<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1998
REGISTRATION NO. 333-48123
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- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ANSWERTHINK CONSULTING GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
FLORIDA 8748 65-0750100
(STATE OF INCORPORATION) (PRIMARY S.I.C. CODE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>
1401 BRICKELL AVENUE, SUITE 350
MIAMI, FLORIDA 33131
(305) 375-8005
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TED A. FERNANDEZ
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
ANSWERTHINK CONSULTING GROUP, INC.
1401 BRICKELL AVENUE, SUITE 350
MIAMI, FLORIDA 33131
(305) 375-8005
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
COPIES TO:
DAVID B.H. MARTIN, JR., ESQ. KEITH F. HIGGINS, ESQ.
HOGAN & HARTSON L.L.P. ROPES & GRAY
555 13TH STREET, N.W. ONE INTERNATIONAL PLACE
WASHINGTON, DC 20004-1190 BOSTON, MA 02110-2624
(202) 637-5600 (617) 951-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR ANY +
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject To Completion)
Issued May 7, 1998
3,850,000 Shares
LOGO
COMMON STOCK
-----------
OF THE 3,850,000 SHARES OF COMMON STOCK BEING OFFERED, 2,850,000 SHARES ARE
BEING SOLD BY THE COMPANY AND 1,000,000 SHARES ARE BEING SOLD BY THE
SELLING SHAREHOLDERS. SEE "PRINCIPAL AND SELLING SHAREHOLDERS." THE
COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY
THE SELLING SHAREHOLDERS. PRIOR TO THE OFFERING THERE HAS BEEN NO
PUBLIC MARKET FOR THE COMMON STOCK. IT IS CURRENTLY ESTIMATED THAT
THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN $12
AND $14. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING
PRICE.
-----------
APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "ANSR."
-----------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON
PAGE 2 HEREOF.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
-----------
<TABLE>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
</TABLE>
- - -----
(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters, as defined, against certain liabilities, including
liabilities under the Securities Act of 1933. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated to be
$900,000.
(3) The Company and certain Selling Shareholders have granted to the
Underwriters an option exercisable within 30 days of the date hereof to
purchase up to an aggregate of 577,500 additional Shares of Common Stock
at the price to public less underwriting discounts and commissions for
the purpose of covering over-allotments, if any. If the Underwriters
exercise such option in full, the total price to public, underwriting
discounts and commissions, proceeds to Company and proceeds to Selling
Shareholders will be $ , $ , $ and $ , respectively. See
"Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Ropes & Gray, counsel for the Underwriters. It is expected that delivery of
the Shares will be made on or about , 1998 at the office of Morgan Stanley
& Co. Incorporated, New York, New York, against payment therefor in immediately
available funds.
-----------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
NATIONSBANC MONTGOMERY SECURITIES LLC
THE ROBINSON-HUMPHREY COMPANY
, 1998
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING (THE "OFFERING") OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING SHAREHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN
OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
UNTIL (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
---------------
TABLE OF CONTENTS
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PAGE
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Prospectus Summary....................................................... 1
Risk Factors............................................................. 2
The Company.............................................................. 9
Use of Proceeds.......................................................... 9
Dividend Policy.......................................................... 9
Capitalization........................................................... 10
Dilution................................................................. 11
Selected Consolidated Financial and Pro Forma Data....................... 12
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 14
Business................................................................. 20
Management............................................................... 31
Certain Transactions..................................................... 37
Principal and Selling Shareholders....................................... 40
Description of Capital Stock............................................. 41
Shares Eligible for Future Sale.......................................... 44
Underwriters............................................................. 47
Legal Matters............................................................ 49
Experts.................................................................. 49
Additional Information................................................... 49
Index to Financial Statements............................................ F-1
</TABLE>
---------------
The Company intends to furnish its shareholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and with quarterly reports
for the first three quarters of each year containing unaudited consolidated
interim financial information.
---------------
Except as otherwise indicated herein, all historical financial and share
information in this Prospectus assumes the one-for-two reverse stock split of
all of the outstanding shares of capital stock of the Company (the "Reverse
Stock Split") and the amendments to the Company's Articles of Incorporation in
connection therewith prior to the effectiveness of the Offering. In addition,
unless otherwise indicated, all information in this Prospectus assumes (i)
that the conversion of all of the outstanding shares of convertible preferred
stock into 7,160,104 shares of Common Stock (the "Conversion") concurrent with
the Offering and (ii) no exercise of the Underwriters' over-allotment option.
As used in this Prospectus, unless the context otherwise requires, references
to "AnswerThink" or the "Company" are to the Company and its consolidated
subsidiaries.
---------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
<PAGE>
[INSIDE GATEFOLD]
[TEXT:] In today's climate of intense global competition and accelerating
technological change, companies are increasingly turning to technology-enabled
solutions to improve their productivity and competitive position. In this
environment, IT is viewed not as an isolated back office function but rather as
a critical component of organizational strategy.
[SYLIZED TEXT:] "INTERPRISE"
[TEXT:] The Company believes that success is today's business environment
requires excellence in communication and collaboration, not just within the
corporate enterprise, but across the network of customers, suppliers, strategic
partners and others which together form the extended enterprise-what the Company
refers to as the "Interprise" business model. AnswerThink provides IT solutions
to help its clients succeed in this Interprise environment, which demands the
assimilation and integration of data from both internal and external sources.
[DIAGRAM SHOWING RELATIONSHIPS BETWEEN INTERNET, INTRANET, EXTRANET, CUSTOMERS
AND INTEGRATED APPLICATIONS APPEARS HERE]
[STYLIZED TEXT:] "KNOWLEDGE"
[TEXT:] AnswerThink does more than study problems. It identifies and answers
questions at the outset of an engagement which allows it to propose and
implement solutions on time and on budget. By using its knowledge-based
delivery process and employing experienced, multidisciplinary consulting teams,
the Company is able to reduce both the risk of delivery and time of
implementation of its project.
[TEXT:] AnswerThink has developed Mind~share/SM/, a proprietary intranet-based
knowledge management system that captures, indexes and disseminates the combined
knowledge base and experience of its consultants.
<PAGE>
[SECOND PAGE GATEFOLD]
[STYLIZED TEXT:] "SOLUTIONS"
[TEXT:] AnswerThink provides solutions in the areas of process transformation
and benchmarking, software package implementation and advanced technologies
integration. AnswerThink delivers these solutions through multidisciplinary
teams of professionals with experience in these areas that deliver solutions for
each of the specific business functions in an organization. These teams target
finance, administration and human resources, information technology, sales and
customer support, and supply chain management.
[DIAGRAM OUTLINING THE COMPANY'S BUSINESS FUNCTIONS, SOLUTION SETS AND CORE
COMPETENCIES APPEARS HERE.]
[LOGO OF ACG APPEARS HERE]
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified by the more detailed information and the audited
financial statements and the unaudited pro forma financial information and
notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
AnswerThink Consulting Group, Inc. ("AnswerThink" or the "Company") is a
rapidly growing provider of knowledge-based consulting and information
technology ("IT") services to Fortune 1000 companies and other sophisticated
buyers. The Company addresses its clients' strategic business needs by offering
a wide range of integrated services or solutions, including benchmarking,
process transformation, software package implementation, electronic commerce,
decision support technology, technology architecture and integration and Year
2000 solutions. These solutions target a client's specific business functions
(finance and administration, human resources, IT, sales and customer support,
and supply chain management) and allow a business to reach beyond the
enterprise and link the people, processes and technologies of the extended
organization or "Interprise." AnswerThink markets its services to senior
executives in organizations where business transformation and technology-
enabled change can have a significant competitive impact.
AnswerThink leverages its knowledge base to propose solutions to its clients'
most critical and complex business problems. The Company delivers its services
through multidisciplinary project teams that include professionals with both IT
and business expertise. The Company's knowledge-based approach to consulting
combines the knowledge and experience of its consultants with "best practice"
process solutions and a benchmarking database developed by its subsidiary, The
Hackett Group, Inc. (the "Hackett Group"). The Company believes its highly
focused service delivery model provides its customers with a lower risk of
delivery and a faster time to benefit as compared to the linear, "methodology
based" processes employed by many other IT consulting firms.
The Company was formed in April 1997 by several former leaders of the IT
consulting practice of a "Big Six" accounting firm. From the outset, the
Company made operational investments to develop a comprehensive market
strategy, build a business infrastructure and create sophisticated management
information and service delivery systems capable of supporting a large-scale
consulting and IT services business. Since its formation, AnswerThink has
acquired several consulting and IT services businesses, each of which brought
to the Company complementary skills and customer relationships. In addition,
the Company has grown internally by recruiting approximately 200 consultants.
As of April 3, 1998, the Company employed 343 consultants. The Company supports
its national solution delivery organization through a network of 10 offices
located in Atlanta, Boston, Chicago, Cleveland, Dallas, Iselin (NJ), Miami, New
York, Philadelphia and Silicon Valley. The Company has served a broad range of
clients, including Avon Products, Bell Atlantic, Florida Power & Light,
International Paper and Lucent Technologies.
