than relying on the reputation of a few key
consultants. Each of LAI's consultants is expected to develop and maintain an
expertise in one or two industries and build long-term relationships with a
limited number of clients. To maintain a high level of quality on a consistent
basis, consultants employ LAI's standard executive search process for each new
search assignment, regardless of how similar the parameters of the new search
may be to other search assignments previously conducted by LAI. At the start of
each search assignment, LAI and its client jointly develop detailed candidate
and job specifications and establish a search strategy that targets specific
industries and companies that are expected to produce the most appropriate
candidates. LAI's consultants and research staff then contact potential
candidates, distribute job specifications and client promotional materials,
conduct extensive telephone and personal interviews, and check references of
those candidates who appear most qualified for the position. Because most
candidates are successfully employed and not seeking to change jobs, initial
contact must be conducted discreetly.
After meeting with job candidates, LAI submits to the client confidential
candidate reports regarding those candidates who LAI believes are the most
qualified. Each report contains a detailed business history of the candidate,
results of LAI's preliminary reference checks and LAI's assessment of the
candidate's relevant
26
<PAGE> 28
business experience, qualifications, personal characteristics and suitability.
LAI then assists in the introduction of selected candidates to the client and
administers the interview process. When the client is ready to extend an
employment offer, LAI facilitates the negotiation of employment terms and the
transition by the candidate to the employ of the client.
LAI has also recently begun to provide a new service offering, known as
"selection services," to complement its core executive search practice.
Selection services typically involves searches for mid-to senior-level positions
with cash compensation in the $75,000 to $125,000 range, frequently for a client
seeking to fill multiple positions under a single search engagement. LAI's
approach to selection services is similar to its other executive searches, in
that search consultants evaluate the needs of each client and develop
appropriate job specifications and profiles. However, selection services
frequently differs from other executive searches in the way the successful job
candidate is located. In traditional executive search, LAI identifies and seeks
out specific candidates who ordinarily are not actively looking to change jobs.
In a selection services engagement, by contrast, LAI invites inquiries from
interested candidates in response to a job posting advertised either in print,
such as in The Wall Street Journal, or on the Internet, and then evaluates,
analyzes and ranks the candidates based on inquiries and responses received. The
Company supplements this data with highly focused research, using LAI's
proprietary database and other information sources. To expand and manage
selection services more efficiently, the Company recently licensed an
Internet-based software program. This software will enable LAI to use the
Internet to advertise job opportunities, solicit responses and gather relevant
employment histories from interested candidates; search, sort and evaluate the
resulting database; and pre-select interested candidates based on pre-determined
criteria. Job candidates will also be able to complete job applications on-line,
submit writing samples and complete skill assessment worksheets.
Similar to traditional executive searches, LAI's fee for selection services
is usually based on a percentage of the first year cash compensation for each
position filled, though selection services engagements may include other minimum
or contingent fee provisions. Although the average first year cash compensation
for the position being filled is typically less for a selection services
engagement than for LAI's core executive search practice, the Company can
achieve lower costs and higher profit margins on selection services because
these engagements involve multiple assignments of the same type and are less
labor intensive. The volume and efficiencies typically associated with selection
services provide LAI with an opportunity to enhance both total fee revenue and
average fee revenue per consultant. In addition, offering selection services
provides LAI's consultants with the ability to cross-sell a new service offering
to both new and existing clients.
MARKETING AND CLIENTS
The Company's marketing strategy includes three primary components:
capitalize on its knowledge-based practice groups and long-term client
relationships; penetrate the domestic market through its regional office
structure and the international market through direct ownership of offices in
major business and financial centers around the world; and implement a global
branding program. LAI believes that its industry specialization and
technological capabilities enable it to consistently provide superior research
and, ultimately, deliver higher quality search results to its clients.
Knowledge-Based Practice Groups. LAI has developed a knowledge-based
search practice organized around eight industry groups and one functional group.
The industry groups execute searches for clients in the following business
sectors: automotive; communications, entertainment and technology; consumer
products and services; energy and natural resources; financial services; health
care and pharmaceuticals; industrial; and insurance and risk management. The
functional group executes searches for specific functional positions, including
board of directors, human resources and legal. Each practice group is
coordinated by a Practice Leader who is responsible for developing new business
and maintaining a high standard of service in that practice group. To achieve
these objectives, each group's Practice Leader (i) establishes the marketing and
search strategies for the particular practice group, (ii) identifies focused
accounts and targets clients within
27
<PAGE> 29
that practice group's business sector and (iii) facilitates and assists the
marketing activities of other consultants in the practice group. Each Practice
Leader has substantial industry expertise, frequently having held one or more
executive positions in the group's business sector prior to becoming a search
consultant. Additionally, LAI's Practice Leaders have an average of
approximately 13 years of experience in the executive search industry.
The following table sets forth certain information regarding LAI's practice
groups. The companies listed in this table are selected clients with which the
Company anticipates having a continuing significant relationship in the future.
The listed clients of LAI's industry groups include (i) companies that are
either the largest or among the largest clients in the indicated practice group
based on the Company's pro forma fiscal 1998 fee revenue received from such
clients, (ii) companies that have been clients for several years or more and
(iii) companies for which LAI conducted multiple searches in fiscal 1998. The
listed clients of LAI's functional group each engaged LAI to conduct at least
one search in fiscal 1998.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF PRO FORMA
FISCAL 1998
PRACTICE GROUP FEE REVENUE(1) SELECTED CLIENTS
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Services 24.5% Banc One, Banco Santander, Lehman
Brothers, Societe Generale
- -----------------------------------------------------------------------------------------------
Communications, Entertainment and 20.4 America Online, GTE, IBM, Lucent
Technology Technologies
- -----------------------------------------------------------------------------------------------
Health Care and Pharmaceuticals 14.3 Bristol-Myers Squibb, Columbia/HCA,
Schering-Plough, PhyMatrix
- -----------------------------------------------------------------------------------------------
Consumer Products and Services 10.8 Grand Metropolitan, Home Depot, Kohler,
PepsiCo
- -----------------------------------------------------------------------------------------------
Industrial 9.0 AlliedSignal, Cooper Industries,
General Electric, Georgia Pacific
- -----------------------------------------------------------------------------------------------
Insurance and Risk Management 6.7 Equitable, Prudential, Zurich Kemper
- -----------------------------------------------------------------------------------------------
Energy and Natural Resources 6.5 Amerada Hess, Enron, Pennzoil
- -----------------------------------------------------------------------------------------------
Automotive 3.7 B.F. Goodrich, General Motors
- -----------------------------------------------------------------------------------------------
Functional (Board of Directors, 4.1 Eastman Chemical, Gillette, Lockheed
Human Resources, Legal) Martin, Waste Management
- -----------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Includes LAI, WHI and CPI fee revenue for their fiscal years ended February
28, 1998, December 31, 1997 and December 31, 1997, respectively.
LAI's practice groups enable its consultants to better understand each
client's business strategy and industry and position LAI as a consulting partner
to its clients. LAI emphasizes long-term relationships with clients, rather than
one-time projects or assignments. Each of LAI's 30 largest clients, based on
LAI's fiscal 1998 fee revenue, had been a client for an average of approximately
seven years as of February 28, 1998. In addition, more than 65% of the Company's
fiscal 1998 fee revenue was attributable to companies for which LAI conducted
one or more searches during the prior two fiscal years.
Domestic and International Offices. To complement its knowledge-based
practice groups, the Company has established 17 domestic offices and one
international office in cities that are key business centers for one or more of
the Company's practice groups. Each major office is run by a Managing Partner
who has complete fiscal responsibility for that office. The Managing Partner's
principal responsibilities include overseeing day-to-day operational and
administrative matters at the local office level, providing assistance to
consultants in that office, assuring quality control in business development and
search execution, hiring and supervising office
28
<PAGE> 30
personnel and serving on an internal operations committee. While compensation
for other consultants is based primarily on individual performance, compensation
for Managing Partners is based largely on the profitability of their respective
local office, as well as on their ability to successfully recruit highly
qualified consultants to LAI. Since consultants have greater opportunities to
develop relationships with clients and prospective clients in close geographic
proximity, they normally focus on, but do not limit their efforts to, clients in
the region served by their particular office. Over time, consultants seek to
establish deep roots in the community and develop strong links with local
business, government and cultural leaders. LAI's domestic offices are located in
Atlanta, Austin (Texas), Barrington (Illinois), Boston, Chicago, Cleveland,
Dallas, Encino (California), Houston, Lake Geneva (Wisconsin), Los Angeles, New
York, Phoenix, Pittsburgh, San Francisco, Stamford and Tampa. In addition, LAI
has an office located in London, England.
Branding Initiatives. The Company historically has relied primarily on
client referrals and the efforts of its consultants, particularly its Practice
Leaders, to market the Company's services. More recently, LAI also has
implemented a global branding program to supplement the marketing efforts of the
Company's consultants. The global branding program is designed to significantly
increase LAI's visibility. The program involves (i) strengthening LAI's
reputation in cities where LAI offices are located through local event
sponsorship, board participation and local public relations, (ii) enhancing
LAI's reputation in the industries served by the Company's knowledge-based
practice groups through trade journal advertising, targeted mailings, and
participation in industry associations and conferences and (iii) building both a
national and global reputation through news releases, participation in industry
forums and issuance of specialized reports.
Blocking Arrangements. Either by agreement with clients or for marketing
or client relations purposes, executive search firms frequently refrain from
recruiting employees of a client, and possibly other entities affiliated with
that client, for a specified period of time (a "blocking" arrangement). LAI
actively manages its blocking arrangements and seeks to mitigate any adverse
effects of blocking by strengthening its long-term relationships with focused
accounts, shortening the length of the off-limits period and by resisting
requests for blocking arrangements with clients who do not engage LAI for
multiple assignments. Additionally, in recent years market conditions and
industry practices have resulted in blocking arrangements that are becoming
narrower in scope and shorter in duration. See "Risk Factors -- Blocking
Arrangements."
RESEARCH AND TECHNOLOGY
LAI believes that its industry specialization and technological
capabilities enable it to consistently provide superior research and,
ultimately, deliver higher quality search results to its clients. Search
consultants must understand a client's industry, competitors and business
strategies and be able to readily identify the universe of most qualified
executive candidates. LAI's 116 associates, researchers and IT professionals
support the Company's consultants by, among other things, gathering and
analyzing information obtained from numerous electronic databases, trade
journals and directories, the Internet and other sources. LAI also maintains a
proprietary database containing professional information on more than 100,000
executive candidates. Consultants can query this database on a variety of
attributes, including demographic information, work experience, compensation and
personal interview results. LAI's wide area computer network provides remote
document sharing and data search capabilities, groupware features and real-time
updates on ongoing search engagements. LAI is committed to continually upgrading
its proprietary database and other information sources to enable LAI's
consultants to retrieve relevant information quickly and efficiently.
The Company's support functions, including its research department, are
coordinated from its Tampa, Florida office. In the search process, the principal
function of LAI's research department is to support the Company's consultants by
gathering and analyzing information on the industries and companies expected to
produce the most qualified candidates. LAI's research professionals also support
the Company's business development activities by providing target lists, data on
past LAI searches and information on companies and executives in target
industries. LAI's researchers typically have had professional research or
library training
29
<PAGE> 31
and experience prior to joining LAI, and many have undergraduate and graduate
degrees in such fields as library science. LAI's research staff is organized by
practice group, with most researchers specializing in one or two specific
industries. Unlike many of its competitors, LAI researchers do not work
exclusively for particular executive search consultants. LAI believes its
focused approach facilitates the development of specialized expertise, promotes
a consistent culture and cooperation across the firm and standardizes
communication and training.
PROFESSIONAL STAFF AND EMPLOYEES
At April 30, 1998, LAI had 386 full time employees, of which 114 were
executive search consultants, 116 were associates, researchers or IT
professionals and 156 were administrative and support staff. LAI has never been
a party to any collective bargaining agreement and considers relations with its
employees to be good.
LAI's search professionals are categorized either as consultants,
consisting of partners and principals, or as associates. Associates are junior
search professionals who generally do not directly execute search assignments,
but assist partners and principals by performing research and other functions.
After several years of experience and satisfactory performance, an associate
will be considered for promotion to the position of principal. If a principal
continues to develop and generate revenue, the principal will be offered the
opportunity to advance to the position of partner. Promotions depend on a
variety of factors, including productivity and business development. As a matter
of corporate philosophy, LAI strives to hire as associates only those
individuals it believes have the potential to become productive consultants.
LAI's consultants (excluding those who joined LAI in connection with the
recent acquisitions of WHI and CPI) have been employed by the Company for an
average of approximately four years. LAI has experienced an average annual
turnover rate among its consultants of less than 8% over the last five fiscal
years. At April 30, 1998, there were 94 partners, 20 principals and 41
associates. Most of LAI's consultants held senior level positions with leading
companies in LAI's targeted industry sectors and had experience in the executive
search business prior to joining LAI. LAI's consultants have, on average,
approximately 11 years of experience in the executive search industry.
LAI has been able to attract and retain some of the most productive
executive search consultants in the industry as a result of its premium
reputation, performance-based consultant compensation system and stock incentive
plans. The Company believes the salaries, commissions, bonuses and profit
sharing it pays to its consultants are among the industry's highest as a
percentage of fee revenue generated. Although consultants are paid base
salaries, a significant portion of most consultants' compensation consists of
incentive compensation that is dependent primarily upon the amount of fee
revenue they generate. See "Risk Factors -- Dependence on Attracting and
Retaining Qualified Executive Search Consultants" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."
COMPETITION
The executive search industry is highly competitive. It is estimated that
there are more than 4,000 executive search firms worldwide. There are relatively
few barriers to entry and new competitors frequently enter the market. While LAI
faces competition to some degree from all firms in the industry, the Company
believes its most direct competition comes from other retained search firms. In
particular, LAI competes with the largest firms in the industry: Heidrick &
Struggles, Inc., Korn/Ferry International, SpencerStuart & Associates, Russell
Reynolds Associates, Inc. and Egon Zehnder International. To a lesser extent,
LAI also faces competition from smaller boutique or specialty firms that may
compete in certain regional or functional markets and from in-house human
resource departments of clients and prospective clients. Some of LAI's
competitors possess greater resources and name recognition than LAI. Each firm
with which LAI competes is also a competitor in seeking to attract the most
productive search consultants. In the Company's experience,
30
<PAGE> 32
the executive search business is more quality-sensitive than price-sensitive. As
a result, LAI competes on the level of service it offers, reflected by its
knowledge-based practice groups and individual client focus, and, ultimately,
the quality of its search results.
FACILITIES
The Company leases all of its office locations. As of February 28, 1998,
the Company leased an aggregate of approximately 155,186 square feet of office
space under leases calling for future minimum lease payments of approximately
$23.2 million and with remaining terms of between one and nine years (exclusive
of renewal options exercisable by LAI). LAI believes that its facilities are
adequate for its current needs and that it will not have difficulty leasing
additional office space to satisfy anticipated future needs.
INSURANCE
LAI maintains insurance in such amounts and with such coverages and
deductibles as management believes are adequate. The principal risks that LAI
insures against are professional liability, workers' compensation, personal
injury, bodily injury, property damage and fidelity losses. There can be no
assurance that the Company's insurance will adequately protect it from potential
losses and liabilities. See "Risk Factors -- Executive Search Liability Risk."
LEGAL PROCEEDINGS
From time to time the Company has been involved in litigation incidental to
its business. LAI currently is not a party to any litigation the adverse
resolution of which, in management's opinion, would be likely to have a material
adverse effect on the Company's business, financial condition or results of
operations.
31
<PAGE> 33
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding LAI's
executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Robert L. Pearson(3).................................. 59 President, Chief Executive
Officer, Director
Jack P. Wissman....................................... 46 Executive Vice President and Chief
Financial Officer
Joe D. Goodwin(1)..................................... 52 Executive Vice President, Director
Roderick C. Gow(2).................................... 50 Executive Vice President, Director
John S. Rothschild(2)................................. 45 Executive Vice President, Director
David L. Witte(1)..................................... 56 Executive Vice President, Director
Philip R. Albright.................................... 28 Vice President -- Finance
John F. Johnson(3).................................... 56 Chairman of the Board of Directors
Ray J. Groves(3)...................................... 62 Director
Richard W. Pogue(2)................................... 70 Director
John C. Pope(1)....................................... 49 Director
</TABLE>
- ---------------
(1) Term expires in 1998.
(2) Term expires in 1999.
(3) Term expires in 2000.
LAI's directors are divided into three classes elected for three-year
terms, which are staggered so that the term of one class of directors expires
each year.
Robert L. Pearson joined the Company in 1984 and has served as President
and Chief Executive Officer and a Director since 1995. Mr. Pearson served as
Executive Director with Russell Reynolds Associates, Inc. from 1982 until 1984.
He owned and was President of Pearson, Inc., an equipment manufacturing company,
from 1971 until 1982; was Vice President, Corporate Finance, of R. J. Financial
Corporation, a financial services holding company, from 1968 until 1970; and was
an engagement manager and management consultant with McKinsey & Company, Inc.
from 1964 until 1968. Mr. Pearson holds an M.S. in Industrial Management from
Massachusetts Institute of Technology and a B.S.E.E. from Michigan State
University. Mr. Pearson's employment agreement requires the Company to use its
good faith efforts, during the term of such agreement, to nominate Mr. Pearson
to the Board of Directors.
Jack P. Wissman joined the Company in 1981 and became Executive Vice
President and Chief Financial Officer in 1997. He previously served as Vice
President and Chief Administrative Officer of the Company. Mr. Wissman also
served as a Director from 1987 until July 1997. Prior to joining LAI, Mr.
Wissman was a certified public accountant with Arthur Andersen LLP from 1974
until 1981. He holds a B.S.B.A. in Accounting from Bowling Green State
University.
Joe D. Goodwin joined the Company in 1991, and has been Managing Partner of
LAI's Atlanta and Tampa offices since 1992, a Director since July 1997 and an
Executive Vice President since April 1998. Mr. Goodwin held various positions,
including Partner and Managing Director, with SpencerStuart & Associates from
1982 until 1991. Mr. Goodwin also held various executive positions with McKinnis
& Goodwin, an executive search firm, from 1979 until 1982; with Burger King
Corporation from 1978 until 1979;
32
<PAGE> 34
and with Xerox Corporation from 1969 until 1978. Mr. Goodwin holds a B.S. in
Commerce and Business Administration from the University of Alabama.
Roderick C. Gow joined the Company and has served as Managing Partner of
LAI's New York office since 1995, a Director since July 1997 and an Executive
Vice President since April 1998. Mr. Gow also has operational responsibility for
LAI's Boston and Stamford offices. Mr. Gow held various positions, including
Managing Director, with Russell Reynolds Associates, Inc., an executive search
firm, from 1983 until 1991 and then again from 1994 until 1995. Mr. Gow was
Chief Executive Officer of GKR Group, an executive search firm based in the
United Kingdom, from 1991 until 1994; was Vice President with Barclays Bank Plc
from 1978 until 1983; and prior to that time served with the British Army. Mr.
Gow holds an M.A. and a B.A. from Trinity College, Cambridge University.
John S. Rothschild joined the Company and has served as Managing Partner of
LAI's Chicago office since 1996, a Director since July 1997 and an Executive
Vice President since April 1998. Mr. Rothschild held various positions,
including Partner and Director, with Heidrick & Struggles, Inc., an executive
search firm, from 1989 until 1996. Mr. Rothschild held positions, including
National Director, Human Resources and Director, Human Resources Consulting
Practice, with Grant Thornton from 1981 until 1989. He served in various
executive positions with American Hospital Supply Corporation from 1978 until
1981; and with GATX Corporation from 1975 until 1978. Mr. Rothschild holds an
M.S. in Industrial Relations from Loyola University and a B.A. in Political
Science from Lake Forest College.
David L. Witte joined the Company in February 1998 in connection with the
acquisition by the Company of WHI, and has been a Director since joining the
Company and an Executive Vice President since March 1998. Mr. Witte served as
President and Chief Executive Officer and Chairman of the Board of Directors of
WHI from 1990 until LAI's acquisition of WHI in February 1998. WHI is now a
wholly-owned subsidiary of the Company. Pursuant to the Agreement and Plan of
Merger entered into in connection with the WHI acquisition, Mr. Witte was
elected to the Board of Directors of the Company upon closing of the
acquisition, and the Company is obligated to use its best efforts to cause Mr.
Witte to be elected to the Board of Directors of the Company at the next annual
meeting of stockholders for a three year term. Mr. Witte holds a B.S. from
Michigan State University.
Philip R. Albright joined the Company in 1997 serving as Controller and was
appointed Vice President -- Finance in 1998. Mr. Albright, a certified public
accountant, was employed by Arthur Andersen LLP from 1992 until 1997. He holds a
B.S.Acc. and a M.Acc. from the University of Florida.
John F. Johnson joined the Company in 1976 and has served as Chairman of
the Board of Directors since 1995. Mr. Johnson previously served as Executive
Vice President and President and Chief Executive Officer of LAI, as well as
Chairman of Amrop International. Mr. Johnson held various positions, including
Manager of Organization and Manpower, with General Electric Company from 1967
until 1976; and Industrial Relations Analyst with Ford Motor Company from 1964
until 1967. Mr. Johnson holds an M.B.A. from Columbia University and a B.A. in
Economics from Tufts University.
Ray J. Groves has been a Director since July 1997. Mr. Groves served as
Chairman and Chief Executive Officer of Ernst & Young, an international
accounting and financial consulting firm, for 17 years prior to his retirement
in 1994. Mr. Groves also serves as Chairman of Legg Mason Merchant Banking,
Inc., and as a Director of Allegheny Teledyne, Incorporated, Consolidated
Natural Gas Company, Electronic Data Systems Corporation, Marsh & McLennan
Companies, Inc. and RJR Nabisco, Inc. Mr. Groves holds a B.S. from The Ohio
State University.
Richard W. Pogue served as an advisor to LAI's Board of Directors from 1995
until he became a Director in July 1997. Mr. Pogue has served as Senior Advisor
to Dix & Eaton, a public relations firm, since 1994. Mr. Pogue held various
positions with the law firm of Jones, Day, Reavis & Pogue, from 1957 until
retiring
33
<PAGE> 35
from his position as Senior Partner in 1994. Mr. Pogue also serves as a Director
of Derlan Industries Ltd., Continental Airlines, Inc., OHM Corporation, M.A.
Hanna Company, Rotek Incorporated, KeyCorp and TRW Inc. Mr. Pogue holds a
bachelor's degree from Cornell University and a law degree from the University
of Michigan.
John C. Pope served as an advisor to LAI's Board of Directors from 1995
until he became a Director in July 1997. Mr. Pope held various positions,
including President and Chief Operating Officer, of UAL Corporation, owner of
United Airlines, from 1988 until his retirement in 1994. Prior to that time Mr.
Pope spent 11 years with AMR Corporation in various financial capacities,
including Chief Financial Officer. Mr. Pope also serves as Chairman of the Board
of Directors of MotivePower Industries, Incorporated and as a Director of
Federal Mogul Corporation, Medaphis Corporation, Wallace Computer Services,
Inc., Waste Management, Inc. and Dollar Thrifty Automotive Group, Inc. He holds
a bachelor's degree from Yale University and an M.B.A. from Harvard Business
School.
COMMITTEES OF THE BOARD OF DIRECTORS
LAI's Board of Directors has the following standing committees:
Compensation and Management Development Committee. The Compensation and
Management Development Committee (the "Compensation Committee") is responsible
for establishing and recommending to the Board of Directors the Company's
compensation philosophy, including general compensation, severance and change in
control arrangements for consultants, Managing Partners, Practice Leaders and
executive officers. The Compensation Committee also establishes and recommends
to the Board of Directors the Company's stock option philosophy, including
granting of awards under all equity-based incentive plans and recommendations
for adoption of new plans. The Compensation Committee sets executive officer
compensation, including annual reviews, and negotiates and approves all
executive officer employment agreements. The Compensation Committee reviews all
existing compensation plans and programs and all amendments thereto, and
recommends the adoption of any new plans. In addition, the Compensation
Committee reviews and coordinates with the full Board of Directors the Company's
senior leadership structure and helps to identify personnel for the next
generation of the Company's leadership. The Compensation Committee's three
members are Messrs. Groves, Pogue and Pope (Chairman), all of whom are
"Non-Employee Directors," as defined under the Securities Exchange Act of 1934.
Audit Committee. The Audit Committee is responsible for reviewing with
management the financial controls, accounting and audit and reporting activities
of the Company. The Audit Committee annually recommends to the Board of
Directors the Company's independent auditors, meets with the independent
auditors before and after the annual audit to review the results of the audit
and the performance of management in implementing the auditors' recommendations,
reviews significant changes in accounting practices and the Company's
implementation of new accounting rules and evaluates annual audit fees. In
addition, the Audit Committee reviews each Annual Report on Form 10-K, including
a review of the Company's financial statements and the related management's
discussion and analysis of financial condition and results of operations. The
Audit Committee's three members are Messrs. Groves (Chairman), Pogue and Pope,
all of whom are Non-Employee Directors.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee is responsible for recommending to the Board of
Directors management's nominees for election to the Board of Directors. This
Committee establishes criteria for qualification and selection of directors,
establishes Board Committees by function, size and responsibilities and
recommends the same to the Board of Directors for adoption and membership
determination, and coordinates responses to stockholder proposals in conjunction
with management and counsel. The Nominating and Corporate Governance Committee's
four members are Messrs. Johnson, Pearson, Pogue and Pope.
34
<PAGE> 36
Executive Committee. The Executive Committee has been granted authority,
subject to the limitations specified in the Florida Business Corporation Act, to
act in the place and stead of the full Board of Directors, including when it is
inconvenient or impossible to convene a meeting of the full Board or when
specific tasks have been assigned to the Executive Committee. The Executive
Committee took no actions and held no meetings during fiscal 1998. The Executive
Committee's four members are Messrs. Johnson, Pearson, Pogue and Pope.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Initial Public Offering, the Board of Directors did not have a
Compensation Committee and the functions of the Compensation Committee
previously had been performed by the entire Board of Directors. Since completion
of the Initial Public Offering in July 1997, the Compensation Committee's three
members have been Messrs. Groves, Pogue and Pope (Chairman), all of whom are
Non-Employee Directors. See "-- Committees of the Board of
Directors -- Compensation and Management Development Committee."
DIRECTOR COMPENSATION
Non-Employee Directors receive $1,000 for each meeting of the Board of
Directors attended and $1,000 for each meeting of a committee of the Board of
Directors attended. Non-Employee Directors who serve as Chairman of a committee
of the Board of Directors receive an additional $500 for each meeting chaired.
In addition, Non-Employee Directors receive an annual retainer fee of $12,000,
paid quarterly. Non-Employee Directors may make an annual election to defer
receipt of all or a portion of the retainer and meeting fees and to have such
deferral credited in the form of either cash or "units," the value of which is
based on the value of the Company's Common Stock, in accordance with LAI's
Directors' Deferral Plan (the "Directors' Deferral Plan"). Directors who opt for
the stock unit alternative receive a 25% premium in initial value. Fees deferred
under the cash deferral alternative earn interest as determined under the
Directors' Deferral Plan. Directors also are reimbursed for reasonable travel
expenses to and from meetings of the Board of Directors and committees.
Directors who are employees of the Company do not receive compensation for
serving as Directors.