THE OFFERING
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<S> <C>
Common Stock offered by the Company...... 2,850,000 shares
Common Stock offered by the Selling
Shareholders............................ 1,000,000 shares
Total Common Stock offered............... 3,850,000 shares
Common Stock outstanding after the
Offering................................ 33,479,311 shares (1)
Use of proceeds.......................... Repayment of indebtedness, working
capital, potential acquisitions and
general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol... ANSR
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL AND PRO FORMA DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
APRIL 23, 1997 (INCEPTION) TO QUARTER ENDED
JANUARY 2, 1998 APRIL 3, 1998
-------------------------------------------------------------
PRO FORMA PRO FORMA
ACTUAL AS ADJUSTED(2) ACTUAL AS ADJUSTED(2)
-------------- ----------------------------- --------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net revenues............ $ 14,848 $ 34,014 $ 18,532 $ 19,864
Loss from operations.... (12,473) (11,435) (39,159) (39,301)
Net loss................ (12,090) (10,909) (39,453) (39,275)
Net loss per common
share--basic and
diluted................ $ (1.91) $ (0.70) $ (3.86) $ (2.13)
Weighted average common
shares outstanding..... 6,342,319 15,675,379 10,226,330 18,455,701
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 3, 1998
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(3)
------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................. $ 4,250 $ 1,504 $27,560
Total assets................................ 37,841 44,638 64,174
Total long-term liabilities................. 9,720 9,729 2,229
Convertible preferred stock................. 11,140 -- --
Shareholders' equity........................ 2,645 17,015 50,571
</TABLE>
- - -------
(1) Based on shares of Common Stock outstanding as of April 3, 1998 giving
effect to 269,166 shares of Common Stock to be issued in the Legacy
Acquisition (as defined). Excludes (i) 1,367,169 shares of Common Stock
issuable upon exercise of options outstanding as of April 3, 1998, none of
which were then exercisable, (ii) 37,500 shares of Common Stock issuable
upon exercise of a warrant outstanding and exercisable as of April 3, 1998,
and (iii) 9,382,831 additional shares of Common Stock reserved for future
issuance under the Stock Plans (as defined).
(2) Gives effect to the Legacy Acquisition, the Conversion, the Offering, and,
for the earlier period, the 1997 Acquisitions (as defined).
(3) Gives effect to the Legacy Acquisition and the Conversion. As adjusted
reflects the Offering.
1
<PAGE>
RISK FACTORS
In evaluating the Company's business, prospective investors should carefully
consider the following factors in addition to the other information presented
in this Prospectus before purchasing the shares of Common Stock offered
hereby. This Prospectus contains certain statements of a forward-looking
nature relating to future events or the future financial performance of the
Company. Prospective investors are cautioned that such statements are only
predictions and that actual events or results may differ materially. In
evaluating such statements, prospective investors should specifically consider
the various factors identified in this Prospectus, including but not limited
to the matters set forth below, which could cause actual results to differ
materially from those indicated by such forward-looking statements.
LIMITED COMBINED OPERATING HISTORY; HISTORY OF LOSSES
The Company was formed in April 1997 and has grown substantially since its
inception both internally and through acquisitions. Although certain of the
acquired businesses have been in operation for some time, the Company has a
limited history of combined operations. Consequently, the historical and pro
forma information herein may not be indicative of the Company's financial
condition and future performance. As a result of the commencement of
operations, building of infrastructure and hiring of consultants, the Company
had a net loss of $12.1 million for the period from its inception through
January 2, 1998. The Company's operating results and financial condition will
be adversely affected if revenues do not increase to cover the Company's
expanding level of operating expenses. There can be no assurance that the
Company will be successful in its efforts to increase its revenues. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
VARIABILITY OF QUARTERLY OPERATING RESULTS; SEASONALITY
The Company expects variations in its revenues and operating results from
quarter to quarter. Such variations are likely to be caused by such factors as
mix and timing of client projects, completion of client projects, project
delays, the number of business days in a quarter, hiring, integration and
utilization of consultants and employees, variations in utilization rates and
average billing rates for consultants and project managers, the length of the
Company's sales cycle, the accuracy of estimates of resources required to
complete ongoing projects, the ability of clients to terminate engagements
without penalty and the integration of acquired entities. Because a
significant portion of the Company's expenses is relatively fixed, a variation
in the number or timing of client assignments or in employee utilization rates
can cause significant variations in operating results from quarter to quarter
and could result in losses to the Company. Unanticipated termination of a
major project, a client's decision not to proceed to the stage of the project
anticipated by the Company or the completion during a quarter of several major
client projects without deploying consultants to new engagements could result
in the Company's underutilization of employees and could therefore have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, to the extent that increases in the number
of professional personnel are not followed by corresponding increases in
revenues, the Company's operating results could be materially and adversely
affected. Further, it is difficult for the Company to forecast the timing of
revenue because project cycles depend on factors such as the size and scope of
assignments and circumstances specific to particular clients. Because the
Company only derives revenue when its consultants are actually working, its
operating results are adversely affected when client facilities close due to
holidays or inclement weather. In particular, the Company has generated a
smaller proportion of its revenues and lower operating income during the
fourth quarter of the year due to the number of holidays in that quarter.
Given all of the foregoing, the Company believes that quarter-to-quarter
comparisons of its operating results for preceding quarters are not
necessarily meaningful and that such results for one quarter should not be
relied upon as an indication of future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations."
2
<PAGE>
MANAGEMENT OF GROWTH
The Company is currently experiencing rapid growth that has challenged, and
will likely continue to challenge, the Company's managerial and other
resources. Since its inception through April 3, 1998, the number of
consultants employed by the Company increased to 343 and further significant
increases are anticipated during the current year. In addition, the number of
active client engagements increased to 117 as of April 3, 1998. The Company
has also expanded its geographic coverage to facilities in 10 locations since
its inception and intends to continue to expand its geographic coverage and
open additional offices in the future. The Company's ability to manage its
growth will depend on its ability to continue to enhance its operating,
financial and management information systems and to expand, develop, motivate
and manage effectively an expanding professional work force. In addition, the
Company's future success will depend in large part on its ability to continue
to set rates and fees accurately and to maintain high rates of employee
utilization and project quality, particularly if the average size of the
Company's projects continues to increase. If the Company is unable to manage
growth effectively, the quality of the Company's services, its ability to
retain key personnel and its business, financial condition and results of
operations could be materially adversely affected. Furthermore, there can be
no assurance that the Company's business will continue to expand. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RISKS RELATED TO ACQUISITIONS
Since its inception, the Company has significantly expanded through
acquisitions. In the future, a key element of the Company's growth strategy
will be to pursue additional acquisitions in order to obtain well-trained,
high-quality professionals, new service offerings, additional industry
expertise, a broader client base or an expanded geographic presence. There can
be no assurance that the Company will be able to integrate successfully recent
or future acquired businesses without substantial expense, delays or other
operational or financial problems or that it will be able to identify, acquire
or profitably manage additional businesses. The Company may also require debt
or equity financing for future acquisitions that may not be available on terms
favorable to the Company, if at all. In addition, acquisitions may involve a
number of risks, including diversion of management's attention, failure to
retain key acquired personnel, unanticipated events or circumstances, legal
liabilities and amortization of acquired intangible assets. Client
satisfaction or performance problems at a single acquired firm could have a
material adverse impact on the reputation of the Company as a whole. Further,
there can be no assurance that the Company's recent or future acquired
businesses will generate anticipated revenues or earnings. Any one of these
risks could have a material adverse effect on the Company's business,
financial condition and results of operations See "Business--Growth Strategy."
INFLUENCE OF EXISTING SHAREHOLDERS
Upon completion of the Offering, the Company's directors, executive officers
and shareholders beneficially owning 5% or more of the Company's Common Stock
together will beneficially own approximately 54.9% of the outstanding shares
of Common Stock (approximately 53.7% if the Underwriters' over-allotment
option is exercised in full). As a result, these shareholders, acting
together, will be able to control matters requiring approval by the
shareholders of the Company, including the election of directors. In addition,
these shareholders are party to the Shareholders Agreement (as defined)
pursuant to which they have agreed to vote their shares in favor of any person
designated as a director by the other parties as provided therein. Although
these provisions of the Shareholders Agreement have been waived temporarily,
they will resume full force and effect if three independent directors have not
been appointed prior to January 1, 1999. This concentration of ownership and
the Shareholders Agreement may have the effect of delaying or preventing a
change in control of the Company, including transactions in which stockholders
might otherwise receive a premium for their shares over then current market
prices. See "Management--Directors and Executive Officers," "Certain
Transactions--Shareholders Agreement" and "Principal and Selling
Shareholders."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Articles of Incorporation and Bylaws, as well as Florida
corporate law, contain certain provisions that could have the effect of
delaying, deferring or preventing a change in control of the Company.
3
<PAGE>
These provisions could limit the price that certain investors might be willing
to pay in the future for shares of the Common Stock. Certain of such
provisions allow the Company to issue preferred stock having rights senior to
those of the Common Stock without shareholder approval. Other provisions
impose various procedural and other requirements that could make it difficult
for shareholders to effect certain corporate actions. See "Description of
Capital Stock."
DEPENDENCE ON GENERAL ECONOMIC CONDITIONS
Demand for professional IT and consulting services is also significantly
affected by the general level of economic activity. When economic activity
slows, clients may delay or cancel plans that involve the hiring of IT
consultants. The Company is unable to predict the level of economic activity
at any particular time, and fluctuations of conditions in the general economy
could adversely affect the Company's business, operating results and financial
condition.
ATTRACTION AND RETENTION OF SKILLED PROFESSIONALS
The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends in large part upon its ability
to attract, develop, motivate and retain highly skilled IT professionals and
business consultants. Qualified IT professionals and business consultants are
in great demand and are likely to remain a limited resource for the
foreseeable future. There can be no assurance that the Company will be able to
attract and retain sufficient numbers of highly skilled IT professionals and
business consultants, and any inability to do so could impair the Company's
ability to adequately manage and complete its existing projects and to secure
and complete client engagements and as a result could have a material adverse
effect on the Company's business, operating results and financial condition.
In addition, even if the Company is able to expand its team of highly skilled
IT professionals and business consultants, the resources required to attract
and retain such employees may adversely affect the Company's operating
margins. See "Business--Human Resources."