The Company grants to each Non-Employee Director, upon initial appointment
to the Board of Directors, a stock option to purchase 5,000 shares of Common
Stock pursuant to LAI's Non-Employee Directors' Stock Plan (the "Directors'
Stock Plan"). In addition, as of the date of each annual meeting of the
Company's stockholders, the Company grants to each Non-Employee Director who is
then reelected or who is continuing as a member of the Board of Directors a
stock option to purchase 5,000 shares of Common Stock. The exercise price of
each such stock option is equal to the closing price of Common Stock on the date
the stock option is granted. Stock options issued under the Directors' Stock
Plan generally vest fully on the first anniversary of the date of grant and
expire after five years. Stock options to purchase an aggregate of up to 15,000
shares of Common Stock are outstanding under the Directors' Stock Plan, and an
aggregate of 80,000 shares of Common Stock (including the shares covered by such
outstanding stock options) are reserved for issuance under the Directors' Stock
Plan.
35
<PAGE> 37
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for fiscal 1997 and fiscal 1998 of the Company's executive officers
during such periods (the "Named Executive Officers," as defined under applicable
Securities and Exchange Commission rules).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
AWARDS
--------------------------
SHARES OF
ANNUAL COMPENSATION COMMON
------------------------------------- RESTRICTED STOCK
FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS($) OPTIONS (#) COMPENSATION(3)
- --------------------------- ------ -------- -------- --------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. Pearson................ 1998 $525,000 $420,240 $8,526 $364,189(4) 97,000 $12,800
President and Chief 1997 250,000 902,238 8,465 -- -- 22,500
Executive Officer
Jack P. Wissman.................. 1998 250,000 115,585 7,073 -- 74,000(5) 12,800
Executive Vice President 1997 130,000 279,102 4,419 -- -- 22,500
and Chief Financial Officer
</TABLE>
- ---------------
(1) Consists of performance-based bonuses based upon individual achievement and
LAI financial performance for the indicated fiscal years.
(2) Consists of above-market interest on deferred compensation, fees for
professional tax services, payments for unused sick time and life insurance
premiums.
(3) Consists of contributions made by LAI to its Profit Sharing Plan. See
"-- Incentive and Benefit Plans."
(4) On April 15, 1998, the Company granted Mr. Pearson 16,939 shares of
restricted Common Stock in lieu of a portion of the compensation he earned
in fiscal 1998. Such shares vest 25% over the four years after the grant
date and may be subject to forfeiture upon termination of his employment
under certain circumstances.
(5) In April 1998, Mr. Wissman elected to return to the Company a stock option
to purchase 69,000 shares of Common Stock granted to him in July 1997.
OPTION GRANTS TABLE
The following table shows information concerning outstanding stock options
granted for fiscal 1998 for the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Pearson................. 15,000 1.25% $ 12.00 7/1/07 $113,201 $ 286,874
82,000 6.85 19.125 7/29/07 986,264 2,499,387
Jack P. Wissman................... 5,000 0.42 12.00 7/1/07 37,734 95,625
69,000(1) 5.77 19.125 7/29/07 829,905 2,103,142
</TABLE>
- ---------------
(1) In April 1998, Mr. Wissman elected to return to LAI this stock option, which
was granted to him in July 1997.
36
<PAGE> 38
OPTION EXERCISES AND YEAR-END VALUE TABLE
No stock options were exercised by any of the Company's directors or
executive officers during fiscal 1998. The following table shows information
concerning values as of the end of fiscal 1998 of stock options to purchase
shares of Common Stock held by each Named Executive Officer.
<TABLE>
<CAPTION>
NUMBER OF OPTIONS VALUE OF OPTIONS
NAME EXERCISABLE/UNEXERCISABLE (#) EXERCISABLE/UNEXERCISABLE ($)
---- ----------------------------- -----------------------------
<S> <C> <C>
Robert L. Pearson...................... -0-/97,000 -0-/$149,361
Jack P. Wissman........................ -0-/74,000(1) -0-/$68,037(1)
</TABLE>
- ---------------
(1) In April 1998, Mr. Wissman elected to return to the Company a stock option
to purchase 69,000 shares of Common Stock granted to him in July 1997.
INCENTIVE AND BENEFIT PLANS
1997 and 1998 Omnibus Stock and Incentive Plans. LAI has two stock option
and incentive plans, the 1997 Omnibus Stock and Incentive Plan (the "1997
Employee Stock Plan") and the 1998 Omnibus Stock and Incentive Plan (the "1998
Employee Stock Plan" and, collectively, the "Employee Stock Plans"). Under the
Employee Stock Plans, incentive stock options, nonqualified stock options, stock
appreciation rights, performance units, performance shares, restricted stock,
restricted stock units and stock not subject to restrictions may be granted from
time to time upon hiring of new personnel, as incentive compensation or to
reward employees for outstanding performance; however, such incentives are not
routinely granted as part of annual consultant compensation, which continues to
be predominantly cash-based. The Compensation Committee administers the Employee
Stock Plans and determines all awards granted thereunder. The exercise price of
a stock option granted may be less than the market price of Common Stock on the
date of grant. Generally, incentive stock options, nonqualified stock options,
restricted stock and restricted stock units vest each year beginning on the
first anniversary of the date of grant at 20-25% per year and expire after 10
years. The Compensation Committee may condition awards upon satisfaction of
performance targets. Up to 950,000 shares of Common Stock may be issued under
the 1997 Employee Stock Plan, including, as of May 29, 1998, up to 775,500
shares upon exercise of stock options already granted and outstanding under the
1997 Employee Stock Plan. Up to 1,000,000 shares of Common Stock may be issued
under the 1998 Employee Stock Plan, including, as of May 29, 1998, 95,970 shares
of Common Stock already issued and outstanding as restricted stock awards and up
to 401,615 additional shares upon exercise of stock options already granted and
outstanding under the 1998 Employee Stock Plan.
Profit Sharing Plan. LAI maintains a profit sharing plan (the "Profit
Sharing Plan"), a defined contribution plan established pursuant to and under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Each year, the Board of Directors determines the amount that LAI will contribute
to the Profit Sharing Plan for that plan year. Such contributions are allocated
to participants' accounts in proportion to their total compensation, subject to
limitations imposed by the Code. During the second quarter of fiscal 1999, the
Profit Sharing Plan will be amended to include a cash or deferred arrangement
feature that qualifies for deferred tax treatment under Section 401(k) of the
Code, pursuant to which participants may make elective contributions of up to
15% of their compensation, as defined in the Profit Sharing Plan. Each year, the
Board of Directors will determine the amount that LAI will contribute to the
Profit Sharing Plan as a matching contribution on participants' elective
contributions. Participants' elective contributions will be 100% vested at all
times, while LAI's contributions will vest 25% per year after completion of one
year of service. Participants may elect among several investment vehicles
selected by the plan administrator as to how their accounts under the Profit
Sharing Plan will be invested, including the Company's Common Stock.
37
<PAGE> 39
Deferred Compensation Plan. LAI maintains a deferred compensation plan
(the "Deferred Compensation Plan") for its executive employees. The Board of
Directors or a Committee appointed by the Board determines the persons eligible
to participate in the Deferred Compensation Plan, although historically all
consultants have been eligible to participate. Each year, eligible participants
may elect to defer under the Deferred Compensation Plan a specified amount or
percentage of their compensation for payment at a specified future date or upon
termination of employment with or retirement from LAI, as directed by each
participant. The Company pays interest on amounts deferred under the Deferred
Compensation Plan at a rate, currently 8.5% per annum, established each year by
the Board of Directors in its discretion. Participants are fully vested in their
accounts. LAI does not match employee contributions to the Deferred Compensation
Plan. See Note 6 to the Consolidated Financial Statements.
1997 Employee Stock Purchase Plan. The Company maintains the 1997 Employee
Stock Purchase Plan (the "ESPP"). Under the ESPP, which is intended to qualify
under the provisions of Section 423 of the Code, eligible employees are given
the right to purchase shares of Common Stock generally two times a year. The per
share purchase price under the ESPP is 85% of the market price of the Common
Stock immediately prior to the first day of each exercise period or, during the
first exercise period, 85% of the lesser of the market price immediately prior
to the first day of such exercise period or the market price at the close of
such period. During each exercise period, an eligible employee will be entitled
to purchase up to that number of shares of Common Stock the aggregate purchase
price of which under the ESPP does not exceed 3% of the employee's annual
compensation. As of May 29, 1998, an aggregate of 200,000 shares of Common Stock
have been reserved for issuance under the ESPP, of which 24,585 shares have been
issued. Shares issued under the ESPP may be newly issued shares or shares
purchased by the Company in the open market.
EXECUTIVE EMPLOYMENT ARRANGEMENTS
The Company has entered into an employment agreement with Mr. Pearson with
an initial term expiring February 29, 2000; however, the agreement provides that
on February 28, 1998 and on the last day of February each year thereafter, the
term of Mr. Pearson's employment shall be extended for an additional one year
period, such that the remaining term of the agreement is restored annually to
three years, unless either the Company or Mr. Pearson gives notice not less than
90 days prior to any extension date of an intention not to extend. Under his
employment agreement, Mr. Pearson is entitled to receive an annual base salary
of not less than $525,000, and is eligible to earn annual incentive bonuses
based upon such plans and criteria as may be established from time to time by
the Compensation Committee. Under the plan currently in effect, Mr. Pearson is
eligible to earn a target bonus equal to 80% of his base salary and a maximum
bonus equal to 160% of his base salary. For fiscal 1998, the employment
agreement provided for a minimum incentive bonus of $420,000 payable pro rata in
monthly installments during the fiscal year. If any cash compensation otherwise
payable to Mr. Pearson thereunder would exceed the deductibility limitations of
Section 162(m) of the Internal Revenue Code, the agreement provides that such
excess compensation shall be paid in phantom stock units, in lieu of cash.
Mr. Pearson may terminate his employment agreement upon 90 days prior
written notice. Mr. Pearson is entitled to receive certain severance benefits if
his employment is terminated by the Company "without good cause" or by Mr.
Pearson following a "change of control" (each as defined in the employment
agreement). In the event of termination "without good cause," Mr. Pearson will
receive his base salary for the remainder of the unexpired term of the
employment agreement (not to exceed 36 months) or 24 months, whichever is
greater, and an amount equal to not less than the target bonus for the year of
termination multiplied by the number of years and fractions thereof in the
unexpired term of the agreement or, if greater, two. Mr. Pearson may terminate
the agreement during the 60 day period commencing six months after a "change of
control," whereupon he would be entitled to receive a lump sum payment equal to
three times his annual base salary plus an amount not less than three times the
target bonus for the year of termination. The agreement requires
38
<PAGE> 40
the Company to use its good faith efforts, during the term, to nominate Mr.
Pearson to the Company's Board of Directors. Mr. Pearson has agreed to not
compete with the Company during the term of his employment and, if his
employment is terminated by the Company without good cause or following a change
of control, for so long as he continues to receive payments under the agreement.
In addition, upon any termination of Mr. Pearson's employment "without good
cause" or following a "change of control," all vesting or performance
requirements with respect to any stock options or other similar equity-based
compensation awards shall be deemed to have been satisfied. With respect to any
payments under his employment agreement upon death, disability, or termination
"without good cause" or following a "change of control", Mr. Pearson would
receive additional cash payments in an amount necessary to pay any federal
excise taxes. Mr. Pearson's employment agreement is also subject to voluntary
termination by Mr. Pearson or termination by the Company "for cause."
In connection with the negotiation of his employment agreement, the
Compensation Committee awarded Mr. Pearson stock options to purchase 82,000
shares of Common Stock at an exercise price of $19.125 per share. Such stock
options will fully vest and become exercisable upon the first to occur of the
sixth anniversary of the date of grant or, if the sale price of the Common Stock
closes at $25.00 or higher for a period of 60 or more consecutive trading days,
on the 60th such day. In July 1997, Mr. Pearson also received stock options to
purchase 15,000 shares of Common Stock at an exercise price of $12.00 per share,
which options vest over four years at the rate of 25% per year.
39
<PAGE> 41
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 11, 1998, and as adjusted to
reflect the sale of shares offered hereby, by: (i) each of the Company's
directors and Named Executive Officers, (ii) all executive officers and
directors of the Company as a group, (iii) each person known by the Company to
own beneficially more than 5% of the outstanding Common Stock and (iv) each of
the Selling Stockholders. Except as otherwise indicated, each of the individuals
listed below is a director or consultant of the Company, has sole voting and
investment power over the shares listed as beneficially owned and has an address
in care of LAI's headquarters in New York, NY.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE AFTER THE
OFFERING(1) SHARES OFFERING(1)
------------------- OFFERED -------------------
NAME NUMBER PERCENT FOR SALE NUMBER PERCENT
- ---- --------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Robert L. Pearson(2).................................. 245,377 4.32% 66,666 178,711 2.30%
Jack P. Wissman(3).................................... 122,224 2.15 38,333 83,891 1.08
David L. Witte........................................ 13,428 * -- 13,428 *
Philip R. Albright(4)................................. 2,692 * -- 2,692 *
John F. Johnson(5).................................... 230,728 4.06 66,666 164,062 2.11
Joe D. Goodwin(6)..................................... 125,726 2.22 40,000 85,726 1.10
Roderick C. Gow(7).................................... 125,152 2.21 25,000 100,152 1.29
Ray J. Groves(8)...................................... 5,000 * -- 5,000 *
Richard W. Pogue(9)................................... 13,000 * -- 13,000 *
John C. Pope(10)...................................... 13,000 * -- 13,000 *
John S. Rothschild(11)................................ 112,423 1.98 30,000 82,423 1.06
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (11
PERSONS)............................................ 1,008,750 17.69 266,665 742,085 9.52
David W. Palmlund III(12)............................. 206,091 3.63 60,000 146,091 1.88
Anthony B. Cashen..................................... 120,000 2.12 40,000 80,000 1.03
Lawrence F. Nein(13).................................. 105,944 1.87 33,333 72,611 *
Thomas M. Watkins III(14)............................. 103,988 1.83 30,000 73,988 *
Charles E. Taylor(15)................................. 100,849 1.78 33,333 67,516 *
Theodore H. Borman(16)................................ 98,074 1.73 30,000 68,074 *
Arthur I. Newman(17).................................. 96,000 1.69 95,000 1,000 *
Michael Brenner(18)................................... 81,250 1.43 26,666 54,584 *
Mark P. Elliott(19)................................... 79,970 1.41 23,333 56,637 *
David W. Gallagher(20)................................ 76,600 1.35 25,000 51,600 *
Arthur J. Davidson(21)................................ 68,043 1.20 20,000 48,043 *
Rafael A. Sierra(22).................................. 65,906 1.16 21,666 44,240 *
Martin D. Nass(23).................................... 58,607 1.03 15,000 43,607 *
Arnold Kuypers(24).................................... 52,771 * 10,000 42,771 *
Robert H. Crumbaker(25)............................... 51,389 * 16,667 34,722 *
James G. Aslaksen(26)................................. 51,156 * 15,000 36,156 *
Paul McG. Miller(27).................................. 50,300 * 16,667 33,633 *
Austin Broadhurst, Jr. ............................... 50,000 * 16,667 33,333 *
Tara L. Pettersson(28)................................ 38,750 * 11,667 27,083 *
Donald R. Utroska(29)................................. 38,051 * 11,666 26,385 *
Diane M. Barowsky(30)................................. 36,250 * 11,666 24,584 *
Noah W. Waldman(31)................................... 36,250 * 11,666 24,584 *
Eileen M. Merrigan(32)................................ 31,260 * 8,333 22,927 *
Walter U. Baker(33)................................... 29,368 * 8,332 21,036 *
Barry R. Cesafsky(34)................................. 28,793 * 7,500 21,293 *
Susan J. Landon(35)................................... 27,500 * 8,333 19,167 *
Thomas H. Wilson(36).................................. 26,250 * 7,000 19,250 *
Walter E. Williams(37)................................ 25,214 * 7,000 18,214 *
Kenneth I. Felderman.................................. 25,000 * 14,000 11,000 *
Robert R. Stone....................................... 25,000 * 8,300 16,700 *
Dresdner RCM Global Investors LLC(38)................. 372,800 6.57 -- 372,800 4.80
</TABLE>
40
<PAGE> 42
- ---------------
(*) Less than 1%.
(1) Beneficial ownership of shares, as determined in accordance with applicable
Securities and Exchange Commission rules, includes shares as to which a
person has or shares sole voting power and/or investment power.
(2) Includes 6,777 shares of Common Stock held in the Profit Sharing Plan;
6,408 shares held as trustee for the benefit of certain family members,
which Mr. Pearson is deemed to beneficially own; 3,750 shares underlying
currently exercisable stock options deemed beneficially owned; and 16,939
restricted shares subject to a risk of forfeiture.
(3) Includes 5,383 shares of Common Stock held in the Profit Sharing Plan and
1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(4) Includes 192 shares of Common Stock held in the Profit Sharing Plan and
2,500 shares underlying currently exercisable stock options deemed
beneficially owned.
(5) Includes (i) 16,509 shares of Common Stock held in the Profit Sharing Plan,
(ii) 3,750 shares underlying currently exercisable stock options deemed
beneficially owned, (iii) 3,766 restricted shares subject to a risk of
forfeiture, (iv) 5,000 shares held by Mr. Johnson's wife, which Mr. Johnson
may be deemed to beneficially own, and (v) 200 shares held by Mr. Johnson's
children, which Mr. Johnson may be deemed to beneficially own. Does not
include 100 shares held by Mr. Johnson's brother, as to which Mr. Johnson
disclaims beneficial ownership.
(6) Includes 1,133 shares of Common Stock held in the Profit Sharing Plan,
2,500 shares underlying currently exercisable stock options deemed
beneficially owned and 2,093 restricted shares subject to a risk of
forfeiture.
(7) Includes 307 shares of Common Stock held in the Profit Sharing Plan, 2,500
shares underlying currently exercisable stock options deemed beneficially
owned and 20,930 restricted shares subject to a risk of forfeiture.
(8) Includes 5,000 shares underlying currently exercisable stock options deemed
beneficially owned.
(9) Includes 8,000 shares of Common Stock held by a revocable trust which Mr.
Pogue, as trustee, is deemed to beneficially own and 5,000 shares
underlying currently exercisable stock options deemed beneficially owned.
(10) Includes 5,000 shares underlying currently exercisable stock options deemed
beneficially owned.
(11) Includes (i) 2,000 shares of Common Stock held by two of Mr. Rothschild's
children, which Mr. Rothschild is deemed to beneficially own, (ii) 3,000
shares held by Mr. Rothschild's spouse, which Mr. Rothschild may be deemed
to beneficially own, and (iii) 5,581 restricted shares subject to a risk of
forfeiture.
(12) Includes 7,614 shares of Common Stock held in the Profit Sharing Plan,
1,250 shares underlying currently exercisable stock options deemed
beneficially owned and 8,317 restricted shares subject to a risk of
forfeiture.
(13) Includes 4,511 shares of Common Stock held in the Profit Sharing Plan.
(14) Includes 3,488 restricted shares subject to a risk of forfeiture and 500
shares held by Mr. Watkins' children, which Mr. Watkins may be deemed to
beneficially own.
(15) Includes 849 shares of Common Stock held in the Profit Sharing Plan.
(16) Includes 2,802 shares of Common Stock held in the Profit Sharing Plan,
1,250 shares underlying currently exercisable stock options deemed
beneficially owned and 4,022 restricted shares subject to a risk of
forfeiture.
(17) Prior to his retirement from LAI, Mr. Newman was employed as a consultant.
(18) Includes 1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(19) Includes 1,337 shares of Common Stock held in the Profit Sharing Plan,
3,750 shares underlying currently exercisable stock options deemed
beneficially owned and 4,883 restricted shares subject to a risk of
forfeiture.
(20) Includes 1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(21) Includes 747 shares of Common Stock held in the Profit Sharing Plan, 1,250
shares underlying currently exercisable stock options deemed beneficially
owned and 1,046 restricted shares subject to a risk of forfeiture.
(22) Includes 906 restricted shares subject to a risk of forfeiture.
(23) Includes 962 shares of Common Stock held in the Profit Sharing Plan, 2,500
shares underlying currently exercisable stock options deemed beneficially
owned and 3,912 restricted shares subject to a risk of forfeiture.
(24) Includes 1,421 shares of Common Stock held in the Profit Sharing Plan and
1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(25) Includes 25,000 shares held by Mr. Crumbaker's spouse, which Mr. Crumbaker
may be deemed to beneficially own.
(26) Includes 3,750 shares underlying currently exercisable stock options deemed
beneficially owned and 2,406 restricted shares subject to a risk of
forfeiture.
(27) Includes 100 shares held by Mr. Miller's spouse, which Mr. Miller may be
deemed to beneficially own, and 200 shares held by Mr. Miller's children,
which Mr. Miller may be deemed to beneficially own.
(28) Includes 3,750 shares underlying currently exercisable stock options deemed
beneficially owned.
(29) Includes 2,500 shares underlying currently exercisable stock options deemed
beneficially owned.
(30) Includes 1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(31) Includes 1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(32) Includes 1,250 shares underlying currently exercisable stock options deemed
beneficially owned and 5,010 restricted shares subject to a risk of
forfeiture.
(33) Includes 618 shares of Common Stock held in the Profit Sharing Plan and
3,750 shares underlying currently exercisable stock options deemed
beneficially owned.
(34) Includes 441 shares of Common Stock held in the Profit Sharing Plan and
3,102 restricted shares subject to a risk of forfeiture.
(35) Includes 2,500 shares underlying currently exercisable stock options deemed
beneficially owned.
(36) Includes 1,250 shares underlying currently exercisable stock options deemed
beneficially owned.
(37) Includes 214 shares of Common Stock held in the Profit Sharing Plan.
(38) This information is derived from a Schedule 13G dated January 30, 1998
filed with the Securities and Exchange Commission (the "Commission") by
Dresdner RCM Global Investors LLC, RCM Limited L.P. and RCM General
Corporation (collectively, "RCM"). Each of such parties possesses sole
dispositive power with respect to all 372,800 shares and sole voting power
with respect to 267,700 shares. Dresdner Bank AG also filed a Schedule 13G
dated January 30, 1998 with the Commission with respect to such shares and
may be deemed, together with RCM, to beneficially own such shares; however,
Dresdner Bank AG does not possess any voting or dispositive power over such
shares. RCM's address is Four Embarcadero Center, San Francisco, California
94111.
41
<PAGE> 43
CERTAIN TRANSACTIONS
Prior to its Initial Public Offering, it was the Company's practice to sell
shares of Common Stock to newly hired or promoted partners. In connection with
such sales, the Company had arranged for a bank credit facility that provided
installment loans to partners, with the proceeds of such loans being used to pay
the consideration for shares purchased directly from the Company. Each loan
under such facility was secured by a pledge of the shares purchased and was
guaranteed by the Company. Roderick C. Gow and Joe D. Goodwin had outstanding
loans guaranteed by the Company under such facility in fiscal 1998. The original
principal amounts of such loans, and the maximum amounts outstanding and
guaranteed by the Company under such loans during fiscal 1998, were $146,000 and
$125,000, respectively, for Mr. Gow, and $148,000 and $70,000, respectively, for
Mr. Goodwin. The Company obtained a release of its guarantee under such facility
after completion of its Initial Public Offering.
Pursuant to the Agreement and Plan of Merger entered into in connection
with the WHI acquisition, David L. Witte received as of February 27, 1998, in
exchange for his interest in WHI, 13,428 shares of Common Stock, $588,288.46 in
cash and a promissory note in the amount of $534,575.75. Such promissory note
bears interest at 5% per annum and provides for three installment payments of
$178,191.92 each, due February 27, 1999, 2000 and 2001.
In August 1997, the Company made a non-interest bearing loan of $105,000 to
John S. Rothschild, the proceeds of which were used to pay certain initiation
fees for a country club joined by Mr. Rothschild in connection with his
employment responsibilities. So long as Mr. Rothschild does not voluntarily
terminate his employment with the Company, 20% of the principal amount of the
loan will be forgiven on July 1 of each year, commencing July 1, 1998. The
Company also has agreed to pay Mr. Rothschild the amount of any tax on income
that may be imputed to him as a result of such forgiveness.
Since the beginning of fiscal 1998, Dresdner Bank AG has engaged the
Company to perform several executive searches and, as consideration therefor,
has paid the Company aggregate fee revenue of approximately $323,000. Dresdner
Bank AG is the parent of Dresdner RCM Global Investors LLC, which beneficially
owns 6.57% of the Common Stock. Accordingly, Dresdner Bank AG may be deemed to
beneficially own such Common Stock. See "Principal and Selling Stockholders."
The Company has performed its services for Dresdner Bank AG pursuant to its
standard arrangements, under terms no less favorable to the Company than those
obtainable from unaffiliated parties.
See "Description of Capital Stock -- Indemnification and Limitation of
Liability for Directors and Officers" for information regarding indemnification
agreements which LAI has entered into with certain of its directors and
officers.
42
<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
GENERAL
LAI has authority under its Articles of Incorporation to issue up to
35,000,000 shares of Common Stock and up to 3,000,000 shares of Preferred Stock
(the "Preferred Stock").
COMMON STOCK
Subject to any preferential rights of any Preferred Stock created by the
Board of Directors, each outstanding share of Common Stock is entitled to such
dividends, if any, as may be declared from time to time by the Board. See
"Dividend Policy." Each outstanding share is entitled to one vote on all matters
submitted to a vote of stockholders. Holders of Common Stock do not have any
preemptive right to subscribe to any securities of LAI of any kind or class. In
the event of liquidation, dissolution or winding up of LAI, holders of Common
Stock are entitled to receive on a pro rata basis any assets remaining after
provision for payment of creditors and after payment of any liquidation
preferences to holders of Preferred Stock.
PREFERRED STOCK
Preferred Stock is available for issuance from time to time in one or more
series at the discretion of the Board of Directors without stockholder approval.
The Board of Directors has the authority to prescribe, for each series of
Preferred Stock it establishes, the number of shares, the voting rights (if any)
to which such shares are entitled, and the designations, powers, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions of such shares. Depending upon the rights of such
Preferred Stock, the issuance of Preferred Stock could have an adverse effect on
holders of Common Stock by delaying or preventing a change in control of LAI,
making removal of the present management of LAI more difficult or resulting in
restrictions upon the payment of dividends and other distributions to the
holders of Common Stock.
FLORIDA BUSINESS CORPORATION ACT
The Company is subject to several anti-takeover provisions that apply to a
public corporation organized under Florida law unless the corporation has
elected to opt out of such provisions in its Articles of Incorporation or
(depending on the provision in question) its Bylaws. LAI has not elected to opt
out of these provisions. The Florida Business Corporation Act (the "Florida
Act") contains a provision that prohibits the voting of shares in a publicly
held Florida corporation which are acquired in a "control share acquisition"
unless the holders of a majority of the corporation's voting shares (exclusive
of shares held by officers of the corporation, inside directors or the acquiring
party) approve the granting of voting rights as to the shares acquired in the
control share acquisition. A "control share acquisition" means an acquisition
that immediately thereafter entitles the acquiring party to vote in the election
of directors within any of the following ranges of voting power: (i) one-fifth
or more but less than one third of such voting power, (ii) one third or more but
less than a majority of such voting power and (iii) more than a majority of such
voting power.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested stockholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested stockholder,
(ii) the interested stockholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the interested
stockholder is the beneficial owner of at least 90% of the corporation's
outstanding voting shares, exclusive of those shares acquired by the interested
stockholder directly from the corporation in a transaction approved by
43
<PAGE> 45
a majority of the disinterested directors. An interested stockholder is defined
as a person who together with affiliates and associates beneficially owns more
than 10% of the corporation's outstanding voting shares.
PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS AFFECTING CHANGES IN CONTROL
Certain provisions of the Company's Articles of Incorporation and Bylaws
may delay or make more difficult unsolicited acquisitions or changes of control
of LAI. Such provisions may enable LAI to develop its business in a manner that
will foster its long-term growth without disruption caused by the threat of a
takeover not deemed by its Board of Directors to be in the best interests of LAI
and its stockholders. Such provisions could have the effect of discouraging
third parties from making proposals involving an unsolicited acquisition or
change of control of LAI, although such proposals, if made, might be considered
desirable by a majority of LAI's stockholders. Such provisions may also have the
effect of making it more difficult for third parties to cause the replacement of
the current Board of Directors of LAI. These provisions include (i) the
availability of capital stock for issuance from time to time at the discretion
of the Board of Directors, (ii) a classified Board of Directors, (iii)
prohibition against stockholders acting by written consent in lieu of a meeting,
(iv) limitations on calling meetings of stockholders, (v) requirements for
advance notice for raising business or making nominations at stockholders'
meetings and (vi) the ability of the Board of Directors to increase the size of
the Board of Directors and to appoint directors to newly created directorships.
These provisions are present in the Articles of Incorporation or Bylaws of LAI.
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS
The LAI Bylaws provide that LAI shall have the power, but generally not the
obligation, to indemnify directors and officers to the fullest extent permitted
by the laws of the State of Florida. LAI has entered into indemnification
agreements with all of its executive officers and directors creating certain
indemnification obligations on LAI's part in favor of the directors and
executive officers. These indemnification agreements clarify and expand the
circumstances under which a director or executive officer will be indemnified.
The indemnification rights conferred by the Bylaws and indemnification
agreements are not exclusive of any other right, under the Florida Act or
otherwise, to which a person seeking indemnification may otherwise be entitled.
LAI also provides liability insurance for the directors and officers for certain
losses arising from claims or charges made against them while acting in their
capacities as directors or officers.
The effect of such indemnification arrangements may be to exempt or limit
the liability of such executive officers and directors to LAI or its
stockholders for monetary damages for breach of fiduciary duty to LAI, except to
the extent such exemption or limitation is not permitted under the Florida Act
as the same exists or may hereafter be amended.
TRANSFER AGENT
The transfer agent and registrar of the Company's Common Stock is
ChaseMellon Shareholder Services, L.L.C.
44
<PAGE> 46
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares of Common Stock already outstanding, or
issuable on exercise of stock options under the Employee Stock Plans and the
Directors' Stock Plan, are or will be eligible for future sale in the public
market at prescribed times pursuant to Rule 144 or Rule 701 under the Securities
Act.
Upon completion of the Offering, LAI will have 7,761,956 shares of Common
Stock outstanding (8,211,956 if the Underwriters' over-allotment option is
exercised in full) and will have granted stock options to purchase another
1,192,115 shares of Common Stock. Of these shares, the 2,300,000 shares of
Common Stock sold in the Initial Public Offering and the 3,000,000 shares sold
in the Offering (3,450,000 shares if the Underwriters' over-allotment option is
exercised in full) will be freely tradeable by persons other than "affiliates"
of LAI, without restriction under the Securities Act. The remaining 2,461,956
shares of Common Stock are "restricted" securities within the meaning of Rule
144 under the Securities Act and may not be sold in the absence of registration
under the Securities Act unless an exemption from registration is available,
including the exemptions contained in Rule 144. Certain existing stockholders of
LAI, however, have agreed not to sell, contract to sell or otherwise dispose of
an aggregate of 426,000 shares of Common Stock until at least July 2, 1999; an
additional 25,707 shares until at least January 2, 2000; an additional 189,677
shares until at least February 27, 2000; and an additional 1,688,540 shares
until at least June 10, 2000 (two years after the date of this Prospectus),
without the prior written consent of Robert W. Baird & Co. Incorporated.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares of
Common Stock for at least one year (including the prior holding period of any
prior owner other than an affiliate of LAI) is entitled to sell within any
three-month period that number of shares which does not exceed the greater of 1%
of the outstanding shares of Common Stock or the average weekly trading volume
during the four calendar weeks preceding each such sale. Sales under Rule 144
also are subject to certain manner of sale provisions, notice requirements and
the availability of current public information about LAI. A person (or persons
whose shares are aggregated) who is not or has not been deemed an affiliate of
LAI for at least three months and who has beneficially owned shares for at least
two years (including the holding period of any prior owner other than an
affiliate) would be entitled to sell such shares under Rule 144 without regard
to the limitations discussed above. Rule 144 defines "affiliate" of a company as
a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such company.
Affiliates of a company generally include its directors, executive officers and
principal stockholders.
Sales of such shares in the public market, or the perception that such
sales may occur, could adversely affect the market price of the Common Stock or
impair LAI's ability to raise additional capital in the future through the sale
of equity securities.
45
<PAGE> 47
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Stockholders have agreed to sell to each
of the underwriters named below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase from the Company the respective
number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS COMMON SHARES
- ------------ -------------
<S> <C>
Robert W. Baird & Co. Incorporated..........................
The Robinson-Humphrey Company, LLC..........................
J.C. Bradford & Co..........................................
---------
Total............................................. 3,000,000
=========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 3,000,000 shares of
Common Stock offered hereby if any such shares of Common Stock are purchased. In
the event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have been advised by the
Underwriters that the several Underwriters propose to offer such Common Stock to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may
re-allow a concession not in excess of $ per share to other dealers.
After the shares of Common Stock are released for sale to the public, the
offering price and other selling terms may be changed by the Underwriters.
The Company has granted the Underwriters an option, expiring 30 days from
the date of this Prospectus, to purchase up to 450,000 additional shares of
Common Stock at the public offering price less underwriting discounts set forth
on the cover page of this Prospectus. The Underwriters may exercise such option
solely to cover over-allotments, if any, made in connection with the sale of the
Common Stock that the Underwriters have agreed to purchase. To the extent the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase a number of shares
proportionate to such Underwriter's initial commitment.
The Selling Stockholders and LAI's executive officers and directors have
agreed not to sell, contract to sell or otherwise dispose of any shares of
Common Stock for a period of 90 days after the date of this Prospectus without
the prior written consent of Robert W. Baird & Co. Incorporated. In addition,
certain existing stockholders of LAI have agreed not to sell, contract to sell
or otherwise dispose of an aggregate of 426,000 shares of Common Stock until at
least July 2, 1999; an additional 25,707 shares until at least
46
<PAGE> 48
January 2, 2000; an additional 189,677 shares until at least February 27, 2000;
and an additional 1,688,540 shares until at least June 10, 2000 (two years after
the date of this Prospectus), without the prior written consent of Robert W.
Baird & Co. Incorporated. See "Shares Eligible for Future Sale." The Company has
agreed, for a period of 90 days after the date of this Prospectus, not to sell,
contract to sell or otherwise dispose of any shares of Common Stock without the
prior written consent of Robert W. Baird & Co. Incorporated, other than shares
of Common Stock issued in the Offering, under the ESPP or upon exercise of stock
options granted pursuant to the Employee Stock Plans or the Directors' Stock
Plan. See "Management -- Incentive and Benefit Plans."
The Underwriting Agreement provides that LAI and the Selling Stockholders
will indemnify the Underwriters and the Underwriters will indemnify LAI and the
Selling Stockholders against certain liabilities under the Securities Act or
contribute to payments that may be required to be made in respect thereof.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for,
and purchase, shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Any of these activities
may stabilize or maintain the market price of the Common Stock above independent
market levels.
The Underwriters are not required to engage in these activities, and may
end any of these activities at any time. The Underwriters and dealers may also
engage in passive market making transactions in the Common Stock in accordance
with Rule 103 of Regulation M promulgated by the Commission. In general, a
passive market maker may not bid for, or purchase, the Common Stock at a price
that exceeds the higher independent bid. In addition, the net daily purchases
made by any passive market maker generally may not exceed 30% of its average
daily trading volume in the Common Stock during a specified two-month prior
period, or 200 shares, whichever is greater. A passive market maker must
identify passive market making bids as such on the Nasdaq electronic
inter-dealer reporting system. Passive market making may stabilize or maintain
the market price of the Common Stock above independent market levels.
Underwriters and dealers are not required to engage in passive market making and
may end passive market making activities at anytime.
From time to time in the ordinary course of its business, Robert W. Baird &
Co. Incorporated has provided and may continue to provide financial advisory
services to the Company in connection with certain acquisitions and proposed
acquisitions and other matters.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for LAI by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis,
Professional Association, Tampa, Florida. Certain legal matters in connection
with the Offering will be passed upon for the Underwriters by Neal, Gerber &
Eisenberg, Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements and Notes thereto included in this
Prospectus and the Registration Statement have been audited by Arthur Andersen
LLP, independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
47
<PAGE> 49
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
periodic reports and other information with the Commission. Reports, proxy and
information statements and other information filed by the Company may be
inspected and copies may be obtained (at prescribed rates) at the Commission's
Public Reference Section, 450 5th Street, N.W., Washington, D.C. 20549, as well
as the following Regional Offices of the Commission: Seven World Trade Center,
13th Floor, New York, New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained by mail from the Public Reference Section, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549, upon payment
of prescribed rates. In addition, electronically filed documents, including
reports, proxy and information statements and other information regarding the
Company, can be obtained from the Commission's Web site at: http://www.sec.gov.
The Company's Common Stock is quoted on the Nasdaq National Market, and reports,
proxy statements and other information concerning the Company can also be
inspected at the offices of the National Association of Securities Dealers, Inc.
at 1735 K Street, Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-1 (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and such Common Stock offered hereby, reference is made
to the Registration Statement. Statements contained in this Prospectus with
respect to the contents of any contract or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each such
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement. Each such statement is qualified in
all respects by such reference to such exhibit. Copies of all or any part of the
Registration Statement, including the documents incorporated by reference
therein or exhibits thereto, may be obtained upon payment of the prescribed
rates at the offices of the Commission set forth above.
48
<PAGE> 50
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
LAMALIE ASSOCIATES, INC. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
WARD HOWELL INTERNATIONAL, INC. FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-18
Balance Sheets............................................ F-19
Statements of Operations.................................. F-20
Statements of Shareholders' Equity........................ F-21
Statements of Cash Flows.................................. F-22
Notes to Financial Statements............................. F-23
CHARTWELL PARTNERS INTERNATIONAL, INC. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.......... F-27
Statement of Operations................................... F-28
Statement of Cash Flows................................... F-29
Notes to Financial Statements............................. F-30
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Combined Statement of
Operations............................................. F-32
Unaudited Pro Forma Combined Statement of Operations...... F-33
Notes to Unaudited Pro Forma Combined Statement of
Operations............................................. F-34
</TABLE>
F-1
<PAGE> 51
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Lamalie Associates, Inc.:
We have audited the accompanying consolidated balance sheets of Lamalie
Associates, Inc. (a Florida corporation) and subsidiaries as of February 28,
1997 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended February 28, 1998. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Lamalie Associates, Inc. and
subsidiaries as of February 28, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
February 28, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 8, 1998
F-2
<PAGE> 52
LAMALIE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1997 1998
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 1,662 $23,780
Accounts receivable, less allowance of $850 and $2,120,
respectively........................................... 14,238 22,219
Prepaid expenses.......................................... 1,033 1,420
Refundable income taxes................................... 58 1,822
------- -------
Total current assets.............................. 16,991 49,241
------- -------
Property and equipment, net................................. 4,184 5,612
Deferred tax assets......................................... 1,958 4,185
Goodwill, net............................................... -- 24,790
Cash value of life insurance................................ 2,255 4,363
Other assets................................................ 173 725
------- -------
Total assets...................................... $25,561 $88,916
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities.................. $ 2,089 $ 7,191
Payable to former WHI stockholders........................ -- 8,592
Accrued compensation...................................... 13,255 20,573
Current maturities of long-term debt...................... 387 3,070
Current deferred tax liabilities.......................... 643 --
------- -------
Total current liabilities......................... 16,374 39,426
------- -------
Accrued rent................................................ 1,038 1,013
Deferred compensation....................................... 3,872 6,951
Long-term debt, less current maturities..................... 1,650 6,055
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; 3,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock; $0.01 par value; 35,000,000 shares
authorized; 3,075,000 and 5,576,446 shares issued and
outstanding, respectively.............................. 31 56
Additional paid-in capital................................ 4,087 32,873
Subscriptions receivable.................................. (153) --
Retained earnings (accumulated deficit)................... (1,338) 2,542
------- -------
Total stockholders' equity........................ 2,627 35,471
------- -------
Total liabilities and stockholders' equity........ $25,561 $88,916
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 53
LAMALIE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1997 1998
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Fee revenue, net..................................... $35,088 $46,437 $61,803
Operating expenses:
Compensation and benefits.......................... 30,693 39,928 46,513
General and administrative......................... 4,467 6,685 8,680
------- ------- -------
Total operating expenses................... 35,160 46,613 55,193
------- ------- -------
Operating income (loss).............................. (72) (176) 6,610
------- ------- -------
Interest income...................................... 117 125 887
Interest expense..................................... (157) (501) (690)
------- ------- -------
Net interest income (expense).............. (40) (376) 197
------- ------- -------
Income (loss) before provision for income taxes...... (112) (552) 6,807
Provision for income taxes........................... 90 15 2,927
------- ------- -------
Net income (loss).................................... $ (202) $ (567) $ 3,880
======= ======= =======
Basic net income (loss) per common share............. $ (0.07) $ (0.18) $ 0.85
======= ======= =======
Weighted average common shares....................... 2,921 3,199 4,573
======= ======= =======
Diluted net income (loss) per common and common
equivalent share................................... $ (0.07) $ (0.18) $ 0.82
======= ======= =======
Weighted average common and common equivalent
shares............................................. 2,921 3,199 4,751
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 54
LAMALIE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS/ TOTAL
--------------- PAID-IN SUBSCRIPTIONS (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT) EQUITY
------ ------ ---------- ------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF FEBRUARY 28,
1995........................... 2,278 $23 $ 2,943 $ (72) $ (569) $ 2,325
Redemption of common stock....... (100) (1) (136) -- -- (137)
Issuance of common stock......... 612 6 845 (851) -- --
Reduction of subscriptions
receivable from stockholders... -- -- -- 524 -- 524
Net loss......................... -- -- -- -- (202) (202)
----- --- ------- ------ ------- -------
BALANCE AS OF FEBRUARY 29,
1996........................... 2,790 28 3,652 (399) (771) 2,510
Redemption of common stock....... (345) (3) (509) -- -- (512)
Issuance of common stock......... 630 6 944 (950) -- --
Reduction of subscriptions
receivable from stockholders... -- -- -- 1,196 -- 1,196
Net loss......................... -- -- -- -- (567) (567)
----- --- ------- ------ ------- -------
BALANCE AS OF FEBRUARY 28,
1997........................... 3,075 31 4,087 (153) (1,338) 2,627
Redemption of common stock....... (50) (1) (76) -- -- (77)
Initial public offering of common
stock.......................... 2,300 23 24,628 -- -- 24,651
Other issuance of common stock... 251 3 4,183 -- -- 4,186
Reduction of subscriptions
receivable from stockholders... -- -- -- 153 -- 153
Amortization of discounted
options........................ -- -- 51 -- -- 51
Net income....................... -- -- -- -- 3,880 3,880
----- --- ------- ------ ------- -------
BALANCE AS OF FEBRUARY 28,
1998........................... 5,576 $56 $32,873 $ -- $ 2,542 $35,471
===== === ======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 55
LAMALIE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1997 1998
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (202) $ (567) $ 3,880
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 449 768 885
Amortization of goodwill.................................. -- -- 17
Amortization of discounted options........................ -- -- 51
Deferred income taxes..................................... (738) (276) (897)
Changes in assets and liabilities
Accounts receivable, net................................ (3,796) (4,679) (1,367)
Prepaid expenses........................................ (218) (331) (319)
Refundable income taxes................................. 465 (1,146) (1,707)
Other assets............................................ (35) (36) (532)
Accounts payable and accrued liabilities................ 1,843 (155) 361
Accrued compensation.................................... 2,362 3,376 (493)
Accrued rent............................................ 122 531 (25)
Deferred compensation................................... 1,314 1,862 3,079
------- ------- -------
Net cash provided by (used in) operating
activities....................................... 1,566 (653) 2,933
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in life insurance................................ (779) (1,048) (2,109)
Purchases of property and equipment......................... (2,483) (1,825) (2,187)
Acquisition of WHI.......................................... -- -- 1,318
Acquisition of CPI.......................................... -- -- (1,387)
------- ------- -------
Net cash used in investing activities.............. (3,262) (2,873) (4,365)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings.................................................. -- 3,995 --
Repayments of debt.......................................... -- (2,262) (1,783)
Redemption of certificate of deposit........................ 109 -- --
Proceeds from issuance of common stock...................... 524 1,197 25,410
Payments to redeem common stock............................. (217) (271) (77)
------- ------- -------
Net cash provided by financing activities............... 416 2,659 23,550
------- ------- -------
Net (decrease) increase in cash and cash
equivalents............................................. (1,280) (867) 22,118
Cash and Cash Equivalents, at beginning of period........... 3,809 2,529 1,662
------- ------- -------
Cash and Cash Equivalents, at end of period................. $ 2,529 $ 1,662 $23,780
======= ======= =======
Supplemental disclosures of cash flow information --
Cash paid for interest...................................... $ 8 $ 204 $ 145
Cash paid for income taxes.................................. 362 1,437 4,691
Supplemental disclosures of non-cash activities --
Debt issued in connection with acquisitions................. -- -- 8,802
Equity issued in connection with acquisitions............... -- -- 3,580
Payable in connection with acquisitions..................... -- -- 8,592
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 56
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Lamalie Associates, Inc. and its wholly-owned subsidiaries ("LAI" or the
"Company") provide consulting services aimed specifically at solving its
clients' leadership needs by identifying, evaluating and recommending qualified
candidates for senior level positions. LAI provides executive search services
exclusively on a retained basis from 16 regional offices located throughout the
United States.
INITIAL PUBLIC OFFERING & REINCORPORATION
The Company completed its initial public offering (the "IPO") of 2,300,000
shares of common stock on July 1, 1997. The proceeds of $24.7 million, net of
underwriters' discounts and other offering costs, were used to repay outstanding
indebtedness under the Company's credit facilities, to finance business
acquisitions and to provide additional working capital. On June 3, 1997, in
connection with the IPO, the Company reincorporated from Delaware to Florida.
STOCK SPLIT
On June 3, 1997, in connection with the IPO, the Company effected a 1,000
for one stock split of each outstanding share of common stock. All share related
data in these consolidated financial statements have been adjusted retroactively
to give effect to this event as if it had occurred at the beginning of the
earliest period presented.
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 contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid investment instruments with
original maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Office furniture and equipment are stated at cost less accumulated
depreciation. Effective March 1, 1996, the Company adopted the straight-line
method of depreciation for all newly acquired assets. All assets acquired prior
to March 1, 1996, are depreciated using an accelerated method. The effect of the
change in depreciation methods on newly acquired assets is not material to the
Company's financial statements. Depreciation is provided over the assets'
estimated useful lives of 7 years for office furniture and equipment and 5 years
for software. Leasehold improvements are stated at cost less accumulated
amortization using the straight-line method over the related remaining lease
terms which range from 2 to 9 years. Repair and maintenance costs which do not
extend the useful lives of the assets are expensed as incurred.
F-7
<PAGE> 57
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL
Goodwill relates to acquisitions made during the year ended February 28,
1998 (see Note 2), and is being amortized on a straight-line basis over thirty
years. Accumulated amortization as of February 28, 1998, was approximately
$17,000.
REVENUE RECOGNITION
The Company derives substantially all of its revenues from fees for
professional services, which are recognized as fee revenue as clients are
billed, generally over a 60- to 90-day period commencing with the initial
acceptance of a search. Fee revenue is presented net of adjustments to original
billings.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Deferred tax assets and liabilities are
measured by applying enacted statutory tax rates applicable to the future years
in which the related deferred tax assets or liabilities are expected to be
settled or realized. Provision for income taxes consists of the taxes payable
for the current period and the change during the period in deferred tax assets
and liabilities.
NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share was determined by dividing the net
income (loss) by the weighted average number of shares of common stock
outstanding during the year. Diluted net income (loss) per common and common
equivalent share was determined by dividing the net income (loss) by the
weighted average number of shares of common stock outstanding and dilutive
common equivalent shares from stock options using the treasury stock method and
from the convertible debt assuming conversion upon issuance. (See Note 4)
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, shares of common stock issued by the Company during the 12 months
preceding the IPO have been included in the calculation of weighted average
shares of common stock outstanding as if the shares were outstanding for all
periods presented.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to concentration
of credit risk consist primarily of accounts receivable. Credit risk arising
from receivables is minimal due to the large number of clients comprising the
Company's customer base. The customers are concentrated primarily in the
Company's U.S. market areas. Credit losses in the past have not been material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments as of February
28, 1997 and 1998, approximate fair value.
F-8
<PAGE> 58
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NEWLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for
financial statements for periods beginning after December 15, 1997. Management
believes the effect of adopting SFAS 130 would not have a material impact on the
accompanying consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. SFAS 131 is effective for fiscal years
beginning after December 15, 1997. Management has not yet determined the effect
of adopting SFAS 131.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pension and Other Post Retirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other post retirement benefit plans.
SFAS 132 is effective for fiscal years beginning after December 15, 1997;
earlier application is encouraged. Management has implemented SFAS 132 for the
year ended February 28, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance
for capitalizing and expensing the costs of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management believes the effect
of adopting SOP 98-1 would not have a material impact on the accompanying
consolidated financial statements.
RECLASSIFICATIONS
Certain prior year balances have been reclassified in order to conform to
the current year financial statement presentation.
(2) ACQUISITIONS
On February 27, 1998, the Company completed the acquisition by merger of
Ward Howell International, Inc. ("WHI"). WHI and its subsidiary were merged into
a wholly-owned subsidiary of the Company and WHI was the surviving corporation
in the merger. The purchase price was approximately $19.5 million including $7.6
million in notes payable and approximately 190,000 shares or $3.1 million of
common stock. The remaining $8.8 million of the purchase consideration was
payable to the former WHI stockholders as of February 28, 1998, and is accrued
for in the accompanying consolidated balance sheets. Also, additional
acquisition costs of approximately $3.1 million have been accrued for in the
accompanying consolidated balance sheets. The acquisition was accounted for as a
purchase with goodwill being recognized for the excess of the purchase amount
over the fair market value of the assets acquired.
On January 2, 1998, the Company acquired Chartwell Partners International,
Inc. ("CPI"). The acquisition cost was approximately $3.1 million and consisted
of approximately $1.4 million cash, a $1.25 million convertible subordinated
note payable, and approximately 26,000 shares or $424,000 of common stock.
F-9
<PAGE> 59
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition was accounted for as a purchase with goodwill being recognized
for the excess of the purchase amount over the fair market value of the assets
acquired.
Had the acquisitions of WHI and CPI been completed on March 1, 1996 and
1997, respectively, the combined pro forma unaudited results of operations would
have been as follows for the year ended February 28:
<TABLE>
<CAPTION>
1997 1998
------- -------
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Fee revenue, net............................................ $74,193 $91,730
Net income.................................................. 2,943 4,485
Basic net income per common share........................... 0.86 0.94
Diluted net income per common and common equivalent share... 0.86 0.90
</TABLE>
The unaudited pro forma combined results of operations for the years ended
February 28, 1997 and 1998 were prepared using the financial statements of WHI
and CPI for the years ended December 31, 1996 and 1997, respectively.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of February 28:
<TABLE>
<CAPTION>
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Office furniture and equipment.............................. $2,884 $3,934
Leasehold improvements...................................... 2,305 2,614
Software.................................................... 721 1,672
------ ------
5,910 8,220
Less: accumulated depreciation and amortization............. (1,726) (2,608)
------ ------
$4,184 $5,612
====== ======
</TABLE>
F-10
<PAGE> 60
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LONG-TERM DEBT
Long-term debt consists of the following as of February 28:
<TABLE>
<CAPTION>
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to former WHI stockholders dated February 27,
1998, payable in three equal annual installments plus
accrued interest bearing interest at 5.0%................. $ -- $7,552
Convertible subordinated promissory note to a former CPI
stockholder, dated January 2, 1998, payable in three equal
annual installments plus accrued interest, bearing
interest at 6.75%, and convertible into shares of common
stock at each anniversary date at prices specified in the
asset purchase agreement.................................. -- 1,250
Term loan dated March 1996, payable in monthly principal
installments of $23,810 plus accrued interest secured by
accounts receivable, repaid in full during fiscal 1998.... 1,733 --
Notes payable due to former LAI stockholders, non-interest
bearing (interest imputed at 6.5%), payable in three equal
annual installments maturing through April 2000........... 304 254
Notes payable to former WHI stockholders bearing interest
from 5.8% to 9.5% maturing through February 2003.......... -- 69
------ ------
2,037 9,125
Less: current maturities of long-term debt.................. (387) (3,070)
------ ------
$1,650 $6,055
====== ======
</TABLE>
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
- ----------- ------
<S> <C>
February 28, 1999........................................... $3,070
February 29, 2000........................................... 3,070
February 28, 2001........................................... 2,971
February 28, 2002........................................... 7
February 28, 2003........................................... 7
------
$9,125
======
</TABLE>
The Company maintains a line of credit which provides for maximum
borrowings of $6.5 million bearing interest at the bank's prime rate (8.5% at
February 28, 1998). Interest is payable monthly and the principal balance is due
upon demand. The line of credit is collateralized by accounts receivable with
borrowings limited to 75% of qualifying receivables. Additionally, the Company
is required to comply with certain working capital and liquidity covenants. The
Company was in compliance with the terms and covenants of its debt agreements as
of February 28, 1997 and 1998. No amounts were outstanding under the line of
credit as of February 28, 1997 or 1998. During fiscal 1998, the Company obtained
a commitment letter for credit facilities providing for maximum borrowings of
$15.0 million. Subsequent to year end, this commitment was increased to $25.0
million.
F-11
<PAGE> 61
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) INCOME TAXES
Significant components of the provision for income taxes are summarized as
follows:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1997 1998
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.................................... $ 662 $ 235 $2,931
State...................................... 166 56 893
----- ----- ------
828 291 3,824
----- ----- ------
Deferred:
Federal.................................... (591) (220) (683)
State...................................... (147) (56) (214)
----- ----- ------
(738) (276) (897)
----- ----- ------
$ 90 $ 15 $2,927
===== ===== ======
</TABLE>
The provision for income taxes differs from the amount computed by applying
the U.S. federal corporate tax rate to income before provision for income taxes
as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Statutory U.S. federal income tax rate....... 35.0% 35.0% 34.0%
Meals, entertainment and dues.............. (101.0) (31.2) 2.1
Keyperson life insurance premiums.......... (6.6) (3.8) .5
State taxes, net of federal benefit........ (7.3) (2.8) 6.4
------ ----- -----
Effective income tax rate............... (79.9)% (2.8)% 43.0%
====== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding amounts used for income tax reporting purposes.