COMPETITION
The market for consulting and IT services includes a large number of
competitors, is subject to rapid change and is highly competitive. Primary
competitors include participants from a variety of market segments, including
"Big Six" accounting firms, systems consulting and implementation firms,
application software firms, service groups of computer equipment companies,
outsourcing companies, systems integration companies and general management
consulting firms. Many of these competitors have significantly greater
financial, technical and marketing resources and greater name recognition than
the Company. The Company also competes with its clients' internal resources,
particularly where these resources represent a fixed cost to the client. Such
competition may impose additional pricing pressures on the Company. There can
be no assurance that the Company will compete successfully with its existing
competitors or with any new competitors. In addition, the Company is party to
a confidential settlement agreement with a "Big Six" accounting firm resulting
from certain litigation which contains certain non-competition and non-
solicitation provisions. There can be no assurance that the Company may not be
inhibited from soliciting certain potential clients. See "--Litigation and
Settlement" and "Business--Competition."
PROJECT RISKS; FIXED PRICE CONTRACTS
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be
difficult to quantify. The Company's failure or inability to meet a client's
expectations in the performance of its services could give rise to claims
against the Company or damage the Company's reputation, adversely affecting
its business, operating results and financial condition. In addition, most of
the Company's contracts are terminable by the client with little or no notice
to the Company and without
4
<PAGE>
significant penalty. The Company derives a significant portion of its revenues
from large client projects involving significant dollar values and the
cancellation or significant reduction in the scope of a large engagement could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company undertakes certain projects on a fixed-price basis, which is
distinguishable from the Company's principal method of billing on a time and
materials basis, and undertakes other projects on a capped-fee basis. The
failure of the Company to complete such projects within budget or below the
cap would expose the Company to risks associated with potentially
unrecoverable cost overruns. In addition, even when there is no fixed price or
cap the Company's failure or inability to meet a client's expectations with
regard to price could result in the refusal of a client to pay, all of which
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
CONCENTRATION OF REVENUES
Since its inception, the Company has derived a significant portion of its
net revenues from a relatively limited number of clients. For example, during
the period from its inception through January 2, 1998, the Company's ten most
significant clients accounted for approximately 38%, and two clients accounted
for 13%, of its net revenues. There can be no assurance that these clients
will continue to engage the Company for additional projects or do so at the
same revenue levels. Clients engage the Company on an assignment-by-assignment
basis, and a client can generally terminate a contract with little or no
notice to the Company and without significant penalty. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Clients and Representative Solutions."
DEPENDENCE ON PRINCIPAL SERVICE OFFERINGS
The Company has derived a substantial portion of its revenues from projects
based primarily on package software implementation and, to a lesser degree,
Year 2000 issue consulting. Any factors negatively affecting the demand for
package software implementation could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the demand for Year 2000 consulting services is likely to decline as
Year 2000 issues are resolved. Although the Company intends to use the
business relationships and knowledge of clients' systems obtained in providing
Year 2000 consulting or package software implementation services to generate
additional projects for these clients, there can be no assurance that the
Company will be successful in generating any such additional business. See
"Business--Services."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON THIRD PARTY SOFTWARE OFFERINGS
The Company's success will depend in part on its ability to develop IT
solutions that keep pace with continuing changes in IT, evolving industry
standards and changing client preferences. There can be no assurance that the
Company will be successful in adequately addressing these developments on a
timely basis or that, if these developments are addressed, the Company will be
successful in the marketplace. In addition, there can be no assurance that
products or technologies developed by others will not render the Company's
services uncompetitive or obsolete. The Company's failure to address these
developments could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company derives a significant portion of its revenue from projects in
which it implements software developed by third parties, such as PeopleSoft,
Inc. ("PeopleSoft") and Oracle Corporation ("Oracle"). The Company's future
success in its package implementation consulting services depends largely on
its relationship with these organizations. There can be no assurance that the
Company will continue to maintain a favorable relationship with these software
developers. In addition, in the event that PeopleSoft and Oracle are unable to
maintain their leadership positions within the business applications software
market, if the Company's relationship with these organizations deteriorates,
or if these organizations elect to compete directly with the Company, the
Company's business, financial condition and results of operations could be
materially adversely affected. See "Business--Services."
5
<PAGE>
RELIANCE ON KEY EXECUTIVES
The success of the Company is highly dependent upon the efforts, abilities,
business generation capabilities and project execution skills of its senior
leadership team. The loss of the services of any of its senior leadership team
for any reason could have a material adverse effect upon the Company's
business, operating results and financial condition, including its ability to
secure and complete engagements. The Company has obtained a key-man insurance
policy on Ted A. Fernandez, the Company's President, Chief Executive Officer
and Chairman.
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. Although the Company enters into
confidentiality agreements with its employees and limits distribution of
proprietary information, there can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of
proprietary information or that the Company will be able to detect
unauthorized use and take appropriate steps to enforce its intellectual
property rights.
Although the Company believes that its services do not infringe on the
intellectual property rights of others and that it has all rights necessary to
utilize the intellectual property employed in its business, the Company is
subject to the risk of claims alleging infringement of third-party
intellectual property rights. Any such claims could require the Company to
spend significant sums in litigation, pay damages, develop non-infringing
intellectual property or acquire licenses to the intellectual property which
is the subject of asserted infringement. See "Business--Intellectual Property
Rights."
LITIGATION AND SETTLEMENT
Certain of the Company's key executives and other management employees
resigned from a "Big Six" accounting firm during the first quarter of 1997.
The accounting firm initiated litigation in connection with such resignations
and the formation of the Company arising out of activities alleged to have
constituted a breach of non-competition and non-solicitation obligations. This
litigation was settled, and the Company, its key executives, certain other
management employees and certain of its shareholders are subject to certain
provisions contained in a confidential settlement agreement among such persons
and the accounting firm (the "Settlement Agreement"). The Settlement Agreement
prohibits the Company from soliciting or hiring the accounting firm's
employees, and from soliciting or servicing certain of its clients, and
prohibits the accounting firm from soliciting the Company's employees, for a
period of two years commencing December 31, 1996. Subsequent to the execution
of the Settlement Agreement, the accounting firm asserted through legal
proceedings that the Company and its executives and employees had conducted
activities prohibited by the Settlement Agreement. The Company vigorously
denied such assertions, and the accounting firm's claims in these respects
were rejected by the court with jurisdiction over the Settlement Agreement.
The Company and its executives and management believe that they can operate
and grow the Company despite the limitations imposed by the Settlement
Agreement. The Company, its key executives and management employees intend to
continue to abide by the terms of the Settlement Agreement. There can be no
assurance, however, that future claims will not be asserted by the accounting
firm. See "Business--Legal Proceedings."
SIGNIFICANT UNALLOCATED NET PROCEEDS
A substantial majority of the anticipated net proceeds of the Offering has
not been designated for specific uses. Therefore, the Company's management
will have broad discretion with respect to the use of the net proceeds of the
Offering. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price per share of the Common Stock
will be determined by negotiations among management of
6
<PAGE>
the Company and the Representatives. See "Underwriters" for factors to be
considered in determining the initial public offering price per share.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market; however, there can be no assurance that an active trading
market will develop and be sustained after the Offering. The market price of
the Common Stock may fluctuate substantially due to a variety of factors,
including quarterly fluctuations in results of operations, adverse
circumstances affecting the introduction or market acceptance of new services
offered by the Company, announcements of new services by competitors, changes
in earnings estimates by analysts, changes in accounting principles, sales of
Common Stock by existing holders, loss of key personnel and other factors. In
addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has often had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to the
operating performance of these companies. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Any such
litigation instigated against the Company could result in substantial costs
and a diversion of management's attention and resources, which could have a
material adverse effect on the Company's business, operating results and
financial condition.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price of $13.00 per share (based on the mid-
point of the range set forth on the cover of this Prospectus) of Common Stock
is substantially higher than the pro forma as adjusted net tangible book value
per share of Common Stock after the Offering. Purchasers of shares of Common
Stock in the Offering will experience immediate and substantial dilution of
$12.13 in the pro forma as adjusted net tangible book value per share of
Common Stock after the Offering. To the extent outstanding options to purchase
Common Stock are exercised, there will be further dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS AGREEMENTS
Sales of substantial amounts of Common Stock in the public market following
the Offering could adversely affect the prevailing market price of the Common
Stock and the Company's ability to raise capital in the future. Upon
completion of the Offering, the Company will have a total of 33,479,311 shares
of Common Stock outstanding, of which the 3,850,000 shares offered hereby will
be freely tradable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), by persons other than "affiliates" of the
Company, as defined under the Securities Act. The remaining 29,629,311 shares
of Common Stock outstanding are "restricted securities" as that term is
defined by Rule 144 promulgated under the Securities Act (the "Restricted
Shares"). None of the Restricted Shares will be eligible for sale in the
public market on the date of this Prospectus. Following the period ending 180
days after the date of this Prospectus, 18,804,005 of the Restricted Shares
will be eligible for sale in the public market subject to Rule 144 under the
Securities Act. See "Shares Eligible for Future Sale--Lock-up Agreements."
Following the date of this Prospectus, the Company intends to register on
one or more registration statements on Form S-8 approximately 10,750,000
shares of Common Stock issuable under the Stock Plans. Of the 10,750,000
shares issuable under the Stock Plans, 1,367,169 shares are subject to
outstanding options as of April 3, 1998, none of which will be exercisable at
the time of the Offering. The Company also has reserved 37,500 shares for
issuance upon exercise of a warrant outstanding and exercisable as of April 3,
1998. In the event the warrant is exercised during the period ending 180 days
after the date of this Prospectus, the shares issued upon exercise of the
warrant will not be eligible for sale in the public market during such period
but will be eligible for sale in the public market upon completion of such
period subject to Rule 144 under the Securities Act. See "Management--Stock
Option Plan," "Certain Transactions" and "Shares Eligible for Future Sale".
Upon completion of the Offering, the holders of 20,661,757 shares of Common
Stock will be entitled to certain registration rights with respect to such
shares. If such holders, by exercising their registration rights, cause a
large number of shares to be registered and sold in the public market, such
sales could have an adverse effect on the market price of the Common Stock. In
addition, if the Company is required, pursuant to such registration
7
<PAGE>
rights, to include shares held by such persons in a registration statement
which the Company files to raise additional capital, the inclusion of such
shares could have an adverse effect on the Company's ability to raise needed
capital. See "Certain Transactions" and "Shares Eligible for Future Sale."
DIVIDEND POLICY
The Company does not expect to pay any cash dividends on its Common Stock in
the foreseeable future. It is the present policy of the Company to retain
earnings, if any, for use in the operation of the Company's business. In
addition, under the terms of the Credit Facility (as defined), the Company is
restricted from paying dividends to its shareholders. See "Dividend Policy"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
8
<PAGE>
THE COMPANY
The Company was incorporated on April 23, 1997 as a Florida corporation. The
Company maintains its principal executive offices at 1401 Brickell Avenue,
Suite 350, Miami, Florida 33131. The Company's telephone number is (305) 375-
8005 and its Internet address is http://www.answerthink.com. Information
contained in the Company's worldwide web site is not a part of this
Prospectus.
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
$33,556,500 ($39,178,350 if the Underwriters exercise their over-allotment
option in full), at an assumed initial public offering price of $13.00 per
share (the mid-point of the range set forth on the cover of this Prospectus)
and after deducting underwriting discounts and commissions and estimated
Offering expenses payable by the Company. The Company will use a portion of
the net proceeds to repay $7.5 million borrowed under its credit facility, as
amended (the "Credit Facility") with BankBoston, N.A. ("BankBoston"), which as
of April 3, 1998 bears interest at a weighted average rate of 8.5% per annum.
The Company's borrowings under the Credit Facility were used for acquisitions.
The Credit Facility expires on November 7, 2000. The Company will also use
$3.75 million of the net proceeds to retire a portion of a short-term
promissory note, currently bearing interest at the rate of 12.0% per annum,
issued to the sole stockholder of the Hackett Group in connection with the
Company's acquisition of that entity. The Company will also repay a $2,770,000
short-term note payable to the stockholders of Legacy Technology, Inc.
("Legacy") which is expected to be issued in connection with the Legacy
Acquisition, assuming such acquisition is completed. The balance of the net
proceeds, or approximately $19,536,500, will be used for working capital,
potential acquisitions and general corporate purposes. The Company does not
currently have any agreements, arrangements or understandings with respect to
any future acquisitions, and no portion of the net proceeds has been allocated
for any specific acquisition. Pending their use as described in this
Prospectus, the net proceeds of the Offering will be invested in short-term,
interest-bearing, investment-grade securities. The Company will not receive
any proceeds from the sale of shares of Common Stock by the Selling
Shareholders. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--The Acquisitions" and "--Liquidity and Capital
Resources."
DIVIDEND POLICY
The Company does not expect to pay any cash dividends on its Common Stock in
the foreseeable future. It is the present policy of the Company's Board of
Directors to retain earnings, if any, for use in the operation of the
Company's business. In addition, under the terms of the Credit Facility, the
Company is restricted from paying dividends to its shareholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
April 3, 1998, (ii) on a pro forma basis giving effect to the Legacy
Acquisition and the Conversion, and (iii) pro forma as adjusted to give effect
to the sale by the Company of 2,850,000 shares of Common Stock in the Offering
at an assumed initial public offering price of $13.00 per share (the mid-point
of the range set forth on the cover of this Prospectus) and the application of
the estimated net proceeds therefrom. See "Use of Proceeds." This table is
qualified in its entirety by, and should be read in conjunction with, the
Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF APRIL 3, 1998
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
-------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term liabilities.................... $ 9,720 $ 9,729 $ 2,229
-------- ------- -------
Convertible preferred stock, $.001 par
value, 3,650,000 authorized, 1,790,026
issued and outstanding (actual); none
authorized, issued or outstanding (pro
forma and as adjusted).................. 11,140 -- --
-------- ------- -------
Shareholders' equity
Preferred stock, $.001 par value,
1,250,000 authorized, none issued and
outstanding (actual, pro forma and as
adjusted)............................. -- -- --
Common stock, $.001 par value,
125,000,000 authorized (actual, pro
forma and as adjusted); 23,200,041
(actual), 30,629,311 (pro forma) and
33,479,311 (as adjusted) issued and
outstanding, respectively (1)......... 23 31 33
Additional paid-in capital............. 55,780 70,142 103,696
Unearned compensation--restricted stock
(2)................................... (1,614) (1,614) (1,614)
Accumulated deficit.................... (51,544) (51,544) (51,544)
-------- ------- -------
Total shareholders' equity........... 2,645 17,015 50,571
-------- ------- -------
Total capitalization............... $ 23,505 $26,744 $52,800
======== ======= =======
</TABLE>
- - --------
(1) Excludes (i) 1,367,169 shares of Common Stock issuable upon exercise of
options outstanding as of April 3, 1998, none of which were then
exercisable, (ii) 37,500 shares of Common Stock issuable upon exercise of
a warrant outstanding and exercisable as of April 3, 1998, and (iii)
9,382,831 additional shares of Common Stock reserved for future issuance
under the Company's 1998 Stock Option and Incentive Plan (the "Stock
Option Plan") and its 1998 Employee Stock Purchase Plan (together with the
Stock Option Plan, the "Stock Plans"). See "Management--Stock Option Plan"
and "Shares Eligible for Future Sale."
(2) Reflects unearned compensation expense, incurred as a result of restricted
stock issued to employees of acquired companies. See Note 9 of Notes to
Consolidated Financial Statements.
(3) Gives effect to the Legacy Acquisition and the Conversion.
(4) As adjusted reflects the Offering.
10
<PAGE>
DILUTION
The Company's pro forma net tangible deficiency at April 3, 1998 was ($4.3)
million, or $(.14) per share. Pro forma net tangible deficiency per share
represents the Company's pro forma net tangible deficiency (net tangible
assets less total liabilities) divided by the number of shares of Common Stock
outstanding, including shares subject to vesting and performance criteria and
giving effect to the Legacy Acquisition and the Conversion. Without taking
into account any other changes in the pro forma net tangible book value after
April 3, 1998, other than to give effect to the sale of 2,850,000 shares of
Common Stock in the Offering by the Company at an assumed initial public
offering price of $13.00 per share (the mid-point of the price range set forth
on the cover of this Prospectus), and after deducting underwriting discounts
and commissions and estimated Offering expenses payable by the Company, the
pro forma net tangible book value of the Company, as adjusted, as of April 3,
1998 would have been $29.3 million, or $.87 per share. This represents an
immediate increase in pro forma net tangible book value of $1.01 per share to
existing shareholders and an immediate dilution in pro forma net tangible book
value of $12.13 per share to purchasers of Common Stock in the Offering. The
following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $13.00
------
Pro forma net tangible deficiency book value per share at April
3, 1997........................................................ (.14)
Increase in pro forma net tangible book value per share
resulting from the Offering.................................... 1.01
------
Pro forma as adjusted net tangible book value per share after the
Offering......................................................... 0.87
------
Pro forma as adjusted dilution per share to new investors......... $12.13
======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the
increase in pro forma net tangible book value per share resulting from the
Offering, pro forma as adjusted net tangible book value per share after the
Offering and pro forma as adjusted dilution per share to new investors would
be $1.17, $1.03 and $11.97, respectively.
The following table summarizes, as of April 3, 1998 after giving effect to
the Legacy Acquisition, the Conversion and the Offering, the differences
between the number of shares of Common Stock purchased in the Offering, the
total consideration paid to the Company and the average price per share paid
by the existing stockholders and by the new investors (based upon an assumed
initial public offering price of $13.00 per share (the mid-point of the price
range set forth on the cover of this Prospectus), before deduction of
estimated underwriting discounts and Offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders... 30,360,145 90.7% $22,175,851 37.4% $ .73
Legacy Acquisition...... 269,166 0.8% -- -- --
New investors........... 2,850,000 8.5% 37,050,000 62.6% $13.00
---------- ----- ----------- -----
Total................. 33,479,311 100.0% $59,225,851 100.0%
========== ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of the Underwriters' over-allotment
option and no exercise of stock options to purchase 1,367,169 shares of Common
Stock at an average exercise price of $4.06 per share, the warrant to purchase
up to 37,500 shares of Common Stock at $6.00 per share outstanding as of April
3, 1998 or options to be issued to new employees between April 3, 1998 and the
time of the Offering. To the extent the warrant or any of these options are
exercised, there will be further dilution to new investors. See "Risk
Factors--Shares Eligible for Future Sale; Registration Rights Agreements."