As of February 28, 1998, the Company has changed its method of reporting for
income
F-12
<PAGE> 62
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
taxes from the cash basis to the accrual basis. Significant components of the
Company's deferred tax assets and liabilities as of February 28, 1997 and 1998,
are as follows:
<TABLE>
<CAPTION>
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts payable and accrued liabilities.................. $ 766 $ 124
Accrued compensation...................................... 4,539 --
Accrued rent.............................................. 415 408
Allowance for uncollectible accounts...................... -- 595
Deferred compensation..................................... 1,549 2,798
Net operating loss carryforward........................... -- 2,207
Other..................................................... 70 35
------- -------
Total deferred tax assets......................... 7,339 6,167
------- -------
Deferred tax liabilities:
Accrued compensation...................................... -- (117)
Accounts receivable, net.................................. (5,757) --
Liability for change in tax method........................ -- (1,241)
Prepaid expenses.......................................... (261) --
Property and equipment, net............................... (6) (623)
Other..................................................... -- (1)
------- -------
Total deferred tax liabilities.................... (6,024) (1,982)
------- -------
Net deferred tax asset............................ $ 1,315 $ 4,185
======= =======
</TABLE>
The Company has net operating loss carryforwards of approximately $5.5
million, expiring in 2018. Approximately $4.2 million of this amount relates to
the acquisition of WHI (see Note 2). The remaining $1.3 million relates to the
change from calendar to fiscal year end for tax reporting purposes.
(6) EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company maintains a defined contribution retirement plan covering
substantially all employees. As of February 28, 1997 and 1998, the Company has
accrued for contributions totaling approximately $2,183,000 and $1,585,000,
respectively, which are included in accrued compensation in the accompanying
consolidated balance sheets.
DEFERRED COMPENSATION PLAN
The Company has deferred compensation agreements with 59 of its employees.
Under the terms of the agreements, employees elect to defer a portion of their
compensation to be received, together with accrued interest, upon termination of
the agreements, as defined. The present value of the obligation is recorded as
deferred compensation in the accompanying consolidated balance sheets. Interest
is earned on deferred amounts at a rate determined annually by the Company (8.5%
at February 28, 1998).
The Company is the beneficiary of whole life insurance policies with an
aggregate cash surrender value of approximately $2,255,000 and $4,363,000, and
an aggregate face amount of $14,725,000 and $13,450,000, as of February 28, 1997
and 1998, respectively. Proceeds from the policies are intended to fund the
deferred compensation agreements.
F-13
<PAGE> 63
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
The Company maintains an employee stock purchase plan (the "ESPP") covering
all eligible employees meeting length of service requirements as specified in
the ESPP. An aggregate of 200,000 shares of common stock is reserved for
issuance under the ESPP. Eligible employees are given the right to purchase
shares of common stock two times a year at a price equal to 85% of the then
current market price of the common stock.
STOCK OPTION PLANS
The Company has two employee stock option plans, the 1997 Omnibus Stock and
Incentive Plan (the "1997 Plan") and the 1998 Omnibus Stock and Incentive Plan
(the "1998 Plan"). Under the 1997 Plan and the 1998 Plan, incentive stock
options, nonqualified stock options, stock appreciation rights, performance
units, performance shares, restricted stock, restricted stock units and stock
not subject to restrictions may be granted to employees of the Company at prices
determined at the time of grant. Generally, incentive stock options,
nonqualified stock options, restricted stock and restricted stock units will
vest each year beginning on the first anniversary of the date of grant at 20-25%
per year and will expire after 10 years. An aggregate of 950,000 and 1,000,000
shares of common stock are reserved for issuance under the 1997 Plan and the
1998 Plan, respectively. Certain options under the 1997 Plan which have been
granted to executive officers of the Company vest immediately upon the Company's
stock price exceeding specified closing prices for a specified length of time as
determined by the Board of Directors. If the specified criteria are not met, the
options become 100% exercisable six years from the date of grant.
The Company also maintains a non-employee directors' stock plan (the
"Directors' Stock Plan"). An aggregate of 80,000 shares of common stock are
reserved for issuance under the Directors' Stock Plan. Among other provisions,
outside directors will annually receive options to purchase 5,000 shares of
common stock at an exercise price equal to the market price of the common stock
on the date of grant. The options will vest fully on the first anniversary of
the date of grant and expire after five years.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25 ("APB 25"), under which approximately
$51,000 of compensation expense has been recognized for options with an exercise
price less than the market price on the date of grant. In October 1995, the FASB
issued SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
which was effective for fiscal years beginning after December 15, 1995. SFAS 123
allows companies to continue following the accounting guidance of APB 25, but
requires pro forma disclosure of net income and earnings per share for the
effects on compensation expense had the accounting guidance of SFAS 123 been
adopted.
The Company adopted SFAS 123 for disclosure purposes during the year ended
February 28, 1998. For SFAS 123 purposes, the fair value of each option grant
has been estimated as of the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions; risk-free
interest rates ranging from 5.56 to 6.43 percent, depending on the date of
grant, expected life of 7 years, dividend rate of zero percent, and expected
volatility of 45 percent. Using these assumptions, the fair value of the stock
options granted in the year ended February 28, 1998, is approximately
$10,934,000, which would be amortized as compensation expense over the vesting
period of the options. Had compensation cost been determined consistent with
SFAS 123, utilizing the assumptions detailed above, the Company's net income and
net
F-14
<PAGE> 64
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income per share, as reported would have been the following pro forma amounts
(in thousands except per share data):
<TABLE>
<CAPTION>
1998
------
<S> <C>
Net income
As reported............................................... $3,880
Pro forma................................................. 3,399
Basic net income per common share
As reported............................................... $ 0.85
Pro forma................................................. 0.74
Diluted net income per common and common equivalent share
As reported............................................... $ 0.82
Pro forma................................................. 0.72
</TABLE>
A summary of the status of the Company's stock option plans as of February
28, 1998, and for the year then ended is presented in the table and narrative
below:
<TABLE>
<CAPTION>
1998
--------------------------
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding -- beginning of year........................... -- $ --
Granted.................................................... 1,211,615 15.97
--------- ------
Outstanding -- end of year................................. 1,211,615 $15.97
========= ======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------------------------
NUMBER WEIGHTED- WEIGHTED-
OUTSTANDING AVERAGE AVERAGE
AS OF REMAINING EXERCISE
RANGE OF EXERCISE PRICES FEBRUARY 28, 1998 CONTRACTUAL LIFE PRICE
- ------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C>
$7.50............................... 67,500 9.3 years $ 7.50
12.00 -- 17.88...................... 538,500 9.4 years 13.12
19.13 -- 19.56...................... 605,615 10.0 years 19.45
</TABLE>
As of February 28, 1998, options to purchase an aggregate of 1,211,615
shares were outstanding with a weighted average fair value of $9.02. No options
were exercisable as of February 28, 1998. No options were granted during the
years ended February 29, 1996 or February 28, 1997.
F-15
<PAGE> 65
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) NET INCOME (LOSS) PER SHARE
The Company adopted SFAS 128, "Earnings per Share" during the year ended
February 28, 1998. Accordingly, basic and diluted earnings per share ("EPS") are
shown on the face of the accompanying consolidated statements of operations. The
following is a reconciliation of the numerator and denominator of basic EPS to
diluted EPS.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------------------------------------------------------------
FEBRUARY 29, 1996 FEBRUARY 28, 1997
------------------------------------ ------------------------------------
INCOME PER- INCOME PER-
(LOSS) SHARES SHARE (LOSS) SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------ ----------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders............... $(202) 2,921 $(0.07) $(567) 3,199 $(0.18)
Effect of dilutive
securities Options......... -- -- -- --
Convertible promissory
note....................... -- -- -- --
----- ----- ----- -----
DILUTED EPS
Income available to common
stockholders + assumed
conversions................ $(202) 2,921 $(0.07) $(567) 3,199 $(0.18)
===== ===== ====== ===== ===== ======
<CAPTION>
FOR THE YEARS ENDED
------------------------------------
FEBRUARY 28, 1998
------------------------------------
INCOME PER-
(LOSS) SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
BASIC EPS
Income available to common
stockholders............... $3,880 4,573 $0.85
Effect of dilutive
securities Options......... -- 121
Convertible promissory
note....................... 14 57
------ -----
DILUTED EPS
Income available to common
stockholders + assumed
conversions................ $3,894 4,751 $0.82
====== ===== =====
</TABLE>
Options to purchase 605,615 shares of common stock at prices ranging from
$19.13 to $19.56 per share were outstanding as of February 28, 1998, but were
not included in the computation of diluted EPS because the options' exercise
prices were greater than the average market price of common shares.
(8) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain office equipment and real property under
noncancellable operating leases.
Future minimum lease payments under these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
February 28, 1999......................................... $ 4,606
February 29, 2000......................................... 4,078
February 28, 2001......................................... 3,394
February 28, 2002......................................... 2,802
February 28, 2003......................................... 2,511
Thereafter................................................ 5,788
-------
$23,179
=======
</TABLE>
Rent expense totaled approximately $1,769,000, $2,947,000 and $3,396,000
during the years ended February 29, 1996, February 28, 1997, and February 28,
1998, respectively. Certain real property leases provide for periods of free
rent or escalating lease payments throughout the lease term. In accordance with
generally accepted accounting principles, rent expense is recognized ratably
over the term of the agreement.
F-16
<PAGE> 66
LAMALIE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LETTERS OF CREDIT
As of February 28, 1998, the Company has standby letters of credit totaling
approximately $417,000. The letters of credit, which are required by certain
lessors as security deposits, expire between October and December 1998.
LITIGATION
The Company is involved in various legal actions arising in the normal
course of business. While it is not possible to determine with certainty the
outcome of these matters, in the opinion of management, the eventual resolution
of these claims and actions outstanding will not have a material adverse effect
on the Company's financial position or results of operations.
F-17
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ward Howell International, Inc.:
We have audited the accompanying balance sheets of Ward Howell
International, Inc. (the "Company") as of December 31, 1997 and 1996, and the
related statements of operations, shareholders' equity and cash flows for each
of the years in the three year period ended December 31, 1997. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Ward Howell International,
Inc. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31,
1997 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
February 20, 1998
F-18
<PAGE> 68
WARD HOWELL INTERNATIONAL, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 1,997,652 $ 1,437,234
Accounts receivable including client disbursements, net of
allowance for doubtful accounts of approximately
$1,287,000 in 1997 and $726,000 in 1996................ 7,183,214 7,226,873
Employee advances......................................... 712,236 346,149
Due from joint venture (note 2)........................... 1,122 --
Deferred income taxes (note 6)............................ 544,744 285,647
Prepaid expenses and other current assets................. 45,021 107,174
----------- -----------
Total current assets.............................. 10,483,989 9,403,077
----------- -----------
Fixed assets, at cost:
Furniture, fixtures and equipment......................... 1,713,057 1,598,374
Computers and related costs............................... 2,055,770 1,821,307
Leasehold improvements.................................... 476,456 262,769
Assets acquired under capital leases...................... 103,746 103,746
----------- -----------
4,349,029 3,786,196
Less accumulated depreciation and amortization............ (3,460,549) (3,179,067)
----------- -----------
Net fixed assets.................................. 888,480 607,129
Investment in joint ventures (note 1)....................... 96,301 67,028
Other....................................................... 292,536 344,698
----------- -----------
Total assets...................................... $11,761,306 $10,421,932
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable to related parties (note
2)..................................................... $ 29,448 $ 33,021
Current portion of installment notes payable (note 2)..... 39,000 50,069
Due to joint venture (note 2)............................. -- 25,022
Accounts payable and accrued liabilities.................. 699,125 549,373
Accrued profit-sharing contribution and bonuses (note
4)..................................................... 4,102,834 3,578,531
Accrued commissions....................................... 4,962,329 4,176,107
Income taxes payable...................................... 150,560 40,846
----------- -----------
Total current liabilities......................... 9,983,296 8,452,969
Notes payable to related parties, net of current portion
(note 2).................................................. 53,923 42,967
Installment notes payable, net of current portion (note
2)........................................................ 32,931 78,565
Deferred rent (note 3)...................................... 263,224 305,418
Noncurrent deferred income taxes (note 6)................... 64,252 52,104
----------- -----------
Total liabilities................................. 10,397,626 8,932,023
Shareholders' equity:
Common stock, $1 par value; 5,000 shares authorized; 2,146
shares and 2,136 shares issued and outstanding in 1997
and 1996, respectively (note 7)........................ 2,146 2,136
Additional paid-in capital................................ 1,180,598 1,170,248
Retained earnings......................................... 252,867 487,599
----------- -----------
1,435,611 1,659,983
Less:
Shareholders' notes receivable (note 5)................ (71,931) (170,074)
----------- -----------
Total shareholders' equity........................ 1,363,680 1,489,909
Commitments and contingencies (notes 3 and 8)...............
----------- -----------
Total liabilities and shareholders' equity........ $11,761,306 $10,421,932
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE> 69
WARD HOWELL INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Fee revenues....................................... $26,498,292 $25,137,840 $17,063,083
----------- ----------- -----------
Operating expenses:
Compensation and benefits........................ 23,216,196 22,370,604 15,318,795
General and administrative expenses (notes 3 and
4)............................................ 3,701,819 2,078,613 2,271,293
----------- ----------- -----------
Total operating expenses................. 26,918,015 24,449,217 17,590,088
----------- ----------- -----------
Earnings (loss) from operations.......... (419,723) 688,623 (527,005)
Equity in net income of joint ventures............. 43,673 14,335 8,193
Other income (expense):
Interest income (note 5)......................... 52,695 33,936 31,021
Interest expense (note 2)........................ (11,780) (16,512) (5,868)
----------- ----------- -----------
40,915 17,424 25,153
----------- ----------- -----------
Earnings (loss) before income taxes...... (335,135) 720,382 (493,659)
Income tax (expense) benefit (note 6).............. 100,403 (382,445) (111,980)
----------- ----------- -----------
Net earnings (loss)...................... $ (234,732) $ 337,937 $ (381,679)
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE> 70
WARD HOWELL INTERNATIONAL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL SHAREHOLDERS' TOTAL
COMMON PAID-IN RETAINED TREASURY NOTES SHAREHOLDERS'
STOCK CAPITAL EARNINGS STOCK RECEIVABLE EQUITY
------ ---------- --------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994...... $1,664 $ 681,728 $ 531,341 -- $(250,795) $ 963,938
Repurchase of 320 shares of
treasury stock.................. -- -- -- (331,520) 219,483 (112,037)
Issuance of 320 shares of treasury
stock........................... -- -- -- 331,520 (200,000) 131,520
Payment from shareholders......... -- -- -- -- 42,408 42,408
Net loss.......................... -- -- (381,679) -- -- (381,679)
------ ---------- --------- -------- --------- ----------
Balance at December 31, 1995...... 1,664 681,728 149,662 -- (188,904) 644,150
Payment from shareholders......... -- -- -- -- 60,270 60,270
Issuance of 472 shares of common
stock........................... 472 488,520 -- -- (41,440) 447,552
Net earnings...................... -- -- 337,937 -- -- 337,937
------ ---------- --------- -------- --------- ----------
Balance at December 31, 1996...... 2,136 1,170,248 487,599 -- (170,074) 1,489,909
Issuance of 10 shares of common
stock........................... 10 10,350 -- -- -- 10,360
Repurchase of common stock........ -- -- -- (142,968) -- (142,968)
Issuance of treasury stock........ -- -- -- 142,968 -- 142,968
Payment from shareholders......... -- -- -- -- 98,143 98,143
Net loss.......................... -- -- (234,732) -- -- (234,732)
------ ---------- --------- -------- --------- ----------
Balance at December 31, 1997...... $2,146 $1,180,598 $ 252,867 -- $ (71,931) $1,363,680
====== ========== ========= ======== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 71
WARD HOWELL INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................................... $ (234,732) $ 337,937 $ (381,679)
---------- ---------- -----------
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Equity in net income of joint venture................ (43,673) (14,335) (8,193)
Depreciation and amortization........................ 281,482 213,787 233,514
Provision for doubtful accounts...................... 1,173,878 965,625 361,564
Deferred rent........................................ (42,194) (78,971) 30,210
Deferred income taxes................................ (246,949) 292,791 (203,430)
Changes in operating assets and liabilities:
Accounts receivable................................ (1,130,219) (3,555,707) (1,145,366)
Employee advances.................................. (251,092) 163,143 (49,121)
Due from joint venture............................. (1,122) 29,600 (29,600)
Prepaid expenses and other current assets.......... 62,153 (61,339) 80,189
Prepaid income taxes............................... -- 37,820 (67,252)
Other.............................................. 52,162 (42,967) (25,445)
Accounts payable and accrued liabilities........... 149,752 1,295,333 57,643
Accrued commissions................................ 786,222 579,323 769,694
Accrued profit sharing contribution and bonuses.... 524,303 1,170,350 159,535
Income taxes payable............................... 109,714 40,846 --
Due to joint ventures.............................. (25,022) (84,777) (161,881)
Other long-term liabilities........................ -- (3,227) (67,162)
---------- ---------- -----------
Total adjustments............................... 1,399,395 947,295 (65,101)
---------- ---------- -----------
Net cash provided by (used in) operating
activities.................................... 1,164,663 1,285,232 (446,780)
---------- ---------- -----------
Cash flows from investing activities:
Distributions from ventures............................. 14,400 -- --
Purchases of fixed assets............................... (562,833) (179,102) (175,082)
---------- ---------- -----------
Net cash used in investing activities........... (548,433) (179,102) (175,082)
---------- ---------- -----------
Cash flows from financing activities:
Sales of treasury stock................................. $ 27,973 $ -- $ 131,520
Purchases of stock for treasury......................... (102,564) -- (112,037)
Payments on notes payable, net.......................... (89,724) (145,606) (51,215)
Shareholders' payment on notes receivable............... 98,143 60,270 42,408
Payments on capital lease obligations................... -- (10,107) (10,737)
Sale of common stock.................................... 10,360 277,060 --
---------- ---------- -----------
Net cash provided by (used in) financing
activities.................................... (55,812) 181,617 (61)
---------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents................................... 560,418 1,287,747 (621,923)
Cash and cash equivalents, beginning of year.............. 1,437,234 149,487 771,410
---------- ---------- -----------
Cash and cash equivalents, end of year.................... $1,997,652 $1,437,234 $ 149,487
========== ========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................. $ 5,850 $ 18,170 $ 9,424
========== ========== ===========
Taxes................................................ $ 84,532 $ 71,062 $ 177,600
========== ========== ===========
Noncash financing activities:
Shareholder notes receivable, net....................... -- 41,440 19,483
Note payable for repurchase of common stock............. 40,404 -- --
Receivable from sale of common stock.................... $ 114,995 $ 170,492 $ --
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 72
WARD HOWELL INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization and Basis of Presentation
Ward Howell International, Inc. (the "Company") was incorporated in 1951 in
the State of Connecticut. The Company is part of the Ward Howell International
Group, which unites 20 autonomous firms worldwide into one organization for the
purpose of sharing resources, information and conducting international executive
searches. These searches relate to all management disciplines in business,
industry, government, education, health care and foundations. The Company has
offices in New York, Barrington, Chicago, Dallas, Encino, Houston, Stamford,
Atlanta, Phoenix and Wisconsin.
The Company accounts for its investments in joint ventures using the equity
method of accounting. At December 31, 1996 and 1995, the Company had a 30%
interest in Ward Howell Russia, Inc., which in turn held a 29% interest in Ward
Howell International, Holdings, Inc. In 1997 Ward Howell Russia, Inc. was
dissolved and the Company's interest in Ward Howell Russia, Inc. became a direct
8.7% interest in Ward Howell International Holdings, Inc. as of December 31,
1997.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company generates substantially all of its revenues from fees for
professional services, which are recognized as fee revenue as clients are
billed, generally over a 60- to 90- day period commencing with the initial
acceptance of a search. Fee revenue is presented net of adjustments to original
billings.
Depreciation and Amortization
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which generally approximate five years.
Leasehold improvements are amortized over the terms of the related leases
or the estimated useful lives of the improvements, whichever is less.
Income Taxes
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Cash Equivalents
The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
F-23
<PAGE> 73
WARD HOWELL INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS CONTINUED
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make a number of estimates
and assumptions that affect the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform with the 1997 financial statement presentation.
(2) RELATED PARTY TRANSACTIONS
Notes payable to related parties represent amounts due to former
shareholders for repurchases of common stock. The notes are payable in annual
installments with maturities through 2003, and bear interest at rates ranging
from 5.8% to 9.50% at December 31, 1997. Interest expense on notes payable
aggregated approximately $7,000 in 1997, $8,000 in 1996, and $6,000 in 1995
including approximately $5,000 that was accrued at both December 31, 1997 and
1996. In addition, the Company has outstanding installment notes payable that
have been guaranteed by certain shareholders. These notes are payable in monthly
installments through 1999 and bear interest at the prime rate plus one and
one-half percent. At December 31, 1997, the prime rate was 8.50%.
Aggregate future maturities of notes payable as of December 31, 1997 are
approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
- ----------------------- --------
<S> <C>
1998................................................. $ 68,000
1999................................................. 55,000
2000................................................. 12,000
2001................................................. 7,000
2002................................................. 7,000
2003................................................. 6,000
--------
$155,000
========
</TABLE>
Included in due to joint ventures are commissions owed to the joint
ventures and fees collected on behalf of the joint ventures.
(3) RENT EXPENSE AND COMMITMENTS
The Company leases its office facilities under agreements that provide for
scheduled rent increases and rent abatements. Rent expense is recognized on a
straight-line basis, rather than in accordance with lease payment schedules, for
purposes of recognizing a consistent annual rent expense. Scheduled base rent
increases and the effects of rent abatements are spread evenly over the terms of
the respective leases in order to effect a straight-line rent expense amount
over the term of the related leases.
F-24
<PAGE> 74
WARD HOWELL INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS CONTINUED
Noncancelable leases for office space expire on various dates through 2003.
The following is a schedule as of December 31, 1997 of approximate future
minimum lease payments:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ----------
<S> <C>
1998........................................................ $ 930,000
1999........................................................ 890,000
2000........................................................ 762,000
2001........................................................ 602,000
2002........................................................ 602,000
2003........................................................ 139,000
----------
$3,925,000
==========
</TABLE>
The leases provide for additional payments for real estate taxes and other
costs.
In 1997, 1996 and 1995, rent expense aggregated approximately $1,059,000,
$1,028,000 and $1,057,000, respectively.
(4) PROFIT SHARING 401(K) PLAN
The Company has a profit-sharing 401(k) plan that covers substantially all
employees. Contributions to the plan by the Company are limited to 15% of
participants' aggregate annual compensation with limitations on contributions
for each participant of 25% of compensation not to exceed $30,000. Excess
amounts (amounts in excess of $30,000) may be paid in the form of bonuses.
Profit-sharing expense pertaining to the 401(k) plan for 1997, 1996 and 1995,
net of forfeitures, was approximately $953,500, $1,156,600 and $1,057,000,
respectively.
(5) SHAREHOLDERS' NOTES RECEIVABLE
Shareholders' notes receivable represent amounts due for the purchase by
shareholders of common stock. The notes are due in annual installments with
maturities through 1999, and bear interest at 10% per annum.
(6) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1997, 1996
and 1995 is composed of the following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Current:
Federal............................................ $ 86,196 $133,154 $ --
State.............................................. 60,349 61,460 66,900
Deferred............................................. (246,948) 187,831 (178,880)
--------- -------- ---------
$(100,403) $382,445 $(111,980)
========= ======== =========
</TABLE>
F-25
<PAGE> 75
WARD HOWELL INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS CONTINUED
Deferred income taxes included in the respective balance sheets reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts reported for
income tax purposes. A schedule of the temporary differences and the related tax
effect follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Allowance for doubtful accounts............................. $544,744 $297,660
Depreciation and amortization............................... (64,252) (52,104)
Accrued lease termination costs............................. -- 1,323
Tax credit/other carryforward............................... -- (13,336)
-------- --------
$480,492 $233,543
======== ========
</TABLE>
The Company's deferred tax assets and liabilities as of December 31, 1997
and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
CURRENT NONCURRENT CURRENT NONCURRENT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Assets..................................... $544,744 $ -- $298,983 $ --
Liabilities................................ -- (64,252) (13,336) (52,104)
-------- -------- -------- --------
Net deferred tax assets (liabilities)...... $544,744 $(64,252) $285,647 $(52,104)
======== ======== ======== ========
</TABLE>
In 1997, 1996 and 1995, the difference between the effective tax rate and
the Federal statutory rate is due primarily to Federal graduated rates, state
and local taxes and certain meals and entertainment expenses that are not
deductible for tax purposes.
(7) COMMON STOCK
Common stock is issued at a price of $1,036 per share or book value per
share, as defined, whichever is greater. The book value per share at December
31, 1997 and 1996 was $669 and $777, respectively. For purposes of calculating
book value per share, shareholders' notes receivable are not deducted from
shareholders' equity. Upon a shareholder's termination of employment or the
occurrence of certain other events, the Company has the first right and option
to purchase the common stock held by the shareholder at a price of $1,036 per
share or book value per share, as defined, whichever is greater.
(8) SHORT-TERM BORROWINGS
The Company has available a line of credit with a bank in the amount of
$800,000. Borrowings under this line of credit were secured by the Company's
accounts receivable and carried interest at the rate of prime plus 1%. There
were no such borrowings at December 31, 1997 and 1996.
F-26
<PAGE> 76
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder of
Chartwell Partners International, Inc.:
We have audited the accompanying statement of operations of Chartwell
Partners International, Inc. (a California corporation) for the year ended
December 31, 1997, and the related statement of cash flows for the year then
ended. 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 Chartwell
Partners International, Inc. for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 8, 1998
F-27
<PAGE> 77
CHARTWELL PARTNERS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Fee Revenue, net............................................ $3,428,995
Operating Expenses:
Compensation and benefits................................. 2,926,011
General and administrative................................ 544,554
----------
Total operating expenses.......................... 3,470,565
----------
Operating Loss.............................................. (41,570)
Interest Income, net........................................ 25,700
----------
Loss Before Provision for Income Taxes...................... (15,870)
Provision for Income Taxes.................................. 4,000
----------
Net Loss.................................................... $ (19,870)
==========
Basic and Diluted Loss Per Share............................ $ (1.99)
==========
Weighted Average Shares Outstanding......................... 10,000
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-28
<PAGE> 78
CHARTWELL PARTNERS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(19,870)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 59,142
Changes in assets and liabilities:
Accounts receivable.................................. 1,022
Accounts payable and accrued liabilities............. 77,043
Accrued compensation................................. 191,639
--------
Net cash provided by operating activities......... 308,976
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (56,817)
--------
Net cash used in investing activities............. (56,817)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt.............................. (51,667)
Dividends paid............................................ (10,000)
--------
Net cash used in financing activities............. (61,667)
--------
Net Increase in Cash and Cash Equivalents................... 190,492
Cash and Cash Equivalents, beginning of year................ 14,664
--------
Cash and Cash Equivalents, end of year...................... $205,156
========
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest............................................... $ 4,457
Income taxes........................................... $ 4,000
</TABLE>
The accompanying notes are an integral part of this statement.