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND PRO FORMA DATA
The following selected consolidated financial data for the period from April
23, 1997 (inception) to January 2, 1998 (the "Inception Period") and as of
January 2, 1998 are derived from the Company's Consolidated Financial
Statements and related notes thereto, which have been audited by Coopers &
Lybrand L.L.P., independent accountants and which appear elsewhere in this
Prospectus. The following selected consolidated financial data for the quarter
ended and as of April 3, 1998 are derived from unaudited financial information
contained in the Company's Consolidated Financial Statements and related notes
thereto which appear elsewhere in this Prospectus. The following selected pro
forma financial data are derived from the Company's Unaudited Pro Forma
Consolidated Financial Information appearing elsewhere in this Prospectus. The
Pro Forma Consolidated Statement of Operations Data for the Inception Period
give effect to the 1997 Acquisitions, the Legacy Acquisition and the
Conversion as if they had been completed on April 23, 1997, the Pro Forma
Consolidated Statement of Operations Data for the quarter ended April 3, 1998
give effect to the Legacy Acquisition and the Conversion as if they had been
completed on April 23, 1997 and the Pro Forma Balance Sheet as of April 3,
1998 gives effect to the Legacy Acquisition and the Conversion as if they had
been completed on such date. As adjusted information gives effect to the
completion of the Offering at an assumed initial public offering price of
$13.00 per share (the mid-point of the price range set forth on the cover of
this Prospectus) and the application of the estimated net proceeds therefrom.
The selected consolidated financial data should be read in conjunction with
the Company's Consolidated Financial Statements and related notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the pro forma financial data should be read in conjunction
with the Unaudited Pro Forma Consolidated Financial Information of the Company
and the related notes thereto. Management believes the assumptions used in the
Unaudited Pro Forma Consolidated Financial Information provide a reasonable
basis on which to present the pro forma financial data. The pro forma
financial data are provided for informational purposes only and should not be
construed to be indicative of the Company's financial position or results of
operations had the transactions and events described in the notes thereto been
consummated on the dates assumed and are not intended to project the Company's
financial condition or results of operations on any future date or for any
future period.
<TABLE>
<CAPTION>
APRIL 23, 1997 (INCEPTION) QUARTER
TO JANUARY 2, 1998 ENDED APRIL 3, 1998
----------------------------------------------------------
PRO FORMA PRO FORMA
ACTUAL AS ADJUSTED(1) ACTUAL AS ADJUSTED(2)
------------- --------------------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net revenues........... $ 14,848 $ 34,014 $ 18,532 $ 19,864
Costs and expenses:
Project personnel and
expenses............ 13,333 22,688 11,194 11,893
Selling, general and
administrative...... 8,085 16,858 5,654 6,429
Compensation related
to vesting of
restricted shares... -- -- 40,843 40,843
Settlement costs..... 1,903 1,903 -- --
In-process research
and development
technology.......... 4,000 4,000 -- --
------------- ------------- ---------- ----------
Total costs and
operating
expenses.......... 27,321 45,449 57,691 59,165
------------- ------------- ---------- ----------
Loss from
operations.......... (12,473) (11,435) (39,159) (39,301)
Other income (expense):
Interest income...... 498 520 28 26
Interest expense..... (115) -- (322) --
Income tax benefit... -- 6 -- --
------------- ------------- ---------- ----------
Net loss............... $ (12,090) $ (10,909) $ (39,453) $ (39,275)
============= ============= ========== ==========
Net loss per common
share--basic and
diluted............... $ (1.91) $ (.70) $ (3.86) $ (2.13)
============= ============= ========== ==========
Weighted average common
shares outstanding.... 6,342,319 15,675,379 10,226,330 18,455,701
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AS OF
JANUARY 2,
1998 AS OF APRIL 3, 1998
---------- -----------------------------------
PRO FORMA
ACTUAL ACTUAL PRO FORMA(3) AS ADJUSTED(4)
---------- ------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $ 8,180 $ 4,250 $ 1,504 $27,560
Total assets............ 28,650 37,841 44,638 64,174
Total long-term
liabilities............ 12,200 9,720 9,729 2,229
Convertible preferred
stock.................. 10,040 11,140 -- --
Total shareholders'
equity................. 846 2,645 17,015 50,571
</TABLE>
- - --------
(1) Gives effect to (i) the 1997 Acquisitions, (ii) the Legacy Acquisition,
(iii) the Conversion and (iv) the sale of 2,850,000 shares of Common Stock
in the Offering by the Company at an assumed initial public offering price
of $13.00 per share (the midpoint of the price range set forth on the
cover of this Prospectus) and the application of the estimated net
proceeds therefrom which results in a reduction in interest expense of
approximately $712,000. See "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations--The
Acquisitions" and "Unaudited Pro Forma Consolidated Financial
Information."
(2) Gives effect to (i) the Legacy Acquisition, (ii) the Conversion and (iii)
the sale of 2,850,000 shares of Common Stock in the Offering by the
Company at an assumed initial public offering price of $13.00 per share
(the mid-point of the price range set forth on the cover of this
Prospectus) and the application of the net proceeds therefrom which
results in a reduction in interest expense of approximately $381,000. See
"Use of Proceeds", "Management's Discussion and Analysis of Financial
Condition and Results of Operations--The Acquisitions--The Legacy
Acquisition" and "Unaudited Pro Forma Consolidated Financial Information."
(3) Gives effect to (i) the Legacy Acquisition and (ii) the Conversion. See
"Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--The Acquisitions--The Legacy
Acquisition" and "Unaudited Pro Forma Consolidated Financial Information."
(4) Gives effect to (i) the Legacy Acquisition, (ii) the Conversion, and (iii)
the sale of 2,850,000 shares of Common Stock in the Offering by the
Company at an assumed initial public offering price of $13.00 per share
(the mid-point of the price range set forth on the cover of this
Prospectus) and the application of the net proceeds therefrom as set forth
under "Use of Proceeds." See "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations--The
Acquisitions--The Legacy Acquisition and "Unaudited Pro Forma Consolidated
Financial Information."
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
AnswerThink is a rapidly growing provider of knowledge-based consulting and
IT services to Fortune 1000 companies and other sophisticated buyers. The
Company began operations on April 23, 1997. The Company's primary activities
during its initial stages consisted of recruiting consultants and developing
and building a service delivery model and the underlying information systems
to support the future growth of the business. Concurrent with this effort, the
Company embarked on an aggressive acquisition strategy that resulted in three
significant acquisitions during 1997 (the "1997 Acquisitions") and a
definitive agreement in April 1998 to acquire Legacy (the "Legacy
Acquisition"). The Company's operations during the Inception Period resulted
in a loss of $12.1 million which was attributable to the developmental nature
of the business during the start-up phase and to a $4.0 million charge for in-
process research and development technology recognized in connection with
AnswerThink's acquisition of the Hackett Group.
The Company recognizes revenues on contracts as work is performed,
principally on a time and materials basis. For projects billed on a time and
materials basis, the Company recognizes revenue based on the number of hours
worked by consultants at an agreed-upon rate per hour. The Company believes
the financial risk under these types of arrangements is mitigated by the fact
that clients retain the financial risk associated with implementing projects.
The Company also undertakes certain projects, usually short-term, on a capped-
fee basis for which revenues are recognized on a percentage of completion
method based on project hours worked. The Company anticipates that the
majority of its work will continue to be performed on a time and materials
basis. See "Risk Factors--Project Risks; Fixed Price Contracts."
The Company's revenue growth is directly tied to its ability to attract and
retain new consultants to service its increasing client base. The most
significant expense for the Company is the project personnel and related costs
associated with its consultants. The market for skilled consultants is highly
competitive and is characterized by very high demand with a relatively small
pool of qualified personnel. The ability of the Company to manage consultant
utilization, contain payroll costs and control employee turnover costs in
light of these market forces will have a significant impact on its
profitability. To help address these concerns, the Company grants restricted
shares of Common Stock or stock options to all employees including those of
acquired companies which generally vest over four to six years.
The Company recognized non-cash compensation expense of $40.8 million in the
quarter ended April 3, 1998 resulting from the accelerated vesting of
3,320,000 restricted shares of Common Stock that had been issued to certain
members of the Company's management in connection with the formation of the
Company. These charges were non-cash in nature and do not negatively impact
shareholders' equity. The Company believes that such issuances were critical
to its ability to attract and retain qualified personnel during the Company's
crucial start-up phase.
THE ACQUISITIONS
The 1997 Acquisitions
All acquisitions completed by the Company have been accounted for under the
purchase method of accounting. Accordingly, the historical Consolidated
Financial Statements of the Company include the operating results of the
acquired businesses from the date of each respective acquisition.
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On August 1, 1997, the Company acquired Relational Technologies, Inc.
("RTI"), a Georgia-based information technology consulting and Oracle software
implementation company. RTI focuses on the implementation of Oracle
manufacturing, financial and human resources applications. Through the
acquisition of RTI, the Company became an Oracle Business Alliance Member,
which enables the Company to market Oracle applications products to its
customers. RTI was acquired for 1,220,700 restricted shares of Common Stock
issued to RTI's shareholders.
On October 13, 1997, the Company completed its acquisition of the Hackett
Group, an Ohio-based consulting firm specializing in benchmarking and process
transformation. The Hackett Group, through its proprietary "best-practice"
database focuses on the efficiency of such organizational functions as
finance, human resources, IT services and supply chain management. The Company
acquired all of the Hackett Group's outstanding shares from its sole
stockholder, Gregory P. Hackett. The original purchase price was paid in the
form of $6.5 million in cash, a $5.1 million promissory note, and 444,000
restricted shares of Common Stock. The note and the restricted shares were
subject to certain earn-out provisions. On March 12, 1998, Mr. Hackett and the
Company amended the terms of the acquisition to waive the earn-out provisions.
On November 12, 1997, the Company acquired all the outstanding shares of
Delphi Partners, Inc., ("Delphi"), a New Jersey-based PeopleSoft application
solutions and information technology consulting company. Delphi focuses on the
implementation of PeopleSoft financial, human resources and manufacturing
applications. Through the acquisition of Delphi, the Company became a
PeopleSoft Implementation Partner. The total acquisition consideration paid
consisted of $7.4 million in cash and 560,000 restricted shares of Common
Stock issued to Delphi shareholders. The sellers of Delphi will also receive
up to $2.5 million to be paid by April 30, 1999 upon the achievement of
certain pre-tax profit targets related to the performance of Delphi during
1998.