F-29
<PAGE> 79
CHARTWELL PARTNERS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Chartwell Partners International, Inc. (the Company) is an executive search
firm specializing in the recruitment of executives on behalf of its clients. The
Company contracts with its clients, primarily on a retainer basis, to provide
consulting advice on the identification, evaluation, attraction, and
recommendation of qualified candidates for specific positions.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investment instruments with
original maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Office furniture and equipment is depreciated using the straight-line
method of depreciation over its estimated useful lives of five years. Computer
equipment is depreciated using the straight-line method of depreciation over its
estimated useful lives of two and one-half years. Repair and maintenance costs
which do not extend the useful lives of the related assets are expensed as
incurred.
REVENUE RECOGNITION
The Company derives substantially all of its revenues from professional
services, which are recognized as fee revenue as clients are billed, generally
over a 60- to 90-day period commencing with the initial acceptance of a search.
Fee revenue is presented net of adjustments to original billings.
INCOME TAXES
The Company reports its earnings under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, net income is reported through the
stockholder's individual income tax return, and the resulting federal tax
liability is the responsibility of the individual stockholder.
The provision for income taxes relates to state income taxes owed by the
Company for the year ended December 31, 1997.
NET LOSS PER SHARE
Net loss per share is determined by dividing the net loss by the weighted
average number of shares of common stock outstanding during the period. There
were no common equivalent shares outstanding during the year ended December 31,
1997.
F-30
<PAGE> 80
CHARTWELL PARTNERS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
For the year ended December 31, 1997, the Company derived approximately 10
percent of its revenues from a single customer.
NEWLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(SFAS 128). SFAS 128 establishes new standards for computing and presenting
earnings per share (EPS). Specifically, SFAS 128 replaces the presentation of
primary EPS with a presentation of basic EPS, requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS 128 is effective for financial statements issued
for periods ending after December 15, 1997; earlier application is not
permitted. Management has implemented SFAS 128 for the year ended December 31,
1997. Because the Company does not have a complex capital structure, the
implementation of SFAS No. 128 had no impact on the financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits" (SFAS 132). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans.
SFAS 132 is effective for fiscal years beginning after December 15, 1997;
earlier application is encouraged. Management has implemented SFAS 132 for the
year ended December 31, 1997.
2. EMPLOYEE BENEFIT PLANS:
DEFINED CONTRIBUTION 401(K) PROFIT SHARING PLAN
The Company maintains a defined contribution 401(k) profit sharing plan.
For the year ended December 31, 1997, the Company did not make a contribution to
this plan.
MONEY PURCHASE PENSION PLAN
The Company maintains a money purchase pension plan. For the year ended
December 31, 1997, the Company made a contribution totaling approximately
$68,000, which is reflected in compensation and benefits expense in the
accompanying statement of operations.
3. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases certain office space under a non-cancelable operating
lease. Aggregate future minimum lease payments under this lease are
approximately $99,000 and relate to the year ending December 31, 1998.
Rent expense totaled approximately $92,000 for the year ended December 31,
1997.
4. SUBSEQUENT EVENT:
On January 2, 1998, the Company entered into an asset sale agreement with
Lamalie Associates, Inc. (LAI) to sell certain assets of the Company. The sales
price was approximately $3,100,000 and was paid with approximately $1,400,000 of
cash, a $1,250,000 convertible subordinated note and LAI's common stock.
F-31
<PAGE> 81
LAMALIE ASSOCIATES, INC.
INTRODUCTION TO UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma combined statement of operations for the
year ended February 28, 1998, has been prepared to reflect the results of
operations of Lamalie Associates, Inc. ("LAI" or "the Company") as if the
acquisitions of Ward Howell International, Inc. ("WHI") in February 1998 and
Chartwell Partners International, Inc. ("CPI") in January 1998 were completed on
March 1, 1997.
WHI ACQUISITION
The acquisition of WHI was treated under the purchase method of accounting
for financial reporting purposes. The Company acquired WHI for approximately
$19.5 million. The purchase consideration consisted of (i) approximately $8.8
million cash, (ii) $7.6 million in notes payable over three years, accruing
interest on the unpaid balance at the rate of 5.0 percent per annum, and (iii)
approximately 190,000 shares or $3.1 million of common stock. Approximately $8.8
million of the purchase consideration was derived from the proceeds of the
Company's IPO which had been invested in short-term investment securities since
July 1997. Also, additional acquisition costs of approximately $3.1 million have
been accrued for in the consolidated balance sheets.
CPI ACQUISITION
The acquisition of CPI was treated under the purchase method of accounting
for financial reporting purposes. The Company acquired CPI for approximately
$3.1 million. The purchase consideration consisted of (1) approximately $1.4
million cash, (2) a convertible subordinated promissory note of the Company in
the principal amount of $1.25 million, payable over three years, accruing
interest on the unpaid balance at the rate of 6.75% per annum and convertible
into shares of the Company's common stock at each anniversary date at the prices
specified in the asset purchase agreement, and (3) approximately 26,000 shares
of the Company's common stock. Approximately $1.4 million of the purchase
consideration was derived from the proceeds of the Company's IPO which had been
invested in short-term investment securities since July 1997.
The Company believes that the assumptions used in preparing the unaudited
pro forma combined statement of operations contained herein provide a reasonable
basis on which to present the unaudited pro forma combined financial data. The
unaudited pro forma combined statement of operations is provided for
informational purposes only and should not be construed to be indicative of the
results of operations or financial position of the Company had the transactions
occurred on the date indicated and are not intended to project the Company's
results of operations for any future period or as of any future date. The
unaudited pro forma combined statement of operations should be read in
conjunction with the separate historical financial statements of the Company,
WHI and CPI and in conjunction with the related assumptions and notes to this
unaudited pro forma combined statement of operations. The historical financial
statements of WHI and CPI for the year ended December 31, 1997, were used in
preparing the unaudited pro forma combined statement of operations for the year
ended February 28, 1998.
The unaudited pro forma combined statement of operations does not reflect
the effect of expected decreases in expenses as a result of cost savings which
may be achieved through facilities, technology and administrative integration.
Likewise, this statement does not reflect expected increases in levels of
expenses as a result of planned upgrades to WHI's and CPI's management
information systems. Such items are not reflected because they are not factually
determinable or estimable.
F-32
<PAGE> 82
LAMALIE ASSOCIATES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
BUSINESSES
ACQUIRED
---------------- ACQUISITION PRO FORMA
LAI CPI WHI ADJUSTMENTS COMBINED
------- ------ ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Fee revenue, net........................ $61,803 $3,429 $26,498 $ -- $91,730
Operating expenses:
Compensation and benefits............. 46,513 2,926 23,216 (3,602)(a) 69,053
General and administrative expenses... 8,663 545 3,702 -- 12,910
Goodwill amortization................. 17 -- -- 809 (b) 826
------- ------ ------- ------- -------
Total operating expenses...... 55,193 3,471 26,918 (2,793) 82,789
------- ------ ------- ------- -------
Operating income (loss)................. 6,610 (42) (420) 2,793 8,941
Interest income (expense), net.......... 197 26 85 (957)(c) (649)
------- ------ ------- ------- -------
Income (loss) before provision for
income taxes.......................... 6,807 (16) (335) 1,836 8,292
Provision for income taxes.............. 2,927 4 (100) 976 (d) 3,807
------- ------ ------- ------- -------
Net income (loss)............. $ 3,880 $ (20) $ (235) $ 860 $ 4,485
======= ====== ======= ======= =======
Basic earnings per share................ $ 0.85 $ 0.94
======= =======
Weighted average common shares
outstanding........................... 4,573 4,783
======= =======
Diluted earnings per share.............. $ 0.82 $ 0.90
======= =======
Weighted average common and common
equivalent shares outstanding......... 4,751 4,961
======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations.
F-33
<PAGE> 83
LAMALIE ASSOCIATES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(a) To reflect the elimination of that portion of consultant compensation that
exceeds the amount which would have been paid had the WHI and CPI
consultants been paid under the Company's compensation plan for consultants.
(b) To reflect the increase in amortization expense related to the goodwill
recorded under the purchase method of accounting. The Company amortizes
goodwill over 30 years.
(c) To reflect the elimination of interest income foregone in connection with
the cash used in the acquisitions and the increase in interest expense for
the notes payable issued in connection with the acquisitions bearing
interest at rates ranging from 5.00% to 6.75%.
(d) To reflect the increase in income tax expense based on the pro forma
adjustments to income before provision for income taxes based on the
Company's effective tax rate after consideration of certain portions of
goodwill which are not deductible for income tax purposes.
F-34
<PAGE> 84
Center of page lists "LAI Ward Howell is a Knowledge-Based Firm" followed
by the company's mission statement "committed to providing comprehensive
consulting services aimed specifically at fulfilling our clients' leadership
needs. Our firm has been built on the collective experiences of our consultants
and their ability to understand the dynamic changes taking place in industry
today. We save major corporations and emerging companies on a global basis". The
background is the hemisphere of a globe on a light blue background, which
carries over from the inside front cover.
<PAGE> 85
======================================================
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company, the Selling Stockholders or any
Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any security other than the shares of Common
Stock offered hereby, nor does it constitute an offer to sell or solicitation of
an offer to buy any of the securities offered hereby to any person in any
jurisdiction in which it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 12
Price Range of Common Stock........... 12
Dividend Policy....................... 12
Capitalization........................ 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 21
Management............................ 32
Principal and Selling Stockholders.... 40
Certain Transactions.................. 42
Description of Capital Stock.......... 43
Shares Eligible for Future Sale....... 45
Underwriting.......................... 46
Legal Matters......................... 47
Experts............................... 47
Additional Information................ 48
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
3,000,000 SHARES
(LAI WARD HOWELL LOGO)
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
ROBERT W. BAIRD & CO.
INCORPORATED
THE ROBINSON-HUMPHREY
COMPANY
J.C. BRADFORD & CO.
, 1998
======================================================
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 21,309
NASD filing fee............................................. 7,723
Nasdaq listing fees......................................... 17,500
Printing and engraving expenses............................. 150,000*
Accounting fees and expenses................................ 50,000*
Legal fees and expenses..................................... 100,000*
Transfer Agent's fees and expenses.......................... 5,000*
Miscellaneous............................................... 50,000*
--------
Total............................................. $401,532*
========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act, as amended (the "Florida Act"),
provides that, in general, a business corporation may indemnify any person who
is or was a party to any proceeding (other than an action by, or in the right
of, the corporation) by reason of the fact that he or she is or was a director
or officer of the corporation, against liability incurred in connection with
such proceeding, including any appeal thereof, provided certain standards are
met, including that such officer or director acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the Florida Act provides that, in general, a corporation may
indemnify any person who was or is a party to any such proceeding by reason of
the fact that he or she is or was a director or officer of the corporation
against expenses and amounts paid in settlement actually and reasonably incurred
in connection with the defense or settlement of such proceeding, including any
appeal thereof, provided that such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim as to which such person is adjudged liable unless a court of competent
jurisdiction determines upon application that such person is fairly and
reasonably entitled to indemnity. To the extent that any officers or directors
are successful on the merits or otherwise in the defense of any of the
proceedings described above, the Florida Act provides that the corporation is
required to indemnify such officers or directors against expenses actually and
reasonably incurred in connection therewith. However, the Florida Act further
provides that, in general, indemnification or advancement of expenses shall not
be made to or on behalf of any officer or director if a judgment or other final
adjudication establishes that his or her actions, or omissions to act, were
material to the cause of action so adjudicated and constitute: (i) a violation
of the criminal law, unless the director or officer had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to believe it
was unlawful; (ii) a transaction from which the director or officer derived an
improper personal benefit; (iii) in the case of a director, a circumstance under
which the director has voted for or assented to a distribution made in violation
of the Florida Act or the corporation's articles of incorporation; or (iv)
willful misconduct or a conscious disregard for the best interests of the
corporation in a proceeding by or in the right of the corporation to procure a
judgment in its favor or in a proceeding by or in the right of a stockholder.
II-1
<PAGE> 87
Under the terms of the Company's Articles of Incorporation and Bylaws, the
Company may indemnify any director, officer or employee or any former director,
officer or employee to the fullest extent permitted by law.
The Company has entered into agreements with certain of the directors and
officers of the Company pursuant to which the Company agrees to indemnify each
such person against claims, liabilities, damages, expenses, losses, costs,
penalties or amounts paid in settlement incurred by such person and arising out
of his capacity or service as a director, officer, employee, stockholder,
partner, consultant, independent contractor and/or agent of the Company. In
addition, each such person generally shall be entitled to an advance of expenses
to meet the obligations indemnified against. For the benefit and on behalf of
each of its directors, the Company maintains insurance that provides coverage
with respect to liabilities that may arise under the statutory provisions
referred to above and other liabilities as well, including certain liabilities
that could arise under the Securities Act of 1933 and against which such persons
might not be indemnified by the Company.
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in the Underwriting
Agreement (see Exhibit 1).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has issued 1,012,000 shares of
Common Stock to 32 of its current and former professional employees in 44
transactions for aggregate consideration of $1,475,009. The Company also issued
215,384 shares to consultants who joined the Company in fiscal 1998 in
connection with the acquisitions of WHI and CPI. The Company believes that all
such transactions were exempt from registration pursuant to Section 4(2) and/or
Rule 701 under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1** -- Form of Underwriting Agreement
2.1 (4) -- Agreement and Plan of Merger dated February 27, 1998, by and
among Lamalie Associates, Inc., LAI Mergersub, Inc. and Ward
Howell International, Inc.
2.2 (4) -- Asset Purchase Agreement dated December 29, 1997, by and
among Lamalie Associates, Inc., Chartwell Partners
International, Inc. and David M. DeWilde
3.1 (1) -- Articles of Incorporation of the Registrant as now in effect
3.2 (1) -- Bylaws of the Registrant as now in effect
4 (1) -- Form of Common Stock Certificate
5** -- Opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis as to the legality of the Common Stock being
registered
10.1 (3) -- 1997 Omnibus Stock and Incentive Plan
10.2 (1) -- Non-Employee Directors' Stock Option Plan
10.3 (1) -- Profit Sharing Plan
10.4 (1) -- 1997 Employee Stock Purchase Plan
10.5 (1) -- Form of Agreement for Deferred Compensation Plan
10.6 (1) -- Managing Partners' Compensation Plan+
10.7 (1) -- Partners' Compensation Plan+
10.8 (1) -- Employment Agreement for Mr. Gow+
</TABLE>
II-2
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.9 (5) -- 1998 Omnibus Stock and Incentive Plan
10.10(1) -- Employment Agreement for Mr. Rothschild+
10.11(2) -- Form of Indemnification Agreement entered into with certain
Directors and Officers
10.12(1) -- Directors' Deferral Plan
10.13(3) -- Employment Agreement with Robert L. Pearson dated October 8,
1997
10.14(4) -- Form of Employment Agreement for former Ward Howell
International, Inc. Shareholders
21.1* -- Subsidiaries of the Registrant
23.1** -- Consent of Counsel to the Company (included in Exhibit 5)
23.2** -- Consent of Arthur Andersen LLP
23.3** -- Consent of KPMG Peat Marwick LLP
27* -- Financial Data Schedule
</TABLE>
- ---------------
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-26027),
originally filed April 29, 1997, as amended and as effective July 1, 1997.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended May 31,
1997, filed August 8, 1997.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended November
30, 1997, filed January 13, 1998.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Current Report on Form 8-K filed March 13, 1998.
(5) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended February
28, 1998, filed May 29, 1998.
+ Confidential treatment has been granted with respect to portions of this
Exhibit.
* Previously filed
** Filed herewith
(b) Financial Statement Schedules
Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14), or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt deliver to each purchaser.
II-3
<PAGE> 89
The undersigned registrant hereby undertakes that:
i. For purposes of determining any liability under the Securities act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
ii. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on the 9th day of June, 1998.
LAMALIE ASSOCIATES, INC.
By: /s/ PHILIP R. ALBRIGHT
------------------------------------
Philip R. Albright
Vice President -- Finance
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT L. PEARSON* President, Chief Executive June 9, 1998
- ----------------------------------------------------- Officer and Director
Robert L. Pearson (Principal Executive Officer)
/s/ JACK P. WISSMAN* Executive Vice President, June 9, 1998
- ----------------------------------------------------- Chief Financial Officer
Jack P. Wissman (Principal Financial Officer)
/s/ PHILIP R. ALBRIGHT Vice President, June 9, 1998
- ----------------------------------------------------- Finance and Controller
Philip R. Albright (Principal Accounting Officer)
/s/ JOE D. GOODWIN* Director June 9, 1998
- -----------------------------------------------------
Joe D. Goodwin
/s/ RODERICK C. GOW* Director June 9, 1998
- -----------------------------------------------------
Roderick C. Gow
/s/ RAY J. GROVES* Director June 9, 1998
- -----------------------------------------------------
Ray J. Groves
/s/ JOHN F. JOHNSON* Director June 9, 1998
- -----------------------------------------------------
John F. Johnson
/s/ RICHARD W. POGUE* Director June 9, 1998
- -----------------------------------------------------
Richard W. Pogue
/s/ JOHN C. POPE* Director June 9, 1998
- -----------------------------------------------------
John C. Pope
/s/ JOHN S. ROTHSCHILD* Director June 9, 1998
- -----------------------------------------------------
John S. Rothschild
</TABLE>
II-5
<PAGE> 91
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID L. WITTE* Director June 9, 1998
- -----------------------------------------------------
David L. Witte
*By: /s/ PHILIP R. ALBRIGHT
------------------------------------------------
Philip R. Albright,
Attorney-in-fact
</TABLE>
II-6
<PAGE> 92
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Lamalie Associates, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Lamalie Associates, Inc. included in this
registration statement and have issued our report thereon dated April 8, 1998.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index in item
16(b) is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 8, 1998
II-7
<PAGE> 93
SCHEDULE II
LAMALIE ASSOCIATES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO AMOUNT ADDED BALANCE AT
BEGINNING OF COST AND THROUGH END OF
DESCRIPTION PERIOD EXPENSES ACQUISITIONS PERIOD
- ----------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Year ended February 29, 1996
Deducted from asset account:
Allowance for doubtful accounts.... $275 $350 $ -- $ 625
Year ended February 28, 1997
Deducted from asset account:
Allowance for doubtful accounts.... 625 225 -- 850
Year ended February 28, 1998
Deducted from asset account:
Allowance for doubtful accounts.... 850 450 820 2,120
</TABLE>
II-8
<PAGE> 94
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1** -- Form of Underwriting Agreement
2.1 (4) -- Agreement and Plan of Merger dated February 27, 1998, by and
among Lamalie Associates, Inc., LAI Mergersub, Inc. and Ward
Howell International, Inc.
2.2 (4) -- Asset Purchase Agreement dated December 29, 1997, by and
among Lamalie Associates, Inc., Chartwell Partners
International, Inc. and David M. DeWilde
3.1 (1) -- Articles of Incorporation of the Registrant as now in effect
3.2 (1) -- Bylaws of the Registrant as now in effect
4 (1) -- Form of Common Stock Certificate
5** -- Opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis as to the legality of the Common Stock being
registered
10.1 (3) -- 1997 Omnibus Stock and Incentive Plan
10.2 (1) -- Non-Employee Directors' Stock Option Plan
10.3 (1) -- Profit Sharing Plan
10.4 (1) -- 1997 Employee Stock Purchase Plan
10.5 (1) -- Form of Agreement for Deferred Compensation Plan
10.6 (1) -- Managing Partners' Compensation Plan+
10.7 (1) -- Partners' Compensation Plan+
10.8 (1) -- Employment Agreement for Mr. Gow+
10.9 (5) -- 1998 Omnibus Stock and Incentive Plan
10.10(1) -- Employment Agreement for Mr. Rothschild+
10.11(2) -- Form of Indemnification Agreement entered into with certain
Directors and Officers
10.12(1) -- Directors' Deferral Plan
10.13(3) -- Employment Agreement with Robert L. Pearson dated October 8,
1997
10.14(4) -- Form of Employment Agreement for former Ward Howell
International, Inc. Shareholders
21.1* -- Subsidiaries of the Registrant
23.1** -- Consent of Counsel to the Company (included in Exhibit 5)
23.2** -- Consent of Arthur Andersen LLP
23.3** -- Consent of KPMG Peat Marwick LLP
27* -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-26027),
originally filed April 29, 1997, as amended and as effective July 1, 1997.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended May 31,
1997, filed August 8, 1997.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended November
30, 1997, filed January 13, 1998.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Registrant's Current Report on Form 8-K filed March 13, 1998.
(5) Incorporated by reference to the correspondingly numbered exhibit to be
Registrant's Annual Report on Form 10-K for the fiscal year ended February
28, 1998, filed May 29, 1998.
+ Confidential treatment has been granted with respect to portions of this
Exhibit.
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 1
LAMALIE ASSOCIATES, INC.
3,000,000 Shares of Common Stock*
FORM OF
UNDERWRITING AGREEMENT
June ___, 1998
ROBERT W. BAIRD & CO. INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, LLC
J.C. BRADFORD & CO.
As Representatives of the Several Underwriters
Identified in Schedule II Annexed Hereto
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Ladies and Gentlemen:
SECTION 1. INTRODUCTORY. Lamalie Associates, Inc., a Florida
corporation (the "COMPANY"), proposes to issue and sell an aggregate of
2,089,540 shares of common stock, $0.01 par value per share (the "COMMON STOCK")
and the several stockholders of the Company identified in Schedule I annexed
hereto (the "SELLING STOCKHOLDERS") propose to sell an aggregate of 910,460
shares of Common Stock (such 3,000,000 shares, collectively, the "FIRM SHARES")
to the several underwriters identified in Schedule II annexed hereto (the
"UNDERWRITERS"), who are acting severally and not jointly. In addition, the
Company has agreed to grant to the Underwriters an option to purchase up to
450,000 additional shares of Common Stock (the "OPTIONAL SHARES") as provided in
Section 6 hereof. The Firm Shares and, to the extent such option is exercised,
the Optional Shares are hereinafter collectively referred to as the "SHARES."
All references herein to "the Company" are to Lamalie Associates, Inc., a
Florida corporation, and, for all periods prior to June 3, 1997 and when
- ---------------------
* Plus an option to acquire up to 450,000 additional shares of Common Stock
from the Company to cover over-allotments.
<PAGE> 2
the context otherwise requires, its predecessor Lamalie Associates, Inc., a
Delaware corporation.
You, as representatives of the Underwriters (the
"REPRESENTATIVES"), have advised the Company and the Selling Stockholders that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon hereafter as in your judgment is advisable and that the
public offering price of the Shares initially will be [$______] per share.
The Company and the Selling Stockholders hereby confirm their
respective agreements with the Underwriters and each other as follows:
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to, and agrees with, the several Underwriters,
and shall be deemed to represent and warrant to the several Underwriters on each
Closing Date (as hereinafter defined), that:
(a) Each of the Company and the subsidiaries of the Company that
are listed on Exhibit 21.1 of the Registration Statement (as hereinafter
defined) (individually, a "SUBSIDIARY" and collectively, the "SUBSIDIARIES") has
been duly incorporated and is validly existing as a corporation and either its
status is active or it is in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as presently conducted and described
in the Prospectus and the Registration Statement (as such terms are defined in
Section 2(e)). Each of the Company and the Subsidiaries is duly registered and
qualified to do business as a foreign corporation under the laws of, and either
it is in good standing or its status is active as such in, each jurisdiction in
which such registration or qualification is required, except where the failure
to so register or qualify would not have a material adverse effect on the
condition (financial or other), business, property, net worth, results of
operations or prospects of the Company and the Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT"). No proceeding to which the Company or any Subsidiary
has been made a party or as to which the Company or any Subsidiary has actual
notice has been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification. Complete and correct copies of the articles of incorporation and
bylaws, as amended or restated ("ARTICLES OF INCORPORATION" and "BYLAWS,"
respectively), of the Company and each of the Subsidiaries as in effect on the
date hereof have been delivered to the Representatives, and no changes thereto
will be made on or subsequent to the date hereof and prior to each Closing Date
(as hereinafter defined).
(b) All of the shares of Common Stock issued and outstanding
immediately prior to the issuance and sale of the Shares to be sold by the
Company hereunder as set forth in the Prospectus (including the shares to be
sold by the Selling Stockholders) have been duly authorized and validly issued,
are fully paid and nonassessable and conform to the description thereof
contained in the Prospectus and the Registration Statement. There are no
preemptive, preferential or, except as described in the Prospectus, other rights
to subscribe for or purchase any shares of Common Stock
-2-
<PAGE> 3
(including the Shares), and no shares of Common Stock have been issued in
violation of such rights. The Shares to be issued and sold by the Company to the
Underwriters have been duly authorized and, when issued, delivered and paid for
pursuant to this Agreement, will be validly issued, fully paid and nonassessable
and will conform to the description thereof contained in the Prospectus and the
Registration Statement. The delivery of certificates for the Shares to be issued
and sold by the Company and to be sold by the Selling Stockholders hereunder and
payment therefor pursuant to the terms of this Agreement will pass valid title
to such Shares to the Underwriters, free and clear of any lien, claim,
encumbrance or defect in title. Except as described in the Prospectus, there are
no outstanding options, warrants or other rights of any description, contractual
or otherwise, entitling any person to be issued any class of security by the
Company or any Subsidiary, and there are no holders of Common Stock or other
securities of the Company or any Subsidiary, or of securities that are
convertible or exchangeable into Common Stock or other securities of the Company
or any Subsidiary, that have rights to the registration of such Common Stock or
securities under the Securities Act of 1933, as amended, and the regulations
thereunder (together, the "ACT") or the securities laws or regulations of any of
the states (the "BLUE SKY LAWS").
(c) Except for the Subsidiaries and except as to its relationship
with Amrop International ("AMROP") as has been disclosed to the Representatives
in writing, the Company has no subsidiaries and does not own any equity interest
in or control, directly or indirectly, any other corporation, limited liability
company, partnership, joint venture, association, trust or other business
organization. The Company owns directly all of the issued and outstanding shares
of capital stock of each Subsidiary, free and clear of any and all liens,
claims, encumbrances or security interests, and all such shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
outstanding options, warrants or other rights of any description, contractual or
otherwise, entitling any person to subscribe for or purchase any shares of
capital stock of any Subsidiary.
(d) The Company has full corporate power and authority to enter
into and perform this Agreement. The execution and delivery by the Company of
this Agreement, the performance by the Company of its obligations hereunder and
the consummation of the transactions described herein, have been duly authorized
with respect to the Company by all necessary corporate action and will not: (i)
violate any provisions of the Articles of Incorporation or Bylaws of the
Company; (ii) violate any provisions of, or result in the breach, modification
or termination of, or constitute a default under, any provision of any
agreement, lease, franchise, license, indenture, permit, mortgage, deed of
trust, evidence of indebtedness or other instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary, or any property
owned or leased by the Company or any Subsidiary, may be bound or affected,
which violation would have a Material Adverse Effect; (iii) violate any statute,
ordinance, rule or regulation applicable to the Company or any Subsidiary, or
order or decree of any court, regulatory or governmental body, arbitrator,
administrative agency or instrumentality of the United States or other country
or jurisdiction having jurisdiction over the Company or any Subsidiary, which
violation would have a Material Adverse Effect; or (iv) result in
-3-
<PAGE> 4
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any Subsidiary, which lien, charge or encumbrance
would have a Material Adverse Effect. No consent, approval, authorization or
other order of any court, regulatory or governmental body, arbitrator,
administrative agency or instrumentality of the United States or other country
or jurisdiction is required for the execution and delivery of this Agreement by
the Company, the performance of its obligations hereunder or the consummation of
the transactions contemplated hereby, except for compliance with the Act, the
Securities Exchange Act of 1934, as amended, and the regulations thereunder
(together, the "EXCHANGE ACT"), the Blue Sky Laws applicable to the public
offering of the Shares by the several Underwriters and the clearance of such
offering and the underwriting arrangements evidenced hereby with the National
Association of Securities Dealers, Inc. (the "NASD"). This Agreement has been
duly executed and delivered by and on behalf of the Company and is a valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms.