The Legacy Acquisition
On April 25, 1998, the Company signed a definitive agreement to acquire all
the outstanding shares of Legacy, a Massachusetts-based provider of decision
support and data warehouse solutions to Fortune 1000 companies. The total
consideration will consist of a $2.8 million promissory note and 269,166
restricted shares of Common Stock. The promissory note will be payable over a
12-month period commencing October 1, 1998 or, if earlier, on the date the
Company completes a public offering of shares of its Common Stock. The
stockholders of Legacy will also receive up to $1.3 million in additional
consideration, half of which will be in the form of cash and half of which
will be in shares of Common Stock, upon the achievement of certain revenue and
pre-tax profit targets related to the performance of Legacy during the 12-
month period ending April 30, 1999. Although there can be no assurance that
the Legacy Acquisition will be completed, management expects that it will be
completed during the second quarter of 1998.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the Company's
results of operations and the percentage relationship to net revenues of such
results. This information for quarterly periods has been prepared on the same
basis as the Consolidated Financial Statements and, in the opinion of the
Company's management, reflects all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information
for the periods presented.
<TABLE>
<CAPTION>
APRIL 23, 1997 APRIL 23, 1997 QUARTER ENDED
(INCEPTION) (INCEPTION) ---------------------------------------------------
TO JANUARY 2, TO JUNE 30, SEPTEMBER 30, JANUARY 2, APRIL 3,
1998 1997 1997 1998 1998
--------------- ----------------- --------------- -------------- ----------------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $ 14,848 100.0 % $ 62 100.0% $ 2,698 100.0 % $12,088 100.0 % $ 18,532 100.0 %
Costs and expenses:
Project personnel and
expenses.............. 13,333 89.8 1,616 nm 3,730 138.3 7,987 66.1 11,194 60.4
Selling, general and
administrative........ 8,085 54.5 1,290 nm 2,932 108.7 3,863 32.0 5,654 30.5
Compensation related to
vesting of restricted
shares................ -- -- -- -- -- -- -- -- 40,843 220.4
Settlement costs....... 1,903 12.8 1,756 nm 125 4.6 22 0.1 -- --
In-process research and
development
technology............ 4,000 26.9 -- -- -- -- 4,000 33.1 -- --
-------- ----- -------- ------ ------- ------ ------- ----- -------- ------
Total costs and
operating expenses.... 27,321 184.0 4,662 nm 6,787 251.6 15,872 131.3 57,691 311.3
-------- ----- -------- ------ ------- ------ ------- ----- -------- ------
Loss from operations... (12,473) (84.0) (4,600) nm (4,089) (151.6) (3,784) (31.3) (39,159) (211.3)
Other income (expense):
Interest income
(expense), net........ 383 2.6 252 406.5 194 7.2 (63) (0.5) (294) (1.6)
-------- ----- -------- ------ ------- ------ ------- ----- -------- ------
Net loss................ $(12,090) (81.4)% $ (4,348) nm $(3,895) (144.4)% $(3,847) (31.8)% $(39,453) (212.9)%
======== ===== ======== ====== ======= ====== ======= ===== ======== ======
</TABLE>
Quarter Ended April 3, 1998 Compared to Quarter Ended January 2, 1998
In light of the Company's incorporation on April 23, 1997 and the absence of
operations in the first quarter of the prior year, management has decided to
present a comparison of results for the first quarter of 1998 versus the
fourth quarter of 1997 because it believes that such a comparison is the most
meaningful presentation to the reader and helps address the continuation of
trends established during the prior fiscal year.
Net Revenues. Net revenues for the first quarter of 1998 increased by $6.4
million or 53.3% over the prior quarter as the Company continued to increase
the number of clients served to 117 from 109 at the end of the prior quarter.
The comparison of revenues to the prior quarter is positively impacted by the
timing of the Delphi acquisition, which was completed during the second month
of the prior quarter. The comparison is also slightly positively impacted by
seasonality since the first quarter of 1998 had only one observed holiday as
compared to three holidays in the prior quarter.
Project Personnel and Expenses. Project personnel and expenses for the first
quarter of 1998 increased by $3.2 million or 40.2% over the prior quarter. The
increase in project personnel and expenses over the prior quarter was caused
in part by the timing of the Delphi acquisition mentioned above. Project
personnel and expenses as a percentage of net revenues decreased by 5.7% from
66.1% to 60.4% primarily as a result of more effective deployment of
consultants onto billable projects during the first quarter of 1998. During
the first quarter of 1998, the number of consultants employed by the Company
increased by 68 to 343 from 275 at the end of the prior quarter.
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Selling, General and Administrative. Selling, general and administrative
expenses for the first quarter of 1998 increased by $1.8 million or 46.4% over
the prior quarter, but decreased as a percentage of revenues by 1.5% from
32.0% to 30.5%. The increase in selling, general and administrative expenses
is primarily attributable to a continued increase in the number of functional
support personnel employed, which increased by 13 from the end of the prior
quarter. The primary increases were made in the recruiting, human resources,
and service delivery areas.
Compensation Related to Vesting of Restricted Shares. The Company recorded a
charge in the first quarter of 1998 of approximately $40.8 million relating to
the vesting of restricted shares held by five of the Company's senior
managers, one director and two managing directors of business units that were
subject to certain performance vesting criteria. The vesting of these shares
was accelerated into the first quarter of 1998 based on the Company's results
to date and the expectation of completion of the Offering during the second
quarter of 1998. There are no additional restricted shares outstanding that
are subject to performance criteria for vesting.
Settlement Costs. The Company did not incur any additional settlement costs
during the first quarter of 1998.
In-process Research and Development Technology. The Company did not incur
any costs relating to in-process and research and development technology
during the first quarter of 1998.
Interest Income (Expense), Net. Interest expense for the first quarter of
1998 increased by $231,000 or 367% over the prior quarter as a result of the
debt incurred in connection with the 1997 Acquisitions.
Inception Period (April 23, 1997 to January 2, 1998)
Net Revenues. Net revenues for the Inception Period were $14.8 million. The
Company achieved month-to-month net revenue increases by increasing the number
of services delivered to new clients, as well as leveraging the Company's
existing client base by undertaking additional projects for these clients. The
number of active clients served increased from one at June 30, 1997, to 27 at
September 30, 1997 and to 109 at January 2, 1998. Net revenues increased
during the quarter ended September 30, 1997 primarily as a result of the
acquisition of RTI. The net revenues increase during the quarter ended January
2, 1998 resulted from the acquisitions of the Hackett Group and Delphi, as
well as an increase in the total number of clients served.
Project Personnel and Expenses. During its start-up phase, the Company
invested a significant amount of project resources to develop its service
delivery model and the related management information systems in order to
position the Company for future growth. Project personnel and expenses
amounted to $13.3 million, or 89.8% of net revenues, for the Inception Period.
The Company increased the number of project personnel through recruiting
efforts and the 1997 Acquisitions. The Company had 46 consultants at June 30,
1997, 142 at September 30, 1997 and 275 at January 2, 1998. Project personnel
and expenses as a percent of net revenues decreased over each quarterly period
and was 66.1% for the quarter ended January 2, 1998. The decrease in project
personnel and expenses as a percentage of net revenues resulted primarily from
higher utilization as the personnel of the acquired entities were already
deployed to existing clients.
Selling, General and Administrative. Selling, general and administrative
expenses for the Inception Period totaled $8.1 million, or 54.5% of net
revenues. Functional support personnel increased from 16 at June 30, 1997, to
37 at September 30, 1997 and to 63 at January 2, 1998. This increase and
resulting personnel costs were incurred to create an infrastructure that could
support a rapidly growing organization with the ability to integrate strategic
acquisitions. The primary expenditures were made in the sales and marketing
and recruiting and service delivery systems functions. Selling, general and
administrative expenses as a percent of net revenues decreased significantly
over each quarterly period and were 32.0% for the quarter ended January 2,
1998. The decrease in selling, general and administrative expenses as a
percentage of net revenues resulted primarily from the lower level of selling,
general and administrative costs incurred by the acquired companies.
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<PAGE>
Settlement Costs. Settlement costs totaled $1.9 million, or 12.8% of net
revenues, for the Inception Period. Settlement costs consisted primarily of
(i) payments to certain key executives and certain other management employees
of the Company relating to the obligations assumed by the Company for
compensation earned during the period from December 1, 1996 to the date of the
Company's inception (the "Dispute Period") by such employees, and (ii) legal
fees incurred in connection with the ensuing litigation. See "Business--Legal
Proceedings." The substantial majority of these costs were incurred during the
first quarter of the Company's operations before the matter was settled.
In-process Research and Development Technology. The in-process research and
development technology charge of $4.0 million resulted from the acquisition of
the Hackett Group. At the date of acquisition, there were four benchmark
applications that had not met technological feasibility requirements and did
not have any alternative future use and therefore the value of such
applications was charged to operations. This charge was recorded during the
quarter ended January 2, 1998 and is considered a non-recurring item.
Interest Income (Expense), Net. Net interest income amounted to $383,000, or
2.6% of net revenues, for the Inception Period. The majority of the interest
income was earned in the first six months of the Company's operations as the
initial capitalization of the Company was placed in short-term investments.
The invested cash and borrowed funds were used to complete the Hackett Group
and Delphi acquisitions mentioned previously, thereby causing the Company to
be a net borrower of funds for the quarter ended January 2, 1998.