(e) A registration statement on Form S-1 (Reg. No.
333-52075) with respect to the Shares, including a preliminary form of
prospectus and a preliminary form of prospectus supplement relating to the offer
and sale of Shares, has been carefully prepared by the Company in conformity
with the requirements of the Act and has been filed with the Securities and
Exchange Commission (the "COMMISSION"). Such registration statement, as finally
amended and revised at the time such registration statement was or is declared
effective by the Commission (including all financial schedules and exhibits and
including the information contained in the form of final prospectus and related
prospectus supplement, if any, filed with the Commission pursuant to Rule 424(b)
and Rule 430A under the Act and deemed to be part of the registration statement
if the registration statement has been declared effective pursuant to Rule
430A(b)) and as thereafter amended by post-effective amendment or as
supplemented by any supplements thereto, if any, is herein referred to as the
"REGISTRATION STATEMENT." If an abbreviated registration statement is prepared
and filed with the Commission in accordance with Rule 462(b) under the Act (an
"ABBREVIATED REGISTRATION STATEMENT"), then the term "Registration Statement" as
used in this Agreement includes the Abbreviated Registration Statement. The
final prospectus and the related prospectus supplement, each in the form first
filed with the Commission pursuant to Rule 424(b) or, if no such filing is
required, as included in the Registration Statement, or any supplement thereto,
is herein referred to collectively as the "PROSPECTUS." The prospectus and the
related prospectus supplement, each as subject to completion and in the forms
included in the Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and each such prospectus and related
prospectus supplement as amended from time to time until the date of the
Prospectus, is referred to herein collectively as the "PRELIMINARY PROSPECTUS."
The Company has prepared and filed such amendments to the Registration Statement
since its initial filing with the Commission, if any, as may have been required
to the date hereof, and will file such additional amendments thereto as may
hereafter be required. There have been delivered to the Representatives two
signed copies of the Registration Statement and each amendment thereto, if any,
together with two copies of each exhibit filed therewith, and such number of
conformed copies for each of the
-4-
<PAGE> 5
Underwriters of the Registration Statement and each amendment thereto, if any
(but without exhibits), and of each Preliminary Prospectus and of the Prospectus
as the Representatives have requested.
(f) Neither the Commission nor any state securities commission has
issued any order preventing or suspending the use of any Preliminary Prospectus,
nor, to the knowledge of the Company, have any proceedings for that purpose been
initiated or threatened, and each Preliminary Prospectus filed with the
Commission as part of the Registration Statement as originally filed or as part
of any amendment or supplement thereto complied when so filed with the
requirements of the Act and, as of its date, did not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. As of
the effective date of the Registration Statement, and at all times subsequent
thereto up to each Closing Date, the Registration Statement and the Prospectus
contained or will contain all statements that are required to be stated therein
in accordance with the Act and conformed or will conform in all respects to the
requirements of the Act, and neither the Registration Statement nor the
Prospectus included or will include any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company makes no representation or warranty as to the information that is
contained (i) in the Registration Statement, the Prospectus and/or the
Preliminary Prospectus, or any amendment or supplement thereto in reliance upon
written information furnished to the Company by or on behalf of the
Underwriters, as described in Section 5, or (ii) on the inside and outside front
cover and on the inside back cover of the four page overlay that was affixed to
the outside cover of the copies of the Preliminary Prospectus that were used to
offer the Firm Shares in the Canadian provinces of Ontario and Quebec, which
information relates to various aspects of Canadian and provincial law. Neither
the Company, nor any person that controls, is controlled by or is under common
control with the Company (including the Subsidiaries), has distributed or will
distribute prior to each Closing Date any offering material in connection with
the offering and sale of the Shares other than a Preliminary Prospectus, the
Prospectus, the Registration Statement or other materials permitted by the Act
and provided to the Representatives.
(g) Arthur Andersen LLP, which has expressed its opinion with
respect to the consolidated financial statements and schedules filed with the
Commission and included as a part of each Preliminary Prospectus, the Prospectus
or the Registration Statement, are independent accountants as required by the
Act.
(h) The consolidated financial statements (other than the pro
forma financial statements) and the related notes thereto included in each
Preliminary Prospectus, the Prospectus and the Registration Statement present
fairly the financial position, results of operations and cash flows of the
Company as of their respective dates or for the respective periods covered
thereby, all in conformity with generally accepted accounting principles
consistently applied throughout the periods involved. The financial statement
schedules, if any, included in the Registration Statement present
-5-
<PAGE> 6
fairly the information required to be stated therein on a basis consistent with
the consolidated financial statements of the Company contained therein. The pro
forma financial statements, together with the related schedules and notes, if
any, in each Preliminary Prospectus, the Prospectus and the Registration
Statement (i) have been prepared on a basis consistent with such historical
financial statements, except for the pro forma adjustments specified therein,
(ii) give effect to the pro forma adjustments specified therein, which
adjustments are based on reasonable assumptions, and (iii) present fairly the
historical and proposed transactions specified therein. The other financial and
statistical information and data included in each Preliminary Prospectus, the
Prospectus and the Registration Statement, whether historical or pro forma, are,
in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company. The consolidated financial statements and schedules and the related
notes thereto included in each Preliminary Prospectus, the Prospectus or the
Registration Statement are the only such financial statements and schedules
required under the Act to be set forth therein. The Company had an outstanding
capitalization as set forth in the Registration Statement and under
"Capitalization" in the Prospectus as of the date indicated therein, and there
has been no material change thereto since such date except as disclosed in the
Prospectus.
(i) Neither the Company nor any Subsidiary is, or with the giving
of notice or passage of time or both, would be, in violation or in breach of:
(i) its respective Articles of Incorporation or Bylaws; (ii) any statute,
ordinance, order, rule or regulation applicable to the Company or such
Subsidiary; (iii) any order or decree of any court, regulatory body, arbitrator,
administrative agency or other instrumentality of the United States or other
country or jurisdiction having jurisdiction over the Company or such Subsidiary;
or (iv) any provision of any agreement, lease, franchise, license, indenture,
permit, mortgage, deed of trust, evidence of indebtedness or other instrument to
which the Company or such Subsidiary is a party or by which any property owned
or leased by the Company or such Subsidiary is bound or affected, which
violation or breach would have a Material Adverse Effect. Neither the Company
nor any Subsidiary has received notice of any violation of any applicable
statute, ordinance, order, rule or regulation applicable to the Company or any
Subsidiary. The Company and each Subsidiary have obtained and hold, and are in
compliance with, all permits, certificates, licenses, approvals, registrations,
franchises, consents and authorizations of governmental or regulatory
authorities required under all laws, rules and regulations in connection with
their businesses (hereinafter "PERMIT" or "PERMITS"), except for any
non-compliance that would not have a Material Adverse Effect, and all of such
permits are in full force and effect; and the Company and each Subsidiary have
fulfilled and performed all of their respective obligations with respect to each
such permit and no event has occurred which would result in, or after notice or
lapse of time would result in, revocation or termination of any such permit or
result in any other impairment of the rights of the holder of such permit.
Neither the Company nor any Subsidiary is or has been (by virtue of any action,
omission to act, contract to which it is a party or other occurrence) in
violation of any applicable foreign, federal, state, municipal or local
statutes, laws, ordinances, rules, regulations or orders (including those
relating to environmental protection, occupational safety and health and equal
employment practices) heretofore or currently in effect.
-6-
<PAGE> 7
(j) There are no legal or governmental proceedings or
investigations pending or, to the knowledge of the Company, threatened to which
the Company or any Subsidiary is or may be a party or to which any property
owned or leased by the Company or any Subsidiary is or may be subject,
including, without limitation, any such proceedings that are related to
environmental or employment discrimination matters, which are required to be
described in the Registration Statement or the Prospectus which are not so
described, or which question the validity of this Agreement or any action taken
or to be taken pursuant hereto. Except as described in the Registration
Statement or the Prospectus, neither the Company nor any Subsidiary: (i) is in
violation of any statute, ordinance, rule or regulation, or any decision, order
or decree of any court, regulatory body, arbitrator, administrative agency or
other instrumentality of the United States or other country or jurisdiction
having jurisdiction over the Company or such Subsidiary relating to the use,
disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environmental or human exposure to hazardous or
toxic substances (collectively, "ENVIRONMENTAL LAWS"); (ii) owns or operates any
real property contaminated with any substance that is subject to any
environmental laws; (iii) is liable for any off-site disposal or contamination
pursuant to any environmental laws; or (iv) is subject to any claim relating to
any environmental laws, which violation, contamination, liability or claim would
have a Material Adverse Effect.
(k) There is no transaction, relationship, obligation, agreement
or other document required by the Act to be described in the Registration
Statement or the Prospectus or to be filed or deemed to be filed as an exhibit
to the Registration Statement, which has not been described or filed as
required. All such contracts or agreements to which the Company or any
Subsidiary is a party have been duly authorized, executed and delivered by the
Company or such Subsidiary, constitute valid and binding agreements of the
Company or such Subsidiary, and are enforceable by and against the Company or
such Subsidiary, in accordance with the respective terms thereof.
(l) Neither the Company nor any Subsidiary owns any real property.
The Company or a Subsidiary has good and valid title to all property and assets
reflected as owned by the Company or such Subsidiary in the Company's
consolidated financial statements included in the Registration Statement (or
elsewhere in the Registration Statement or the Prospectus), free and clear of
all liens, claims, mortgages, security interests or other encumbrance of any
kind or nature whatsoever except those, if any, reflected in such financial
statements (or elsewhere in the Registration Statement or the Prospectus). All
property (real and personal) held or used by the Company or any Subsidiary under
leases, licenses, franchises or other agreements is held by the Company or such
Subsidiary under valid, subsisting, binding and enforceable leases, franchises,
licenses or other agreements.
(m) Neither the Company nor any person that controls, is
controlled by or is under common control with the Company (including the
Subsidiaries) has taken or will take, directly or indirectly, any action
designed to cause or result in, or which constituted, or which could cause or
result in, stabilization or manipulation, under the Exchange Act or otherwise,
of the price of any security of the Company to facilitate the sale or resale of
the Common Stock.
-7-
<PAGE> 8
(n) Except as described in the Registration Statement or the
Prospectus, since the respective dates as of which information is given in the
Registration Statement or the Prospectus and prior to each Closing Date: (i)
neither the Company nor any Subsidiary has or will have incurred any liability
or obligation, direct or contingent, or entered into any transaction, that is
material to the Company, except as in the ordinary course of business; (ii) the
Company has not and will not have paid or declared any dividend or other
distribution with respect to its capital stock and neither the Company nor any
Subsidiary is or will be delinquent in the payment of principal or interest on
any outstanding debt obligation; and (iii) there has not been and will not have
been any change in the capital stock, any material change in the indebtedness of
the Company or any Subsidiary, or any change or development involving or which
would involve, a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business.
(o) Neither the Company nor any person that controls, is
controlled by or is under common control with the Company (including the
Subsidiaries) has, directly or indirectly: (i) made any unlawful contribution to
any candidate for political office, or failed to disclose fully any contribution
in violation of law; or (ii) made any payment to any federal, state or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or applicable foreign
jurisdictions; provided, however, that no representation or warranty is made as
to (A) any act or omission of Amrop with respect to which no employee of the
Company, acting in his or her capacity as the Company's representative to Amrop,
voted or otherwise exercised decision making authority on behalf of Amrop, or
(B) any act or omission of any member firm of Amrop other than the Company.
Notwithstanding the foregoing, nothing has come to the Company's attention that
would cause it to believe, and the Company is not aware, that Amrop has (1) made
any unlawful contribution to any candidate for political office, or failed to
disclose fully any contribution in violation of law; or (2) made any payment to
any federal, state or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof or
applicable foreign jurisdictions.
(p) The Company and the Subsidiaries own or possess adequate
rights to use all patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights and
licenses presently used in or necessary for the conduct of their businesses or
ownership of their properties, and neither the Company nor any Subsidiary has
violated or infringed upon the rights of others, or received any notice of
conflict with the asserted rights of others, in respect thereof.
(q) The Company and the Subsidiaries have in place and effective
such policies of insurance, with limits of liability in such amounts, as are
normal and prudent in the ordinary course of the business of the Company and its
Subsidiaries.
-8-
<PAGE> 9
(r) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent, and neither
the Company nor any Subsidiary is a party to any collective bargaining agreement
and, to the knowledge of the Company, no union organizational attempts have
occurred or are pending. There has been no change in the relationship of the
Company or any Subsidiary with any of its principal suppliers, manufacturers,
contractors or customers resulting in or that would result in a Material Adverse
Effect.
(s) Neither the Company nor any Subsidiary is an "investment
company", an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended.
(t) All federal, state and local tax returns required to be filed
by or on behalf of the Company and the Subsidiaries have been filed (or are the
subject of valid extensions) with the appropriate federal, state and local
authorities, and all such tax returns, as filed, are accurate in all material
respects; all federal, state and local taxes (including estimated tax payments)
required to be shown on all such tax returns or claimed to be due from or with
respect to the business of the Company or such Subsidiary have been paid or
reflected as a liability on the financial statements of the Company for
appropriate periods, except for any taxes (or taxes claimed to be due) that are
being contested by the Company in good faith and by appropriate proceedings; all
deficiencies asserted as a result of any completed federal, state or local tax
audits have been paid or finally settled, and no issue has been raised in any
such audit which, by application of the same or similar principles, reasonably
could be expected to result in a proposed deficiency for any other period not so
audited; no state of facts exist or has existed which would constitute grounds
for the assessment of any tax liability with respect to the periods which have
not been audited by appropriate federal, state or local authorities; there are
no outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local tax return of any period;
and neither the Company nor any Subsidiary has ever been a member of an
affiliated group of corporations filing consolidated federal income tax returns,
other than a group of which the Company is and has been the common parent. The
Company originally was formed as Lamalie Associates, Inc., a Delaware
corporation ("LAMALIE-DELAWARE"). Lamalie-Delaware validly elected to be an S
corporation under federal income tax law, effective as of the date of its
formation, and such S corporation election continued in full force and effect
without interruption until November 1, 1994. As of June 3, 1997,
Lamalie-Delaware merged with and into the Company, and the Company is treated
for federal income tax purposes to be the same entity as Lamalie-Delaware. For
purposes of this Section 2(t), "S corporation" means a corporation with respect
to which a valid election has been made under Section 1362 of the Internal
Revenue Code of 1986, as amended (the "CODE"), and any corresponding provision
of state, local or foreign law.
-9-
<PAGE> 10
(u) Except for the Company's Principal Group Life, Health, Dental
and Vision Insurance Plan, its Unum Group Long Term Disability Plan, its Profit
Sharing Plan and Trust and its deferred compensation plan for employees [CONFIRM
NO NEW ERISA PLANS] (collectively, the "ERISA PLANS"), neither the Company nor
any Subsidiary is a participating employer or plan sponsor with respect to any
employee pension benefit plan as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any employee
welfare benefit plan as defined in Section 3(1) of ERISA, including, without
limitation, any multiemployer welfare or pension plan. With respect to the ERISA
Plans, the Company is in substantial compliance with all applicable regulations,
including ERISA and the Code. No such ERISA Plan is a defined benefit retirement
plan. The Company or the administrator of each of the ERISA Plans, as the case
may be, has timely filed the reports required to be filed by ERISA and the Code
in connection with the maintenance of the ERISA Plans, and no facts, including,
without limitation, any "reportable event" as defined by ERISA and the
regulations thereunder, exist in connection with the ERISA Plans which, under
applicable law, would constitute grounds for the termination of any of the ERISA
Plans by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer any of the
ERISA Plans.
(v) The Company and each Subsidiary maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of consolidated financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(w) None of the Company, any Subsidiary, any officer or director
of the Company or any Subsidiary, or any person who owns, of record or
beneficially, 5% or more of any class of securities issued by the Company is:
(i) an officer, director or partner of any brokerage firm, broker or dealer that
is a member of the NASD ("NAS0 MEMBER"); or (ii) directly or indirectly, a
"person associated with" an NASD Member or an "affiliate" of an NASD Member, as
such terms are used in the Conduct Rules of the NASD, except as otherwise
verbally represented to counsel for the Underwriters. In addition, neither the
Company nor any Subsidiary has issued or transferred any Common Stock, warrants,
options or other securities, or any other items of value, to any of the
Underwriters or any "related person" of any Underwriter, as such term is used in
the Conduct Rules of the NASD, except as provided in this Agreement or the
Underwriting Agreement dated July 1, 1997 relating to the Company's initial
public offering.
(x) Neither the Company, any Subsidiary nor any affiliate of the
Company or any Subsidiary does business with the government of Cuba, or with any
person or affiliate located in Cuba within the meaning of Section 517.075 of the
Florida Statutes, and the Company agrees to comply with such Section if, prior
to the completion of the distribution of the Shares, the Company, any
-10-
<PAGE> 11
Subsidiary or any affiliate of the Company or any Subsidiary commences doing
such business; provided, however, that no representation or warranty is made as
to (i) any act or omission of Amrop with respect to which no employee of the
Company, acting in his or her capacity as the Company's representative to Amrop,
voted or otherwise exercised decision making authority on behalf of Amrop, or
(ii) any act or omission of any member firm of Amrop other than the Company.
Notwithstanding the foregoing, nothing has come to the Company's attention that
would cause it to believe, and the Company is not aware, that Amrop does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075 of the Florida Statutes.
(y) All offers and sales of the securities of the Company and each
Subsidiary prior to the date hereof were made in compliance with the Act and all
other applicable state and federal laws or regulations.
(z) The Company has received from each of the Selling Stockholders
a letter agreement in the form attached as Exhibit A to this Agreement executed
by each such stockholder, and each such letter agreement is enforceable by
Robert W. Baird & Co. Incorporated ("BAIRD") against the Selling Stockholder
executing such letter agreement. The Company also has received from each
director and executive officer of the Company (other than directors or
executive officers who are Selling Stockholders) a letter agreement in the form
attached as Exhibit B to this Agreement, executed by each such director and
executive officer, and each such letter agreement is enforceable by Baird
against each person who executed such letter agreement.
(aa) The Company has furnished to counsel for the Underwriters,
prior to the date hereof, (i) a copy of each Irrevocable Power of Attorney (as
hereinafter defined) and a copy of each Custody Agreement (as hereinafter
defined) executed by each Selling Stockholder, (ii) a copy of each Questionnaire
executed by each director, officer and holder of 5% or more of any class of
securities of the Company with respect to the matters referred to in Section
2(w), and (iii) such other information as such counsel may reasonably request in
connection with their review thereof.
A certificate signed by any officer of the Company and delivered
to the Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby. A certificate delivered by the Company to its counsel for
purposes of enabling such counsel to render the opinion referred to in Section
10(d) will also be furnished to the Representatives and counsel for the
Underwriters and shall be deemed to be additional representations and warranties
to the Underwriters by the Company as to the matters covered thereby.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLING
STOCKHOLDERS. Each Selling Stockholder, severally and not jointly, represents
and warrants to and agrees with the several Underwriters and the Company, and
shall be deemed to represent and warrant to the several Underwriters and the
Company on each Closing Date, that:
-11-
<PAGE> 12
(a) Such Selling Stockholder has duly executed (i) an Irrevocable
Power of Attorney of Selling Stockholder (the "IRREVOCABLE POWER OF ATTORNEY")
naming Jack P. Wissman and Philip R. Albright, or either of them, as such
Selling Stockholder's attorneys-in-fact ("ATTORNEYS-IN-FACT") for the purpose of
entering into and carrying out this Agreement and (ii) a Custody Agreement (the
"CUSTODY AGREEMENT") naming ChaseMellon Shareholder Services, L.L.C. as
custodian ("CUSTODIAN") of the Shares owned by such Selling Stockholder for the
purpose of selling such Shares to the Underwriters on the First Closing Date and
receiving payment therefor.
(b) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of each of this
Agreement, the Irrevocable Power of Attorney and the Custody Agreement, and for
the sale and delivery of the Shares to be sold by such Selling Stockholder
hereunder, as set forth on Schedule I annexed hereto, have been obtained. Such
Selling Stockholder has, and at the time of delivery thereof hereunder such
Selling Stockholder will have, good and valid title to the Shares proposed to be
sold hereunder by such Selling Stockholder, free and clear of all voting trust
arrangements, liens, encumbrances, security interests, equities, claims and
community or marital property rights, other than any created by the Irrevocable
Power of Attorney, the Custody Agreement or this Agreement for the benefit of
the Underwriters. Such Selling Stockholder has full right, power and authority
to enter into this Agreement, the Irrevocable Power of Attorney and the Custody
Agreement and to sell, assign, transfer and deliver such Shares hereunder, free
and clear of all voting trust arrangements, liens, encumbrances, security
interests, equities, claims and community or marital property rights, other than
any created by the Irrevocable Power of Attorney, the Custody Agreement or this
Agreement for the benefit of the Underwriters. Upon delivery of and payment for
such Shares hereunder, the Underwriters will acquire good and marketable title
thereto, free and clear of all voting trust arrangements, liens, encumbrances,
security interests, equities, claims and community or marital property rights.
(c) Such Selling Stockholder has not distributed and will not
distribute any Preliminary Prospectus, the Prospectus or any other material in
connection with the offering and sale of the Shares. Such Selling Stockholder
has not taken and will not take, directly or indirectly, any action designed to
or which could cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Common Stock.
(d) The execution, delivery and performance by such Selling
Stockholder of this Agreement, the Irrevocable Power of Attorney and the Custody
Agreement will not, if applicable, result in the violation of any provisions of
the Articles of Incorporation, By-laws or other governing documents of such
Selling Stockholder, or constitute a breach, or be in contravention, of any
provision of any agreement, franchise, license, indenture, mortgage, deed of
trust or other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or such Selling Stockholder's property may be
bound or affected, or any statute, rule or regulation applicable to such Selling
Stockholder, or violate any order or decree of any court, regulatory body,
administrative
-12-
<PAGE> 13
agency or other governmental body having jurisdiction over such Selling
Stockholder or any of such Selling Stockholder's property. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of,
and performance under, this Agreement by such Selling Stockholder or the
consummation by such Selling Stockholder of the transactions contemplated by
this Agreement, except for compliance with the Act, the Exchange Act, the Blue
Sky Laws applicable to the public offering of the Shares by the Underwriters and
the clearance of such offering with the NASD. Such Selling Stockholder hereby
represents and warrants that each Attorney-in-Fact has been duly appointed as
attorney-in-fact by such Selling Stockholder for the purpose of entering into
and carrying out this Agreement, and each of the Irrevocable Power of Attorney
and the Custody Agreement has been duly executed and delivered by or on behalf
of such Selling Stockholder to the Representatives.
(e) Each of this Agreement, the Irrevocable Power of Attorney and
the Custody Agreement is a valid and binding agreement of such Selling
Stockholder, enforceable against such Selling Stockholder in accordance with its
terms.
(f) Such Selling Stockholder has deposited with the Custodian
under the Custody Agreement, certificates in negotiable form for the Shares to
be sold hereunder by such Selling Stockholder, as set forth opposite such
Selling Stockholder's name on Schedule I annexed hereto for the purpose of
further delivery pursuant to this Agreement. Such Selling Stockholder agrees
that the Shares of such Selling Stockholder on deposit with the Custodian are
subject to the interests of the Company, the Underwriters and the other Selling
Stockholders, that the arrangements made for such custody, and the appointment
of the Attorneys-in-Fact pursuant to the Irrevocable Power of Attorney are to
that extent irrevocable, and that the obligations of such Selling Stockholder
hereunder and under each of the Irrevocable Power of Attorney and the Custody
Agreement shall not be terminated (except as otherwise provided in this
Agreement, the Irrevocable Power of Attorney or the Custody Agreement), by any
act of such Selling Stockholder, by operation of law, whether in the case of an
individual Selling Stockholder, by the death or incapacity of such Selling
Stockholder or, in the case of a trust or estate, by the death of the trustee or
trustees or the executor or executors or the termination of such trust or
estate, or, in the case of a partnership or corporation, by the dissolution,
winding up or other event affecting the legal life of such entity, or by the
occurrence of any other event. If any individual Selling Stockholder, trustee or
executor should die or become incapacitated, or any such trust, estate,
partnership or corporation should be terminated, or if any other event should
occur before the delivery of the Shares hereunder, the certificates for Shares
then on deposit with the Custodian shall, to the extent such Shares are
purchased by the Underwriters, be delivered by the Custodian in accordance with
the terms and conditions of this Agreement, the Irrevocable Power of Attorney
and the Custody Agreement as if such death, incapacity, termination or other
event had not occurred, regardless of whether or not the Custodian shall have
received notice thereof. Such Selling Stockholder represents that each
Attorney-in-Fact has been authorized by such Selling Stockholder to execute and
deliver this Agreement and the Custodian has been authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares sold by such Selling
Stockholder against delivery thereof and otherwise to act on behalf of such
Selling Stockholder.
-13-
<PAGE> 14
(g) Insofar as it relates to such Selling Stockholder, each
Preliminary Prospectus, as of its date, has conformed in all material respects
with the requirements of the Act and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and on the effective
date of the Registration Statement and at all times subsequent thereto up to
each Closing Date, (i) the Registration Statement and the Prospectus, as they
relate to such Selling Stockholder, did or will conform to the requirements of
the Act, and (ii) neither the Registration Statement nor the Prospectus as it
relates to such Selling Stockholder did or will include any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(h) To the knowledge of each Selling Stockholder, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct.
(i) If such Selling Stockholder was required to complete a
Questionnaire with respect to the matters set forth in 2(w), the information
contained in such Questionnaire and delivered to the Representatives was, as of
the date of such questionnaire, and is, as of the date of this Agreement, true
and correct.
A certificate signed by or on behalf of any Selling Stockholder as
such and delivered to the Representatives or to counsel for the Underwriters
shall be deemed a representation and warranty by such Selling Stockholder to the
Underwriters as to the matters covered thereby. A certificate delivered by or on
behalf of any Selling Stockholder to counsel for the Selling Stockholders for
purposes of enabling such counsel to render the opinion referred in Section
10(e) will also be furnished to the Representatives and counsel for the
Underwriters and shall be deemed to be additional representations and warranties
to the Underwriters by such Selling Stockholder as to the matters covered
thereby.
SECTION 4. REPRESENTATION OF UNDERWRITERS. The Representatives
will act as the representatives for the several Underwriters in connection with
the public offering of the Shares, and any action under or in respect of this
Agreement taken by the Representatives will be binding upon all of the
Underwriters.
SECTION 5. INFORMATION FURNISHED BY THE UNDERWRITERS. The
information set forth in the Preliminary Prospectus and the Prospectus in (a)
the last paragraph on the outside front cover page concerning the terms of the
offering by the Underwriters, (b) the paragraphs on the bottom of the inside
front cover page relating to stabilization practices and passive market making,
(c) the list on page [____] stating the names of the Underwriters and the number
of shares of Common Stock to be purchased by each Underwriter, (d) the
[___________] full paragraph after the
-14-
<PAGE> 15
list on page [____] relating to concession and reallowance amounts, and (e) the
[____________] and [____________] full paragraphs on page [____] relating to
stabilization transactions, passive market making transactions and the like,
constitute all of the information furnished to the Company by and on behalf of
the Underwriters for use in connection with the preparation of the Registration
Statement, the Preliminary Prospectus and the Prospectus, as such information is
referred to in this Agreement.
SECTION 6. PURCHASE, SALE AND DELIVERY OF SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, and subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriters identified in Schedule II annexed
hereto 2,089,540 Firm Shares, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company that number of Firm Shares set forth
opposite the name of such Underwriter on Schedule II hereto, at the price per
share of [$_______].
(b) On the basis of the representations, warranties and agreements
herein contained, and subject to the terms and conditions herein set forth, each
Selling Stockholder agrees, severally and not jointly, to sell to the
Underwriters that number of full Firm Shares set forth opposite the name of such
Selling Stockholder in Schedule I annexed hereto (a total of 910,460 shares
from all of the Selling Stockholders), and each of the Underwriters agrees,
severally and not jointly, to purchase from each Selling Stockholder the number
of Firm Shares as hereinafter set forth at the same purchase price per share as
stated in the preceding paragraph. The obligation of each Underwriter to each
Selling Stockholder shall be to purchase from that Selling Stockholder that
number of full Firm Shares which (as nearly as practicable in full shares as
determined by the Representatives) bears the same proportion to the number of
Firm Shares to be sold by such Selling Stockholder as the number of shares set
forth opposite the name of such Underwriter in Schedule II annexed hereto bears
to the total number of Firm Shares to be purchased by all of the Underwriters
under this Agreement.
(c) On the First Closing Date (as hereinafter defined), the
Company and the Custodian, on behalf of the Selling Stockholders, will deliver
to the Representatives, at the offices of Robert W. Baird & Co. Incorporated,
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, or through the facilities
of The Depository Trust Company, for the accounts of the several Underwriters,
certificates representing the Firm Shares to be sold by them against payment in
Milwaukee, Wisconsin of the purchase price therefor by wire transfer of
immediately available funds for credit to the account of and in accordance with
written instructions of the Company with respect to the Firm Shares being sold
by the Company and to the order of the Custodian with respect to the Firm Shares
being sold by the Selling Stockholders. As referred to in this Agreement, the
"FIRST CLOSING DATE" shall be on the third full business day after the date of
the Prospectus, at 9:00 a.m., Milwaukee, Wisconsin time, or at such other date
or time not later than ten full business days after
-15-
<PAGE> 16
the date of the Prospectus as the Representatives, the Company and the
Attorneys-in-Fact (or either of them) may agree. The certificates for the Firm
Shares to be so delivered will be in denominations and registered in such names
as the Representatives request by notice to the Company and the
Attorneys-in-Fact, or either of them, prior to the First Closing Date, and such
certificates will be made available for checking and packaging at 9:00 a.m.,
Milwaukee, Wisconsin time on the first full business day preceding the First
Closing Date at a location to be designated by the Representatives.
(d) In addition, on the basis of the representations, warranties
and agreements herein contained, and subject to the terms and conditions herein
set forth, the Company hereby agrees to sell to the Underwriters, and the
Underwriters, severally and not jointly, shall have the right at any time within
thirty days after the date of the Prospectus to purchase from the Company, up to
450,000 Optional Shares at the purchase price per share to be paid for the Firm
Shares, for use solely in covering any over-allotments made by the Underwriters
in the sale and distribution of the Firm Shares. The option granted hereunder
may be exercised upon notice by Robert W. Baird & Co. Incorporated, on behalf of
the Representatives, to the Company, within thirty days after the date of the
Prospectus, setting forth the aggregate number of Optional Shares to be
purchased by the Underwriters and sold by the Company, the names and
denominations in which the certificates for such shares are to be registered and
the date and place at which such certificates will be delivered. Such date of
delivery (the "SECOND CLOSING DATE") shall be determined by the Representatives;
provided that the Second Closing Date, which may be the same as the First
Closing Date, shall not be earlier than the First Closing Date and, if after the
First Closing Date, shall not be earlier than three nor later than ten full
business days after delivery of such notice to exercise. Upon exercise of such
option, each Underwriter, severally and not jointly, agrees to purchase that
number of full Optional Shares (as nearly as practicable in full shares as
determined by the Representatives) which bears the same proportion to the total
number of Optional Shares to be sold as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule II hereto (or such number of
Firm Shares increased as set forth in Section 13 hereof) bears to the total
number of Firm Shares. Certificates for the Optional Shares will be made
available for checking and packaging at 9:00 a.m., Milwaukee, Wisconsin time, on
the first full business day preceding the Second Closing Date at a location to
be designated by the Representatives. The manner of payment for and delivery of
(including the denominations of and the names in which certificates are to be
registered) the Optional Shares shall be the same as for the Firm Shares.
(e) The Representatives have advised the Company and the
Attorneys-in-Fact that each Underwriter has authorized the Representatives to
accept delivery of the Shares and to make payment therefor. It is understood
that the Representatives, individually and not as representatives of the
Underwriters, may (but shall not be obligated to) make payment for any Shares to
be purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any obligation under this Agreement. As referred
to in this Agreement, "CLOSING DATE" shall mean either the First Closing Date or
the Second Closing Date.
-16-
<PAGE> 17
SECTION 7. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters that:
(a) If the effective time of the Registration Statement is not
prior to the execution and delivery of this Agreement, the Company will use its
best efforts to cause the Registration Statement to become effective at the
earliest possible time and, upon notification from the Commission that the
Registration Statement has become effective, will so advise the Representatives
and counsel to the Underwriters promptly. If the effective time of the
Registration Statement is prior to the execution and delivery of this Agreement
and any information shall have been omitted therefrom in reliance upon Rule
430A, the Company, at the earliest possible time, will furnish the
Representatives with a copy of the Prospectus to be filed by the Company with
the Commission to comply with Rule 424(b) and Rule 430A under the Act and, if
the Representatives do not object to the contents thereof, will comply with such
Rules. Upon compliance with such Rules, the Company will so advise the
Representatives promptly. The Company will advise the Representatives, counsel
to the Underwriters and the Attorneys-in-Fact promptly of the issuance by the
Commission or any state securities commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose, or of any notification of the suspension of
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceedings for that purpose, and will also advise the
Representatives, counsel to the Underwriters and the Attorneys-in-Fact promptly
of any request of the Commission for amendment or supplement of the Registration
Statement, of any Preliminary Prospectus or of the Prospectus, or for additional
information, and the Company will not file any amendment or supplement to the
Registration Statement (either before or after it becomes effective), to any
Preliminary Prospectus or to the Prospectus (including a prospectus filed
pursuant to Rule 424(b)) if the Representatives have not been furnished with a
copy prior to such filing (with a reasonable opportunity to review such
amendment or supplement) or if the Representatives object to such filing.
(b) If, at any time when a prospectus relating to the Shares is
required by law to be delivered in connection with sales by an Underwriter or
dealer, any event occurs as a result of which the Prospectus would include an
untrue statement of a material fact, or would omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to supplement the Prospectus to comply with the Act,
the Company promptly will advise the Representatives and counsel to the
Underwriters and the Attorneys-in-Fact thereof and will promptly prepare and
file with the Commission, at its expense, an amendment to the Registration
Statement which will correct such statement or omission or an amendment which
will effect such compliance; and, if any Underwriter is required to deliver a
prospectus after the effective date of the Registration Statement, the Company,
upon request of the Representatives, will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3)
-17-
<PAGE> 18
of the Act. The Company consents to the use, in accordance with the provisions
of the Act and with the Blue Sky Laws of the jurisdictions in which the Shares
are offered by the several Underwriters and by dealers, of each Preliminary
Prospectus.
(c) Neither the Company nor any Subsidiary will, prior to the
Second Closing Date, if any, incur any liability or obligation, direct or
contingent, or enter into any material transaction, other than in the ordinary
course of business, or enter into any transaction with an "affiliate," as
defined in Rule 405 under the Act, which is required to be described in the
Prospectus pursuant to Item 404 of Regulation S-K under the Act, except as
described in the Prospectus.
(d) Neither the Company nor any Subsidiary will, prior to the
Second Closing Date, if any, acquire any of the Common Stock and the Company
will not declare or pay any dividend or make any other distribution upon its
Common Stock payable to stockholders of record on a date prior to the Second
Closing Date, except as described in the Prospectus.
(e) The Company will make generally available to its security
holders and the Representatives an earnings statement as soon as practicable,
but in no event later than sixty days after the end of its fiscal quarter in
which the first anniversary of the effective date of the Registration Statement
occurs, covering a period of twelve consecutive calendar months beginning after
the effective date of the Registration Statement, which will satisfy the
provisions of the last paragraph of Section 11(a) of the Act and Rule 158
promulgated thereunder.
(f) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company will
furnish to the Representatives, at the expense of the Company, copies of the
Registration Statement, the Prospectus, any Preliminary Prospectus and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as the Representatives may reasonably request.
(g) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder for the purposes set forth in the Prospectus.
(h) The Company will cooperate with the Representatives and
counsel to the Underwriters in qualifying or registering the Shares for sale
under the Blue Sky Laws of such jurisdictions as the Representatives designate,
and will continue such qualifications or registrations in effect so long as
reasonably requested by the Representatives to effect the distribution of the
Shares. The Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any such jurisdiction where
it is not presently qualified. In each jurisdiction where any of the Shares
shall have been qualified as provided above, the Company will
-18-
<PAGE> 19
file such reports and statements as may be required to continue such
qualification for a period of not less than one year from the date of the
Prospectus. The Company shall promptly prepare and file with the Commission,
from time to time, such reports as may be required to be filed by the Act and
the Exchange Act, and the Company shall comply in all respects with the
undertakings given by the Company in connection with the qualification or
registration of the Shares for offering and sale under the Blue Sky Laws.
(i) During the period of three years from the date of the
Prospectus, the Company will furnish to each of the Representatives and to each
of the other Underwriters who may so request, as soon as available, each report,
statement or other document of the Company or its Board of Directors mailed to
its stockholders or filed with the Commission, and such other information
concerning the Company as the Representatives may reasonably request.
(j) The Company shall take all necessary or appropriate action
within its power to list the Shares on the Nasdaq National Market and maintain
the authorization for trading of the Common Stock as a Nasdaq National Market
security for a period of at least thirty-six months after the date of the
Prospectus.
(k) Except for (i) the grant of stock options by the Company
pursuant to its 1998 Omnibus Stock and Incentive Plan, 1997 Omnibus Stock and
Incentive Plan (collectively, the "Omnibus Plans") or its Non-Employee
Directors' Stock Plan (the "Directors' Stock Plan"), (ii) the issuance and/or
sale of shares of Common Stock pursuant to its 1997 Employee Stock Purchase Plan
(the "ESPP"), the Omnibus Plans or the Directors' Stock Plan (collectively, the
"Stock Plans"), copies of which are filed as exhibits to the Registration
Statement, (iii) the issuance of shares of Common Stock upon the exercise of
stock options granted pursuant to the Stock Plans and (iv) the sale of the
Shares to be sold pursuant to this Agreement, the Company shall not, for a
period of 90 days after the date of the Prospectus, without the prior written
consent of Baird, directly or indirectly, offer, sell or otherwise dispose of,
contract to sell or otherwise dispose of, or cause or in any way permit to be
sold or otherwise disposed of, any (A) shares of Common Stock; (B) rights to
purchase shares of Common Stock; or (C) securities that are convertible or
exchangeable into shares of Common Stock.
(l) The Company has furnished or will furnish to Baird the
agreements described in Section 2(z) hereof, signed by each of the Selling
Stockholders and each of the Company's directors and executive officers, as
applicable.
(m) The Company will maintain a transfer agent and, if required by
law or the rules of Nasdaq or any national securities exchange on which the
Common Stock is listed, a registrar (which, if permitted by applicable laws and
rules, may be the same entity as the transfer agent) for its Common Stock. The
Company shall, as soon as practicable after the date hereof, use its best
efforts to obtain listing in Standard and Poor's Stock Guide, or such other
recognized securities manuals for
-19-
<PAGE> 20
which it may qualify for listing, if it has not done so already, and the Company
shall use its best efforts to maintain such listings for at least five years
after the First Closing Date.
(n) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any rumor, publication or event relating
to of affecting the Company shall occur as a result of which, in the opinion of
Baird, the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to the Prospectus), the Company will, after written
notice from Baird advising the Company of any of the matters set forth above,
promptly consult with Baird concerning the advisability and substance of, and,
if the Company and Baird determine that it is appropriate, disseminate, a press
release or other public statement responding to or commenting on, such rumor,
publication or event.
(o) If the sale to the Underwriters of the Shares is not
consummated for any reason other than termination of this Agreement pursuant to
Section 13 hereof, without limiting any other rights the Underwriters may have,
the Company agrees to reimburse the Underwriters upon demand for all
out-of-pocket expenses (including reasonable fees and expenses of counsel for
the Underwriters), that shall have been incurred by the Underwriters in
connection with the proposed purchase and sale of the Shares, and the provisions
of Sections 9 and 12 hereof shall at all times be effective and apply.
(p) The Company will comply or cause compliance with the
conditions to the obligations of the Underwriters contained in Section 10
hereof.
SECTION 8. COVENANTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder, severally and not jointly, covenants and agrees with the several
Underwriters and the Company as follows:
(a) If the effective time of the Registration Statement is not
prior to the execution and delivery of this Agreement, such Selling Stockholder
will cooperate to the extent necessary to cause the Registration Statement to
become effective at the earliest possible time; and such Selling Stockholder
will do and perform all things to be done and performed by such Selling
Stockholder prior to each Closing Date, pursuant to this Agreement, the
Irrevocable Power of Attorney and the Custody Agreement.
(b) Such Selling Stockholder agrees to deliver to the Custodian on
or prior to the First Closing Date a properly completed and executed United
States Treasury Department Form W-9 (or other applicable substitute form or
statement specified by Treasury Department regulations in lieu thereof).
(c) Such Selling Stockholder will pay all federal and other taxes,
if any, on the transfer or sale of the Shares being sold by such Selling
Stockholder to the Underwriters.
-20-
<PAGE> 21
(d) Such Selling Stockholder will comply in all respects with the
terms of the letter agreement in the form attached as Exhibit A to this
Agreement executed by such Selling Stockholder.
(e) Such Selling Stockholder will furnish any documents,
instruments or other information which the Representatives may reasonably
request in connection with the sale and transfer of the Shares to the
Underwriters.
SECTION 9. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective, or
if this Agreement is terminated for any reason, the Company will pay all costs,
fees and expenses incurred in connection with the public offering of the Shares
to be sold by the Company and by the Selling Stockholders. Such costs, fees and
expenses to be paid by the Company include, without limitation:
(a) All costs, fees and expenses (excluding the expenses incurred
by the Underwriters and the legal fees and disbursements of counsel for the
Underwriters, but including such fees and disbursements described in subsection
(b) of this Section 9) incurred in connection with the performance of the
Company's obligations hereunder, including without limiting the generality of
the foregoing: the registration fees related to the filing of the Registration
Statement with the Commission; the fees and expenses related to the quotation or
listing of the Shares on Nasdaq or other national securities exchange; the fees
and expenses of the Company's counsel, accountants, transfer agent and
registrar; the costs and expenses incurred in connection with the preparation,
printing, shipping and delivery of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial statements)
and all agreements and supplements provided for herein, this Agreement, the
Preliminary and Supplemental Blue Sky Memoranda, the Irrevocable Power of
Attorney and the Custody Agreement, including, without limitation, shipping
expenses via overnight delivery and/or courier service to comply with applicable
prospectus delivery requirements; and the costs and expenses associated with the
production of materials related to, and travel expenses incurred by the
management of the Company in connection with, the various meetings to be held
between the Company's management and prospective investors.
(b) All registration fees and expenses, including reasonable legal
fees and disbursements of counsel for the Underwriters, incurred in connection
with (i) the preparation of the Blue Sky Memoranda and Blue Sky filings and with
qualifying or registering all or any part of the Shares for offer and sale under
the Blue Sky Laws and (ii) the clearing of the public offering and the
underwriting arrangements evidenced hereby with the NASD.
(c) All fees and expenses related to printing of the certificates
for the Shares, and all transfer taxes, if any, with respect to the sale and
delivery of the Shares.
-21-
<PAGE> 22
Notwithstanding the foregoing, each Selling Stockholder shall be solely
responsible for any transfer or sales tax imposed upon the transfer and sale of
such Selling Stockholder's Shares to the Underwriters. All costs and expenses
incident to the performance of any Selling Stockholder's obligations hereunder
which are not otherwise specifically provided for in this Section will be borne
and paid solely by each such Selling Stockholder. In the event any Selling
Stockholder shall fail to pay such Selling Stockholder's costs, fees and
expenses described in this section within five days after demand by the
Representatives therefor, the Company shall be obligated to pay such costs, fees
and expenses on demand.
SECTION 10. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters under this Agreement shall be subject to
the accuracy of the representations and warranties on the part of the Company
and the Selling Stockholders herein set forth as of the date hereof and as of
each Closing Date, to the accuracy of the statements of the Company's officers,
the Selling Stockholders and the Attorneys-in-Fact on behalf of the Selling
Stockholders made pursuant to the provisions hereof, to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder,
and to the following additional conditions, unless waived in writing by Baird on
behalf of the Representatives:
(a) The Registration Statement shall have been declared effective
by the Commission not later than 5:30 p.m., Washington, D.C. time, prior to or
on the date of this Agreement, or such later time as shall have been consented
to by the Representatives, which consent shall be deemed to have been given if
the Registration Statement shall have been declared effective on or before the
date and time requested in the acceleration request submitted on behalf of the
Representatives pursuant to Rule 461 under the Act; all filings required by
Rules 424(b) and 430A under the Act shall have been timely made; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission or any state securities commission nor, to the
knowledge of the Company, shall any proceedings for that purpose have been
initiated or threatened; and any request of the Commission or any state
securities commission for inclusion of additional information in the
Registration Statement, or otherwise, shall have been complied with to the
satisfaction of the Representatives.
(b) Since the dates as of which information is given in the
Registration Statement:
(i) there shall not have occurred any change or
development involving, or which reasonably would be expected to
involve, a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business; and
(ii) the Company shall not have sustained any loss
or interference from any labor dispute, strike, fire, flood,
windstorm, accident or other calamity (whether or not insured) or
from any court or governmental action, order or decree,
-22-
<PAGE> 23
the effect of which on the Company, in any such case described in clause (i) or
(ii) above, is in the opinion of the Representatives so material and adverse as
to make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares on the terms and in the manner contemplated in the
Registration Statement and the Prospectus.
(c) The Representatives shall not have advised the Company that
the Registration Statement or the Prospectus contains an untrue statement of
fact that, in the opinion of the Representatives or counsel for the
Underwriters, is material, or omits to state a fact that, in the opinion of the
Representatives or such counsel, is material and is required to be stated
therein or necessary to make the statements therein not misleading.
(d) The Representatives shall have received an opinion of Trenam,
Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, Professional Association,
counsel for the Company, addressed to the Representatives, as the
representatives of the Underwriters, and dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation and its status is active under the laws
of its jurisdiction of incorporation, with full corporate power
and authority to own, lease and operate its properties and conduct
its business as presently conducted and as described in the
Prospectus and the Registration Statement. The Company is duly
registered and qualified to do business as a foreign corporation
under the laws of, and either its status is active or it is in
good standing as such in, each jurisdiction in which such
registration or qualification is required, except where the
failure to so register or qualify would not have a Material
Adverse Effect.
(ii) The authorized capital stock of the Company consists of
35,000,000 shares of Common Stock, $0.01 par value per share, and
3,000,000 shares of Preferred Stock, $0.01 par value per share,
and all such stock conforms as to legal matters to the
descriptions thereof in the Prospectus and the Registration
Statement.
(iii) The issued and outstanding shares of capital stock of
the Company immediately prior to the issuance and sale of the
Shares to be sold by the Company hereunder (including the shares
to be sold by the Selling Stockholders) have been duly authorized
and validly issued, are fully paid and nonassessable, and there
are no preemptive, preferential or, except as described in the
Prospectus, other rights to subscribe for or purchase any shares
of capital stock of the Company, and to such counsel's knowledge,
no shares of capital stock of the Company have been issued in
violation of such rights.
-23-
<PAGE> 24
(iv) Except for the Subsidiaries and except as to its
relationship with Amrop as has been disclosed to the
Representatives in writing, the Company has no subsidiaries and
the Company does not own any equity interest in or control,
directly or indirectly, any other corporation, limited liability
company, partnership, joint venture, association, trust or other
business organization; each Subsidiary has been duly incorporated
and is validly existing as a corporation, and either its status is
active or it is in good standing, under the laws of its
jurisdiction of incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct
its business as presently conducted and as described in the
Prospectus and the Registration Statement; each Subsidiary is duly
registered and qualified to do business as a foreign corporation
under the laws of, and either its status is active or it is in
good standing as such in, each jurisdiction in which such
registration or qualification is required, except where the
failure to so register or qualify would not have a Material
Adverse Effect; the issued and outstanding shares of the capital
stock of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable and there are no
preemptive, preferential or other rights to subscribe for or
purchase any shares of capital stock of any Subsidiary and no
shares of capital stock of any Subsidiary have been issued in
violation of such rights; the Company owns directly and
beneficially all of the issued and outstanding capital stock of
each Subsidiary, free and clear of any and all liens, claims,
encumbrances and security interests.
(v) The certificates for the Shares to be delivered
hereunder are in due and proper form and conform to the
requirements of applicable law and, when duly countersigned by the
Company's transfer agent and delivered to the Representatives or
upon the order of the Representatives against payment of the
agreed consideration therefor in accordance with the provisions of
this Agreement, the Shares represented thereby will be duly
authorized and validly issued, fully paid and nonassessable, and
free of any preemptive, preferential or other rights to subscribe
for or purchase shares of Common Stock.
(vi) The Registration Statement has become effective under
the Act, and to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been initiated or are
threatened under the Act or any Blue Sky Laws. The Registration
Statement and the Prospectus and any amendment or supplement
thereto (except for the financial statements and other statistical
or financial data included therein as to which such counsel need
express no opinion) comply as to form in all material respects
with the requirements of the Act. No facts have come to the
attention of such counsel which lead it to believe that either the
Registration Statement or the Prospectus or any amendment or
supplement thereto, contains any untrue statement of a material
fact or omitted or will omit to state a material fact required to
be stated
-24-
<PAGE> 25
therein or necessary to make the statements therein not misleading
or that the Prospectus, as of the First Closing Date or the Second
Closing Date, as the case may be, contained any untrue statement
of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
under which they were made (except for the financial statements
and other financial data included therein as to which such counsel
need express no opinion). To such counsel's knowledge, there are
no legal or governmental proceedings pending or threatened,
including, without limitation, any such proceedings that are
related to environmental or employment discrimination matters,
required to be described in the Registration Statement or the
Prospectus which are not so described or which question the
validity of this Agreement or any action taken or to be taken
pursuant thereto, nor is there any transaction, relationship,
agreement, contract or other document of a character required to
be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement by the Act,
which is not described or filed as required.
(vii) The Company has full corporate power and authority to
enter into and perform this Agreement. The performance of the
Company's obligations hereunder and the consummation of the
transactions described herein have been duly authorized by the
Company by all necessary corporate action and this Agreement has
been duly executed and delivered by and on behalf of the Company,
and is a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms,
except that rights to indemnity or contribution may be limited by
applicable law or the policies underlying such laws and except as
enforceability of this Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by equitable principles limiting
the right to specific performance or other equitable relief. No
consent, approval, authorization or other order or decree of any
court, regulatory or governmental body, arbitrator, administrative
agency or other instrumentality of the United States or other
country or jurisdiction having jurisdiction over the Company is
required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement
(except for compliance with the Act, the Exchange Act, applicable
Blue Sky Laws and the clearance of the underwriting arrangements
by the NASD).
(viii) The execution, delivery and performance of this
Agreement by the Company will not: (A) violate any provisions of
the Articles of Incorporation or Bylaws of the Company or any
Subsidiary; (B) violate any provisions of, or result in the
breach, modification or termination of, or constitute a default
under, any agreement, lease, franchise, license, indenture,
permit, mortgage, deed of trust, other
-25-
<PAGE> 26
evidence of indebtedness or other instrument to which the Company
or any Subsidiary is a party or by which the Company or such
Subsidiary, or any of their respective owned or leased property,
is bound, and which is filed as an exhibit to the Registration
Statement; or (C) violate any statute, ordinance, order, rule,
decree or regulation of any court, regulatory or governmental
body, arbitrator, administrative agency or other instrumentality
of the United States or other country or jurisdiction having
jurisdiction over the Company or any Subsidiary (assuming
compliance with all applicable federal and state securities laws).
(ix) To such counsel's knowledge, except as described in the
Prospectus, there are no holders of Common Stock or other
securities of the Company, or securities that are convertible or
exchangeable into Common Stock or other securities of the Company,
that have rights to the registration of such securities under the
Act or any Blue Sky Laws.
(x) The Common Stock has been designated as a National
Market Security on Nasdaq and is registered under the Exchange
Act.
(xi) Neither the Company nor any Subsidiary is, or with the
giving of notice or passage of time or both would be, in violation
of its respective Articles of Incorporation or Bylaws or, to such
counsel's knowledge, in default in any material respect in the
performance of any agreement, lease, franchise, license, permit,
mortgage, deed of trust, evidence of indebtedness or other
instrument, or any other document that is filed as an exhibit to
the Registration Statement, to which the Company or any Subsidiary
is subject or bound.
(xii) Neither the Company nor any Subsidiary is an
"investment company," an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as
amended, and, upon its receipt of any proceeds from the sale of
the Shares, the Company will not become or be deemed to be an
"investment company" thereunder.
(xiii) The description in the Registration Statement and the
Prospectus of statutes, law, regulations, legal and governmental
proceedings, and contracts and other legal documents described
therein fairly and correctly present, in all material respects,
the information required to be included therein by the Act.
(xiv) All offers and sales by the Company and each Subsidiary
of their respective capital stock before the date hereof were at
all relevant times duly registered under or exempt from the
registration requirements of the Act, and were duly registered
under or the subject of an available exemption from the
registration requirements of any applicable Blue Sky Laws.
-26-
<PAGE> 27
In rendering such opinion, counsel for the Company may rely, to
the extent counsel deems such reliance proper, as to matters of fact upon
certificates of officers of the Company and of governmental officials, and
copies of all such certificates shall be furnished to the Representatives for
the Underwriters on or before each Closing Date. Counsel for the Company also
may rely upon an opinion(s) of local counsel with respect to matters governed by
the laws of jurisdictions other than Florida, provided that (a) a copy of each
opinion so relied upon is delivered to the Underwriters and is in form and
substance satisfactory to counsel to the Underwriters and (b) such counsel shall
state in their opinion that they believe they are justified in relying upon such
local counsel's opinion.