AVAILABILITY OF NET OPERATING LOSSES
The Company generated a tax loss of approximately $8.0 million during the
Inception Period. Current accounting standards require that future tax
benefits, such as net operating losses, be recognized to the extent that
realization of such benefits is more likely than not. In light of the loss
experienced during the Inception Period, a valuation allowance has been
established for the entire amount of the net operating loss carryforward.
LIQUIDITY AND CAPITAL RESOURCES
The Company was formed in April 1997 with $20.4 million of capital raised
through the issuance of Series A Convertible Preferred Stock ("Series A
Convertible Preferred") to the Initial Investors, as defined. The Company
issued additional shares of Series A Convertible Preferred in July 1997 to
certain executives for $600,000. In February 1998, the Company issued
additional shares of Series A Convertible Preferred to certain of the Initial
Investors and their affiliates for aggregate consideration of $600,000. In
March 1998, the Company issued shares of Series B Convertible Preferred Stock
("Series B Convertible Preferred") for aggregate consideration of $500,000 to
an affiliate of BankBoston. Concurrent with the Offering, each outstanding
share of convertible preferred stock will be converted into four shares of
Common Stock. See "Description of Capital Stock" and "Shares Eligible for
Future Sale."
In connection with the acquisition of the Hackett Group, the Company issued
a $5.1 million promissory note to the sole stockholder of the Hackett Group,
subject to certain earn-out provisions. This note is payable in three separate
installments. The first installment obligation is $3.75 million, bears
interest at a rate of 12% per annum and was originally due March 31, 1998. The
second installment obligation of $497,000 is due March 31, 1999, and the third
installment obligation of $896,000 is due March 31, 2000. The obligations for
the second and third installment payments bear interest at a rate of 8% per
annum. In connection with the amendment to the terms of the Hackett Group
acquisition on March 12, 1998, Mr. Hackett agreed to extend the due date on
the $3.75 million installment from March 31, 1998 to the earlier of the
completion of the Offering or January 15, 1999, and the Company agreed to
waive the earn-out provisions. The Company intends to repay that obligation
with a portion of the proceeds from the Offering. See "Use of Proceeds."
On November 7, 1997, the Company entered into an agreement with BankBoston,
for a $10.0 million revolving credit facility for acquisitions, which amount
could be increased to $20.0 million if certain future earnings and performance
criteria are satisfied. The Credit Facility is secured by substantially all of
the Company's assets and contains certain restrictive covenants. Amounts
outstanding under the Credit Facility will
18
<PAGE>
be repaid with a portion of the proceeds of the Offering. At April 3, 1998,
the Company had an outstanding balance of $7.5 million at a weighted average
annual interest rate of 8.5% under the Credit Facility.
As part of the Acquisitions, the Company utilized approximately $12.7
million of cash, net of cash acquired, to complete the purchases of the
Hackett Group and Delphi stock in October and November 1997, respectively.
Additionally, the Company invested approximately $2.1 million in computer
hardware and software and telecommunications equipment to develop its
infrastructure in support of future growth plans. During the Inception Period
and first quarter of 1998, net cash used by the Company in operating
activities amounted to approximately $11.2 million and $33,000, respectively,
principally to cover operating losses and to fund working capital. At April 3,
1998, the Company had cash and cash equivalents of approximately $3.9 million.
The Company believes that the proceeds from the Offering and funds that are
available or that will become available under the Credit Facility or that may
be generated from operations will be sufficient to finance the Company's
currently anticipated capital requirements for at least the next 12 months.
There can be no assurance, however, that the Company's actual needs will not
exceed anticipated levels or that the Company will generate sufficient
revenues or have sufficient funds available under the Credit Facility to fund
its operations in the absence of other sources. There also can be no assurance
that any additional required financing will be available through additional
bank borrowings, debt or equity offerings or otherwise, or that if such
financing is available, that it will be available on terms favorable to the
Company.
YEAR 2000 ISSUE
Many existing computer programs were designed and developed without
considering the impact of the upcoming change in the century and consequently
use only two digits to identify a year in the date field. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000 (the "Year 2000 Issue"). All of the Company's systems have been
recently implemented and are Year 2000 compliant. The Company believes the
Year 2000 Issue will not have a material adverse impact on the Company's
financial condition or results of operation.
19
<PAGE>
BUSINESS
AnswerThink is a rapidly growing provider of knowledge-based consulting and
IT services to Fortune 1000 companies and other sophisticated buyers. The
Company addresses its clients' strategic business needs by offering a wide
range of integrated services or solutions, including benchmarking, process
transformation, software package implementation, electronic commerce, decision
support technology, technology architecture and integration and Year 2000
solutions. These solutions target a client's specific business functions
(finance and administration, human resources, IT, sales and customer support,
and supply chain management) and allow a business to reach beyond the
enterprise and link the people, processes and technologies of the extended
organization or "Interprise." AnswerThink markets its services to senior
executives in organizations where business transformation and technology-
enabled change can have a significant competitive impact.
AnswerThink leverages its knowledge base to propose solutions to its
clients' most critical and complex business problems. The Company delivers its
services through multidisciplinary project teams that include professionals
with both IT and business expertise. The Company's knowledge-based approach to
consulting combines the knowledge and experience of its consultants with
"best-practice" process solutions and a benchmarking database developed by the
Hackett Group. The Company believes its highly focused service delivery model
provides its customers with a lower risk of delivery and a faster time to
benefit as compared to the linear, "methodology based" processes employed by
many other IT consulting firms.
The Company was formed in April 1997 by several former leaders of the IT
consulting practice of a "Big Six" accounting firm. From the outset, the
Company made operational investments to develop a comprehensive market
strategy, build a business infrastructure and create sophisticated management
information and service delivery systems capable of supporting a large-scale
consulting and IT services business. Since its formation, AnswerThink has
acquired several consulting and IT services businesses, each of which brought
to the Company complementary skills and customer relationships. In addition,
the Company has grown internally by recruiting approximately 200 consultants.
As of April 3, 1998, the Company employed 343 consultants. The Company
supports its national solution delivery organization through a network of 10
offices located in Atlanta, Boston, Chicago, Cleveland, Dallas, Iselin (NJ),
Miami, New York, Philadelphia and Silicon Valley. The Company has served a
broad range of clients, including Avon Products, Bell Atlantic, Florida Power
& Light, International Paper and Lucent Technologies.
INDUSTRY OVERVIEW
In today's climate of intense global competition and accelerating
technological change, companies are increasingly turning to technology-enabled
solutions to improve their productivity and competitive positioning. In this
environment, IT is viewed not as an isolated back office function but rather
as a critical component of organizational strategy. IT deployment decisions
are increasingly made on an enterprise-wide level by senior executives.
The migration of technology from the back office to desktops throughout the
enterprise has created a wide range of business opportunities. Data that was
once collected nightly or weekly and used to analyze events retrospectively
can now be deployed to manage an entire enterprise in real time. Custom-
developed software that once produced reports that allowed managers to analyze
what had happened is being replaced by enterprise-wide packaged software
applications capable of linking manufacturing, sales, distribution and finance
functions and helping decision-makers shape what will happen. This enterprise-
wide software is being deployed in geographically dispersed, complicated
technology environments. The multitude of different protocols, operating
systems, devices and architectures makes deployment of technology solutions a
difficult challenge. Companies must also continually keep pace with new
developments, which often render existing equipment and internal skills
obsolete. At the same time, external economic factors have forced
organizations to focus on core
20
<PAGE>
competencies and trim workforces. Accordingly, these organizations often lack
the quantity or variety of IT skills necessary to design and implement
comprehensive IT solutions.
The shortage of skilled IT professionals and the complexity of IT solutions
have pushed senior executives to increasingly rely on outside specialists to
help them execute IT strategies and, as a result, demand for consulting
services is expected to continue to grow rapidly. According to industry
sources, the worldwide market for IT consulting and system integration
services was estimated at $53.7 billion in 1996 with a projected market of
$96.3 billion for 2001, a 12.4% growth rate. In addition, the domestic IT
consulting and system integration service market is projected to grow from
$26.0 billion in 1996 to $48.3 billion in 2001, a 13.2% growth rate.
Although the market for IT services is robust, the Company believes that
many buyers are investing heavily in IT solutions that are not yielding the
desired benefits or that are not being implemented on time. Generally,
companies who turn to IT consultants to help implement these investments
choose between "tactical" solution providers and larger organizations such as
the "Big Six" accounting firms that offer more comprehensive services. The
Company believes that tactical solution providers which focus on limited
functionality requirements (such as application development and staff
augmentation) often do not address broader strategic business and IT goals
that are critical to the customer and the success of the IT solutions
implemented. At the same time, the Company believes that larger IT consulting
firms, with their complex or fragmented organizational models, high turnover
rates and use of linear "methodology-based" processes (which propose solutions
only after extensive studies of a particular client's business problems),
often fail to deliver the right IT solutions on time and on budget. In
AnswerThink's view, companies today require strategic service providers that
have a comprehensive understanding of the relevant business issues, the
ability to design and implement integrated solutions that can help them meet
their strategic business goals as they evolve and the skills and tools
necessary to deliver solutions in a timely and cost-effective manner.
THE ANSWERTHINK SOLUTION
AnswerThink does more than just study problems. It identifies and answers
the questions at the outset of an engagement which allow it to propose and
implement solutions on time and on budget. By using its knowledge-based
delivery process and employing experienced, multidisciplinary consulting
teams, the Company is able to reduce both the risk of delivery and time of
implementation of its projects. The Company believes this approach appeals to
senior executives seeking solutions to complex business and IT problems.