(e) The Representatives shall have received an opinion of Trenam,
Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, Professional Association,
counsel for the Selling Stockholders, addressed to the Representatives, as the
representatives of the Underwriters, and dated the First Closing Date, to the
effect that:
(i) Each of this Agreement, the Irrevocable Power of
Attorney and the Custody Agreement has been duly authorized, if
applicable, executed and delivered by or on behalf of each Selling
Stockholder and each such agreement constitutes the valid and
binding agreement of such Selling Stockholder, enforceable against
such Selling Stockholder in accordance with its respective terms,
except that rights to indemnity or contribution thereunder may be
limited by applicable law and except as enforceability of such
agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting the
rights of creditors and by equitable principles limiting the right
to specific performance or other equitable relief;
(ii) The execution, delivery and performance of this
Agreement, the Irrevocable Power of Attorney and the Custody
Agreement will not, if applicable, result in the violation of any
provisions of the Articles of Incorporation, By-laws or other
governing documents of such Selling Stockholder, or constitute a
breach, or be in contravention, of any provision of any agreement,
franchise, license, indenture, mortgage, deed of trust or other
instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or such Selling Stockholder's
property may be bound or affected, or any statute, rule or
regulation applicable to such Selling Stockholder, or violate any
order or decree of any court, regulatory or governmental body,
administrative body or instrumentality of the United States or
other jurisdiction having jurisdiction over such Selling
Stockholder or any of such Selling Stockholder's property, which
violation would reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), business,
properties, net worth or results of operations of such Selling
Stockholder;
-27-
<PAGE> 28
(iii) Such Selling Stockholder has full legal right, power and
authority, and has secured any consent, approval, authorization
and order required, to enter into and perform this Agreement, the
Irrevocable Power of Attorney and the Custody Agreement and to
sell, assign, transfer and deliver title to the Shares to be sold
by such Selling Stockholder as provided herein; and upon delivery
to the Underwriters or upon the order of the Representatives
against payment of the agreed consideration therefor in accordance
with the provisions of this Agreement, the Underwriters will
acquire good and marketable title to the Shares to be sold
hereunder by such Selling Stockholder, free and clear of all
voting trust arrangements, liens, encumbrances, security
interests, equities, claims and community or marital property
rights; and
(iv) To such counsel's knowledge, the information concerning
the Selling Stockholders contained in the Prospectus under the
caption "Principal and Selling Stockholders" complies in all
material respects with the Act.
In rendering such opinion, counsel for the Selling Stockholders may rely,
to the extent counsel deems such reliance proper, as to matters of fact upon
certificates of the Selling Stockholders, and copies of all such certificates
shall be furnished to the Representatives and counsel for the Underwriters on or
before each Closing Date.
(f) The Representatives shall have received an opinion of Neal,
Gerber & Eisenberg, counsel for the Underwriters, dated the First Closing Date
or the Second Closing Date, as the case may be, with respect to the issuance and
sale of the Shares by the Company, the Registration Statement and other related
matters as the Representatives may require, and the Company shall have furnished
to such counsel such documents and shall have exhibited to them such papers and
records as they request for the purpose of enabling them to pass upon such
matters.
(g) The Representatives shall have received on each Closing Date,
a certificate of Robert L. Pearson, President and Chief Executive Officer, and
Jack P. Wissman, Executive Vice President and Chief Financial Officer of the
Company, to the effect that:
(i) The representations and warranties of the Company set
forth in Section 2 hereof are true and correct as of the date of
this Agreement and as of the date of such certificate, and the
Company has complied with all the agreements and satisfied all the
conditions to be performed or satisfied by it at or prior to the
date of such certificate.
(ii) The Commission has not issued an order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus
or any amendment or supplement thereto; no stop order suspending
the effectiveness of the Registration Statement has been issued;
and to the knowledge of the respective signatories, no proceedings
for
-28-
<PAGE> 29
that purpose have been initiated or are pending or contemplated
under the Act or under the Blue Sky Laws of any jurisdiction.
(iii) Each of the respective signatories has carefully
examined the Registration Statement and the Prospectus, and any
amendment or supplement thereto, and such documents contain all
statements required to be stated therein, and do not include any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and since the date on which the
Registration Statement was initially filed, no event has occurred
that was required to be set forth in an amended or supplemented
prospectus or in an amendment to the Registration Statement that
has not been so set forth.
(iv) Since the date on which the Registration Statement was
initially filed with the Commission, there shall not have occurred
any change or development involving, or which reasonably would be
expected to involve, a Material Adverse Effect, whether or not
arising from transactions in the ordinary course of business,
except as disclosed in the Prospectus and the Registration
Statement as heretofore amended or (but only if the
Representatives expressly consent thereto in writing) as disclosed
in an amendment or supplement thereto filed with the Commission
and delivered to the Representatives after the execution of this
Agreement; since such date and except as so disclosed or in the
ordinary course of business, the Company has not incurred any
liability or obligation, direct or indirect, or entered into any
transaction which is material to the Company; since such date and
except as so disclosed, there has not been any change in the
outstanding capital stock of the Company, or any change that is
material to the Company in the short-term debt or long-term debt
of the Company; since such date and except as so disclosed, the
Company has not acquired any of the Common Stock or other capital
stock of the Company nor has the Company declared or paid any
dividend, or made any other distribution, upon its outstanding
Common Stock payable to stockholders of record on a date prior to
such Closing Date; since such date and except as so disclosed, the
Company has not incurred any material contingent obligations, and
no material litigation is pending or threatened against the
Company; and, since such date and except as so disclosed, the
Company has not sustained any material loss or interference from
any strike, fire, flood, windstorm, accident or other calamity
(whether or not insured) or from any court or governmental action,
order or decree.
The delivery of the certificate provided for in this subsection
(g) shall be and constitute a representation and warranty of the Company as to
the facts required in the immediately foregoing clauses (i), (ii), (iii) and
(iv) to be set forth in said certificate.
-29-
<PAGE> 30
(h) The Representatives shall have received a certificate from
each Selling Stockholder (which may be signed by such Selling Stockholder's
Attorneys-in-Fact, or either of them), dated the First Closing Date, to the
effect that: (i) the representations and warranties of such Selling Stockholder
in Section 3 of this Agreement are true and correct as of the date of this
Agreement and as of the First Closing Date, as if again made on and as of the
First Closing Date, and such Selling Stockholder has complied with all of the
agreements and satisfied all of the conditions to be performed or satisfied by
such Selling Stockholder at or prior to the First Closing Date; and (ii) such
Selling Stockholder has no reason to believe that the Registration Statement or
any amendment thereto at the time it was declared effective by the Commission
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus, as amended or supplemented,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(i) At the time this Agreement is executed and also on each
Closing Date, there shall be delivered to the Representatives a letter addressed
to the Representatives, as the representative of the Underwriters, from Arthur
Andersen LLP, the Company's independent accountants, the first letter to be
dated the date of this Agreement, the second letter to be dated the First
Closing Date and the third letter (if applicable) to be dated the Second Closing
Date, which shall be in form and substance satisfactory to the Representatives
and shall contain information as of a date within five days of the date of such
letter. There shall not have been any change or decrease set forth in any of the
letters referred to in this subsection (i) which makes it impracticable or
inadvisable in the judgment of the Representatives to proceed with the public
offering or purchase of the Shares as contemplated hereby.
(j) The Shares shall have been qualified or registered for sale
under the Blue Sky Laws of such jurisdictions as shall have been specified by
the Representatives, the underwriting terms and arrangements for the offering
shall have been cleared by the NASD, and the Common Stock shall have been
designated for inclusion as a Nasdaq National Market security on Nasdaq and
shall have been registered under the Exchange Act.
(k) Such further certificates and documents as the Representatives
may reasonably request (including certificates of officers of the Company).
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to the
Representatives and to Neal, Gerber & Eisenberg, counsel for the Underwriters.
The Company and the Selling Stockholders shall furnish the Representatives with
such manually signed or conformed copies of such opinions, certificates, letters
and documents as the Representatives may reasonably request.
-30-
<PAGE> 31
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at either Closing Date is not so satisfied, this Agreement
at the election of the Representatives will terminate upon notification to the
Company and the Attorneys-in-Fact, or any one of them, for the Selling
Stockholders without liability on the part of (i) any Underwriter, including the
Representatives, (ii) the Company or the Selling Stockholders except for the
provisions of Section 7(o) hereof, the expenses to be paid by the Company and
the Selling Stockholders pursuant to Section 9 hereof and (iii) except to the
extent provided in Section 12 hereof.
SECTION 11. MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company and the Selling Stockholders will use their respective best efforts to
prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement, and, if such stop order is issued, to obtain as soon as
possible the lifting thereof.
-31-
<PAGE> 32
SECTION 12. INDEMNIFICATION.
(a) The Company and each of the Selling Stockholders, jointly and
severally, subject to the last paragraph of this Section 12, agree to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of the Act or the Exchange Act, from and against
any losses, claims, damages, expenses, liabilities or actions in respect thereof
("CLAIMS"), joint or several, to which such Underwriter or each such controlling
person may become subject under the Act, the Exchange Act, Blue Sky Laws or
other federal or state statutory laws or regulations, at common law or otherwise
(including payments made in settlement of any litigation), insofar as such
Claims arise out of or are based upon any breach of any representation, warranty
or covenant made by the Company in this Agreement, or any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or in any application filed under any Blue Sky Law or other
document executed by the Company for that purpose or based upon written
information furnished by the Company and filed in any state or other
jurisdiction to qualify any or all of the Shares under the securities laws
thereof (any such document, application or information being hereinafter called
a "BLUE SKY APPLICATION") or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Company and each
of the Selling Stockholders, jointly and severally, subject to the last
paragraph of this Section 12, agree to reimburse each Underwriter and each such
controlling person for any legal fees or other expenses incurred by such
Underwriter or any such controlling person in connection with investigating or
defending any such Claim. Notwithstanding the foregoing, however, the Company
and the Selling Stockholders will not be liable in any such case to the extent
that (i) any such Claim arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or supplement
thereto or in any Blue Sky Application in reliance upon and in conformity with
the written information furnished to the Company pursuant to Section 5 of this
Agreement, or (ii) such statement or omission was contained or made in any
Preliminary Prospectus and corrected in the Prospectus and (A) any such Claim
suffered or incurred by any Underwriter (or any person who controls such
Underwriter) resulted from an action, claim or suit by any person who purchased
Shares which are the subject thereof from such Underwriter, and (B) in any case
where such delivery is required by the Act, such Underwriter failed to deliver
or provide a copy of the Prospectus to such person at or prior to the written
confirmation of the sale of such Shares, unless such failure was due to failure
by the Company to provide copies of the Prospectus to the Underwriters as
required by this Agreement. The indemnification obligations of the Company and
each of the Selling Stockholders as provided above are in addition to and in no
way limit any liabilities the Company and each of the Selling Stockholders may
otherwise have.
-32-
<PAGE> 33
(b) Each of the Selling Stockholders, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter and each controlling
person from and against any Claims to which such Underwriter or each such
controlling person may become subject under the Act, the Exchange Act, Blue Sky
Laws or other federal or state statutory laws or regulations, at common law or
otherwise (including payments made in settlement of any litigation), insofar as
such Claims arise out of or are based upon any breach of any representations,
warranty or covenant made by such Selling Stockholder in this Agreement.
(c) Each Underwriter, severally and not jointly, will indemnify
and hold harmless the Company, each of its directors and each of its officers
who signs the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act and each Selling
Stockholder against any Claim to which the Company, or any such director,
officer, controlling person or Selling Stockholder may become subject under the
Act, the Exchange Act, Blue Sky Laws or other federal or state statutory laws or
regulations, at common law or otherwise (including payments made in settlement
of any litigation, if such settlement is effected with the written consent of
such Underwriter and Baird), insofar as such Claim arises out of or is based
upon any breach of any representation, warranty or covenant made by such
Underwriter in this Agreement, any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or in any
Blue Sky Application, or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, in reliance solely upon and
in conformity with the written information furnished by the Representatives to
the Company pursuant to Section 5 of this Agreement. Each Underwriter will
severally reimburse any legal fees or other expenses incurred by the Company, or
any such director, officer, controlling person or Selling Stockholder in
connection with investigating or defending any such Claim, and from any and all
Claims solely resulting from failure of an Underwriter to deliver a Prospectus,
if the person asserting such Claim purchased Shares from such Underwriter and a
copy of the Prospectus (as then amended if the Company shall have furnished any
amendments thereto) was not sent or given by or on behalf of such Underwriter to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended) would have cured the defect giving rise to such
Claim. The indemnification obligations of each Underwriter as provided above are
in addition to any liabilities any such Underwriter may otherwise have.
Notwithstanding the provisions of this Section, no Underwriter shall be required
to indemnify or reimburse the Company, or any officer, director, controlling
person or Selling Stockholder in an aggregate amount in excess of the total
price at which the Shares purchased by any such Underwriter hereunder were
offered to the public, less the amount of any damages such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
-33-
<PAGE> 34
(d) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless the Company, each of its directors and each of its
officers who signs the Registration Statement, and each person, if any,
controlling the Company within the meaning of the Act or the Exchange Act to the
same extent as the foregoing indemnity from the Company to each Underwriter set
forth in subsection (a) of this section. In case any Claim shall be brought or
asserted against the Company, its directors, such officers or any such
controlling person, in respect of which indemnity may be sought against any
Selling Stockholder, such Selling Stockholder shall have the rights and duties
given to the Company, and the Company, such directors or officers and any such
controlling person shall have the rights and duties given to the Underwriters by
subsection (a) of this section.
(e) Promptly after receipt by an indemnified party under this
Section 12 of notice of the commencement of any action in respect of a Claim,
such indemnified party will, if a Claim in respect thereof is to be made against
an indemnifying party under this Section 12, notify the indemnifying party in
writing of the commencement thereof; but, provided that the indemnifying party
is not materially adversely prejudiced by any delay in so notifying or failure
to so notify, the omission so to notify the indemnifying party will not relieve
an indemnifying party from any liability it may have to any indemnified party
under this Section 12 or otherwise. In case any such action is brought against
any indemnified party, and such indemnified party notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in and, to the extent that he, she or it may wish, jointly with all
other indemnifying parties, similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified party
and any indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to the indemnified party
and/or other indemnified parties which are different from or additional to those
available to any indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties.
(f) Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the defense of
such action and upon approval by the indemnified party of counsel selected by
the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section 12 for any legal fees or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, unless:
(i) the indemnified party shall have employed separate counsel
in connection with the assumption of legal defenses in accordance with
the proviso to the last sentence of subsection (e) of this Section 12 (it
being understood, however, that the indemnifying party shall not be
liable for the legal fees and expenses of more than one separate counsel,
approved by Baird, if one or more of the Underwriters or their
controlling persons are the indemnified parties);
-34-
<PAGE> 35
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the indemnified party's
notice to the indemnifying party of commencement of the action; or
(iii) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(g) If the indemnification provided for in this Section is
unavailable to an indemnified party under subsection (a), (b), (c) or (d) hereof
in respect of any Claim referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall, subject to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, each Selling Stockholder and the
Underwriters from the offering of the Shares; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above,
but also the relative fault of the Company, each Selling Stockholder and
the Underwriters in connection with the statements or omissions which
resulted in such Claim, as well as any other relevant equitable
considerations.
The relative benefits received by each of the Company, each
Selling Stockholder and the Underwriters shall be deemed to be in such
proportion so that the Underwriters are responsible for that portion represented
by the percentage that the amount of the underwriting discounts and commissions
per share appearing on the cover page of the Prospectus bears to the public
offering price per share appearing thereon, and the Company (including its
officers and directors and controlling persons), and each of the Selling
Stockholders, are responsible for the remaining portion. The relative fault of
the Company, each Selling Stockholder and the Underwriters shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, such Selling
Stockholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the Claims
referred to above shall be deemed to include, subject to the limitations set
forth in subsections (e) and (f) of this Section 12, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
(h) The Company, the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section were determined by pro rata
-35-
<PAGE> 36
or per capita allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method or allocation which does not take into
account the equitable considerations referred to in subsection (f) of this
Section 12. Notwithstanding the other provisions of this Section 12, no
Underwriter shall be required to contribute any amount that is greater than the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 12 are several in proportion to their
respective underwriting commitments and not joint.
(i) Notwithstanding any provision of this section 12 to the
contrary, the liability of each of the Selling Stockholders arising under this
section 12 shall not exceed the proceeds received by such Selling Stockholder
from the Underwriters for the Shares sold by such Selling Stockholder.
SECTION 13. DEFAULT OF UNDERWRITERS. It shall be a condition to
the obligations of each Underwriter to purchase the Shares in the manner as
described herein, that, except as hereinafter provided in this Section, each of
the Underwriters shall purchase and pay for all the Shares agreed to be
purchased by such Underwriter hereunder upon tender to the Representatives of
all such Shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Shares hereunder on either
the First Closing Date or the Second Closing Date and the aggregate number of
Shares which such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed ten percent (10%) of the total number of Shares which
the Underwriters are obligated to purchase on such Closing Date, the
Representatives may make arrangements for the purchase of such Shares by other
persons, including any of the Underwriters, but if no such arrangements are made
by such Closing Date the nondefaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Shares which such defaulting Underwriters agreed but failed to purchase on
such Closing Date. If any Underwriter or Underwriters so default and the
aggregate number of Shares with respect to which such default or defaults occur
is greater than ten percent (10%) of the total number of Shares which the
Underwriters are obligated to purchase on such Closing Date, and arrangements
satisfactory to the Representatives for the purchase of such Shares by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any nondefaulting Underwriter, the
Company or any Selling Stockholder except for the expenses to be paid by the
Company pursuant to Section 9 hereof and except to the extent provided in
Section 12 hereof.
In the event that Shares to which a default relates are to be
purchased by the nondefaulting Underwriters or by another party or parties, the
Representatives shall have the right to postpone the First Closing Date or the
Second Closing Date, as the case may be, for not more than
-36-
<PAGE> 37
seven business days in order that the necessary changes in the Registration
Statement, Prospectus and any other documents, as well as any other
arrangements, may be effected. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section. Nothing
herein will relieve a defaulting Underwriter from liability for its default.
SECTION 14. EFFECTIVE DATE. This Agreement shall become effective
upon the execution and delivery of this Agreement by the parties hereto. Such
execution and delivery shall include an executed copy of this Agreement sent by
telecopier, facsimile transmission or other means of transmitting written
documents.
SECTION 15. TERMINATION. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof, this Agreement may be
terminated by the Representatives prior to or on the First Closing Date and the
over-allotment option from the Company referred to in Section 6 hereof, if
exercised, may be cancelled by the Representatives at any time prior to or on
the Second Closing Date, if in the judgment of the Representatives, payment for
and delivery of the Shares is rendered impracticable or inadvisable because:
(a) additional governmental restrictions, not in force and effect
on the date hereof, shall have been imposed upon trading in securities generally
or minimum or maximum prices shall have been generally established on the New
York Stock Exchange or the American Stock Exchange, or trading in securities
generally shall have been suspended or materially limited on either such
exchange or on Nasdaq or a general banking moratorium shall have been
established by either federal or state authorities in New York, Chicago or
Milwaukee;
(b) any event shall have occurred or shall exist which makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or which is not reflected in the
Registration Statement but should be reflected therein to make the statements or
information contained therein not misleading in any material respect; or
(c) an outbreak or escalation of hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated to such
extent, in the judgment of the Representatives, as to have a material adverse
effect on the financial markets of the United States, or to make it
impracticable or inadvisable to proceed with completion of the sale of and
payment for the Shares as provided in this Agreement.
Any termination pursuant to this Section shall be without
liability on the part of any Underwriter to the Company or any Selling
Stockholder, or on the part of the Company or any Selling Stockholder to any
Underwriter, except for expenses to be paid by the Company pursuant to Section 9
hereof or reimbursed by the Company pursuant to Section 7(o) hereof and except
as to indemnification to the extent provided in Section 12 hereof.
-37-
<PAGE> 38
SECTION 16. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties, covenants
and other statements of the Company, of its officers or directors, of the
Selling Stockholders, and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, any Selling
Stockholder or the Company or any of its or their partners, officers, directors
or any controlling person, as the case may be, and will survive delivery of and
payment for the Shares sold hereunder.
SECTION 17. NOTICES. All communications hereunder will be in
writing and, if sent to the Representatives, will be mailed, delivered,
telecopied (with receipt confirmed) or telegraphed and confirmed to C.
Christopher Coetzee, Robert W. Baird & Co. Incorporated, 227 West Monroe Street,
Suite 2100, Chicago, Illinois 60606, with a copy to Helen N. Kaminski, Neal,
Gerber & Eisenberg, Two North LaSalle Street, Chicago, Illinois 60602, and if
sent to the Company, will be mailed, delivered, telecopied (with receipt
confirmed) or telegraphed and confirmed to the Company at Lamalie Associates,
Inc., Northdale Plaza, Suite 220E, 3903 Northdale Boulevard, Tampa, Florida
33624-1824, Attention: Jack P. Wissman, with a copy to Richard M. Leisner,
Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, Professional
Association, 2700 Barnett Plaza, 101 East Kennedy Boulevard, Tampa, Florida
33602; and, if sent to the Selling Stockholders, will be mailed, delivered,
telecopied (with receipt confirmed) or telegraphed and confirmed to the
Attorneys-in-Fact, or either of them, in care of the Company, with copies to
Richard M. Leisner, Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis,
Professional Association, 2700 Barnett Plaza, 101 East Kennedy Boulevard, Tampa,
Florida 33602
SECTION 18. SUCCESSORS. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors,
personal representatives and assigns, and to the benefit of the officers and
directors and controlling persons referred to in Section 12 hereof and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares as such from any of the Underwriters
merely by reason of such purchase.
SECTION 19. PARTIAL UNENFORCEABILITY. If any section, paragraph,
clause or provision of this Agreement is for any reason determined to be invalid
or unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph clause or provision hereof.
SECTION 20. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Wisconsin without reference to conflict of law principles thereunder. This
Agreement may be signed in various counterparts which together shall constitute
one and the same instrument, and shall be effective when at least one
counterpart hereof shall have been executed by or on behalf of each party
hereto.
-38-
<PAGE> 39
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, each of the
Selling Stockholders and the several Underwriters, including the
Representatives, all in accordance with its terms.
Very truly yours,
LAMALIE ASSOCIATES, INC.
By:
-----------------------------------------
Robert L. Pearson, President and Chief
Executive Officer
THE SELLING STOCKHOLDERS:
By:
-----------------------------------------
Jack P. Wissman, Attorney-in-Fact
By:
-----------------------------------------
Philip R. Albright, Attorney-in-Fact
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
ROBERT W. BAIRD & CO. INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
J.C. BRADFORD & CO.
By: ROBERT W. BAIRD & CO. INCORPORATED
Acting as Representatives of the several
Underwriters (including themselves) identified
in Schedule II annexed hereto.
By:
----------------------------------------------
C. Chris Coetzee, Managing Director
-39-
<PAGE> 40
LAMALIE ASSOCIATES, INC.
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF FIRM NUMBER OF OPTIONAL
SHARES SHARES
------ ------
<S> <C> <C>
The Company __________ __________
The Selling Stockholders:
</TABLE>
-40-
<PAGE> 41
LAMALIE ASSOCIATES, INC.
SCHEDULE II
<TABLE>
<CAPTION>
NO. FIRM
SHARES
NAME OF UNDERWRITER PURCHASED
- ------------------- ---------
<S> <C>
Robert W. Baird & Co. Incorporated..........................................................
The Robinson-Humphrey Company, LLC..........................................................
J.C. Bradford & Co..........................................................................
Total.....................................................................
</TABLE>
-41-
<PAGE> 1
EXHIBIT 5
TRENAM, KEMKER, SCHARF, BARKIN, FRYE, O'NEILL & MULLIS
PROFESSIONAL ASSOCIATION
ATTORNEYS AT LAW
TAMPA OFFICE ST. PETERSBURG OFFICE
2700 BARNETT PLAZA 2100 BARNETT TOWER
101 EAST KENNEDY BOULEVARD ONE PROGRESS PLAZA
POST OFFICE BOX 1102 POST OFFICE BOX 2245
TAMPA, FLORIDA 33601-1102 ST PETERSBURG, FLORIDA 33731-2245
TELEPHONE (813) 223-7474 TELEPHONE (813) 898-7474
TELEFAX (813) 229-6553 TELEFAX (813) 821-0407
PLEASE REPLY TO
TAMPA
June 9, 1998
Securities and Exchange Commission
Judiciary Plaza
450 5th Street, N.W.
Washington, DC 20549
Re: Lamalie Associates, Inc.
Registration Statement on Form S-1
File No. 333-52075
----------------------------------
Ladies and Gentlemen:
We have represented Lamalie Associates, Inc. (the "Company") in
connection with the Company's Registration Statement on Form S-1 (File No.
333-52075), as amended (the "Registration Statement") relating to the proposed
public offering by the Company and by certain stockholders of the Company (the
"Selling Stockholders") of an aggregate of up to 3,000,000 shares (3,450,000
shares if the Underwriters' over-allotment option is exercised)(the "Shares") of
the Company's Common Stock (the "Offering"). This opinion is being provided as
Exhibit 5 to the S-1 Registration Statement.
In our capacity as counsel to the Company in connection with the
Registration Statement and the Offering, we have examined and are familiar
with: the Company's Articles of Incorporation and Bylaws, as currently in
effect, the Registration Statement and such other corporate records, documents
and instruments as in our opinion are necessary or relevant as the basis for
the opinions expressed below.
As to various questions of fact material to our opinion, we have
relied without independent investigation on statements or certificates of
officials and representatives of the Company, the Department of State of the
State of Florida and others. In all such examinations, we have assumed the
genuineness of all signatures on original and certified documents and the
conformity
<PAGE> 2
to original and certified documents of all copies submitted to us as conformed,
photostatic or other exact copies. We express no opinion as to the law of any
jurisdiction other than the general corporate law of the State of Florida and
the Federal laws of the United States of America.
Based upon and in reliance on the foregoing, we are of the opinion
that:
1. The Company is a duly organized and validly existing as a
corporation under the laws of the State of Florida and its status as
such is active.
2. The Shares being offered and sold by the Selling Stockholders
(the "Selling Stockholder Shares") are duly authorized, validly issued,
fully paid and non-assessable shares of the capital stock of the
Company.
3. When the following events shall have occurred:
a. the Registration Statement shall have become
effective in accordance with the Securities Act of
1933, as amended;
b. the Shares being offered and sold by the Company
(the "Company Shares") shall have been offered and
sold as provided in the Registration Statement,
and the consideration specified in the Registration
Statement shall have been received by the Company;
and
c. the certificates representing the Company Shares
shall have been executed, countersigned and issued
by or on behalf of the Company,
the Company Shares so offered and sold in the Offering will be duly
authorized, validly issued, fully paid and non-assessable shares of the
capital stock of the Company.
This firm hereby consents to the filing of this opinion as an Exhibit
to the Registration Statement and to the reference to it under the heading
"Legal Matters."
Sincerely,
TRENAM, KEMKER, SCHARF, BARKIN,
FRYE, O'NEILL & MULLIS,
Professional Association
By: /s/ J. Cary Ross, Jr.
--------------------------------
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our reports (and to all references to our firm) included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Tampa, Florida,
June 8, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 20, 1998, with respect to
the balance sheets of Ward Howell International, Inc. as of December 31, 1997
and 1996 and the related statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997 included herein.
KPMG PEAT MARWICK LLP
New York, New York
June 9, 1998