Key elements of AnswerThink's strategic IT services delivery approach are:
. Senior Leadership and Delivery Expertise. AnswerThink's leadership team
has extensive experience in providing IT consulting and system
integration services. AnswerThink's executive officers and senior
managers have, on average, 15 years of experience in consulting and in
the delivery of IT services. The Company's practice area leaders have
built strong reputations in their areas of expertise. The Company has
leveraged this experience to build an organizational model, market
strategy and knowledge-based service delivery process enabling the
Company to deliver highly-focused, results-oriented, comprehensive IT
solutions for sophisticated buyers of technology-enabled solutions.
. Interprise Focus. The Company believes that success in today's business
environment requires excellence in communication and collaboration, not
just within the corporate enterprise, but across the network of
customers, suppliers, strategic partners and others which together form
the extended enterprise--what the Company refers to as the "Interprise"
business model. AnswerThink provides IT solutions to help its clients
succeed in this Interprise environment, which demands the assimilation
and integration of data from both internal and external sources.
. Multidisciplinary Solution Teams. IT service providers must understand
underlying business issues so they can better design, implement and
integrate effective IT solutions. AnswerThink provides solutions in the
areas of process transformation and benchmarking, software package
implementation and advanced technologies integration. AnswerThink
delivers these solutions through multidisciplinary teams of professionals
with experience in these areas that deliver solutions for each of the
specific business
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functions in an organization. These teams target finance, administration
and human resources ("CFO | solutionsSM"), information technology
("CIO | solutionsSM"), sales and customer support
("Customer | solutionsSM"), and supply chain management ("Interprise
Supply Chain | solutionsSM"). By assembling multidisciplinary teams of
professionals for an engagement, the Company believes it can provide
superior technology-enabled solutions to its clients.
. Knowledge-based Delivery. AnswerThink, primarily through its Hackett
Group, has developed and continuously refines a proprietary database of
"best-practice" organizational solutions and benchmarks from more than
1,100 companies. This database enables AnswerThink to identify for its
clients areas of strength and weakness in their organizations relative to
their peers. Relevant aspects of this accumulated knowledge can be
incorporated quickly into the Company's analysis for new engagements,
allowing AnswerThink to provide proven and effective solutions. In
addition, AnswerThink's internal information systems and corporate
culture enable it to capture knowledge from previous consulting
engagements and share it throughout the organization to allow AnswerThink
to identify and solve the problems of other clients in future
engagements. The Company has developed MindShareSM, a proprietary
intranet knowledge management system that will capture, index and
disseminate the combined knowledge and experiences of its consultants.
GROWTH STRATEGY
The Company's goal is to become a leading global provider of knowledge-based
consulting and IT services. AnswerThink's strategy to achieve this goal
includes the following elements:
. Maintain a Culture Designed for Rapid Growth. The Company believes that
its dynamic, entrepreneurial culture is particularly attractive to
consultants seeking new, non-traditional work environments. The Company
recognizes that to be a leading global consulting and IT services
organization, it must continue to recruit and, more importantly, retain
qualified and experienced professionals with the consulting and IT skills
currently in high demand. Many AnswerThink consultants were previously
employed at traditional consulting and IT services firms. The Company
recruits and retains consultants by offering attractive base and
incentive compensation packages that include equity ownership
opportunities. All AnswerThink employees currently have an equity
interest in the Company.
. Develop and Expand Client Relationships. AnswerThink has developed a
direct, high-level sales organization that encourages its sales
professionals to pursue, establish and maintain close relationships with
senior management of Fortune 1000 companies. Since inception, AnswerThink
has provided consulting and other IT services to Fortune 1000 companies
including engagements for limited types of services for a single division
or business unit. With its growing service offerings, experienced
management and the structure of its sales organization, the Company
believes that it has a significant advantage in cross-selling additional
services and solutions to its client base. A number of clients have
expanded their relationship with AnswerThink both in terms of revenue and
types of services purchased. In addition, the Company intends to target
new clients by (i) continuing to leverage and expand the Company's direct
sales force, (ii) increasing the hiring of consultants with existing
client relationships and (iii) pursuing referrals from existing clients
and third-party organizations including hardware partners, software
partners and industry research organizations.
. Leverage and Expand Scalable Infrastructure. AnswerThink's senior
management team has extensive experience managing a large-scale IT
services organization. Since inception, the Company has invested in the
development of service delivery processes and the underlying systems to
build the foundation for a global consulting and IT services company. In
addition, AnswerThink has invested significant resources to capture and
retain critical information by developing its knowledge management
system, MindShareSM, which will enhance collaboration and communication
among its employees. The Company intends to leverage and expand its
infrastructure to increase the number of its consulting professionals,
geographic coverage, client base and scope of engagements.
. Expand Service Offerings. At its inception, the Company defined a
framework of services and capabilities that it would need to become a
leading global consulting and IT services company.
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AnswerThink has systematically added service capabilities both internally
and through acquisitions in several business lines, such as the addition
of Oracle and PeopleSoft packaged software implementation services and the
Company's development of a supply chain management implementation business
unit. The Company intends to continue to add service offerings through
acquisitions and additional hiring. In addition, the Company plans to
continually evaluate "best-of-breed" technologies in order to provide
high-impact IT solutions to keep pace with changes in technology.
. Pursue Strategic Acquisitions and Partnerships. The Company has completed
and intends to continue to pursue strategic acquisitions that will
provide additional well-trained, high-quality professionals, new service
offerings, additional industry expertise, a broader client base and an
expanded geographic presence. Since inception, the Company has
successfully made three significant acquisitions. In addition, the
Company currently has strategic relationships with a number of business
partners, including Oracle, PeopleSoft, International Business Machines
Corporation ("IBM") and Netscape Corporation ("Netscape"), among others.
The Company intends to expand and develop its relationships with business
partners serving the IT market to benefit from joint marketing
opportunities and shared technical and industry knowledge.
THE ACQUISITIONS
The 1997 Acquisitions
. Relational Technologies, Inc. The Company acquired RTI in August 1997. As
a result of the RTI acquisition, the Company provides Oracle application
services to its clients for Oracle Financials, Oracle HR, Oracle
Distribution and Oracle Manufacturing. The Company is also able to
provide technical services such as systems selection, installation and
maintenance, communications management and network consolidations of
Oracle products.
. The Hackett Group, Inc. The Company acquired the Hackett Group in October
1997. The Hackett Group is a nationally recognized benchmarking and best-
practices firm focused on creating a proprietary database which
catalogues the efficiency and effectiveness of knowledge-worker
functions, such as finance, human resources, information technology and
supply chain management. The Hackett Group has gathered data from more
than 1,100 companies, including more than 40% of the Fortune 100. The
Hackett Group's benchmark participants share cost, productivity and
practices information on specific organizational functions. This data is
collected into a database that allows the Hackett Group to compare its
clients' performance to other companies' performance on specific criteria
and to identify the most effective management strategies for change.
. Delphi Partners, Inc. The Company acquired Delphi in November 1997. As a
result of this acquisition, the Company is a PeopleSoft Implementation
Partner and provides clients implementing PeopleSoft client/server
financial, human resources and manufacturing applications with a broad
range of services, including implementation management consulting,
application design and development, customized end user training and
documentation, process redesign and automated workflow and technology
integration and support.
The Legacy Acquisition
. Legacy Technology, Inc. The Company signed a definitive agreement in
April 1998 to acquire Legacy which implements sophisticated data
warehousing and decision support solutions for Fortune 1000 clients.
Legacy provides product selection, systems architecture, database design
and development services to support all phases of the project life cycle.
Legacy assists customers in developing customer information warehouses,
category management and marketing support systems, sales force solutions
to promote technology enabled selling, as well as budgeting, costing and
demand planning systems. Although there can be no assurance that the
Legacy Acquisition will be completed, management expects that it will be
completed in the second quarter of 1998.
SERVICES
The Company offers its services or solutions in three principal areas: (i)
"best-practice" benchmarking and business process transformation, (ii) "best-
of-breed" packaged software implementation and (iii) advanced technologies
integration. The Company delivers those services and solutions to its clients
through the Company's
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<PAGE>
CFO | solutionsSM, CIO | solutionsSM, Customer | solutionsSM and Interprise
Supply Chain | solutionsSM multidisciplinary teams. The Company's current
consulting capabilities are summarized below.
Benchmarking and Business Process Transformation. In the area of
benchmarking and business process transformation, the Company works with
clients to compare their performance to other companies, identify key business
issues and develop and implement new processes to transform their
organizations.
. Benchmarking | solutionsSM. The Company, through the Hackett Group, works
with large national and multinational corporations in evaluating their
staff functions (such as finance, human resources, IT and supply chain
management), and has compiled databases on a large number of companies in
a wide variety of industries. Using these databases, the Company collects
information from its clients, identifies benchmarks by which its clients
can evaluate their performance on specific criteria relative to other
companies and identifies the most effective strategies for specific
functions in a given industry. Each benchmark is composed of the
following three elements: (i) a quantitative analysis of costs,
productivity, service, quality and effectiveness; (ii) an understanding
of world-class best-practices; and (iii) opportunities to learn from
best-practices companies. Stringent process definitions and controls
enable comparisons to be made between companies with different attributes
and across industries. Clients can receive a detailed, confidential
evaluation of their performance measured against other benchmarks on the
basis of business focus (e.g., manufacturing, service or distribution),
size, organizational structure and geography. Since benchmark studies
often lead to clients implementing revised IT strategies, the Company
believes that it is well positioned to cross-sell its services.
. Transformation | solutionsSM. The Company works with its clients to
conceive, design and manage processes, organizations and systems
necessary to implement technology-enabled business solutions. There are
four key components to the Company's transformation solutions:
Performance Assessment. The Company helps clients gain a systematic
and objective understanding of the relative strengths and weaknesses of
key aspects of their businesses, identify market trends and best-
practices, and highlight those areas that offer the greatest
opportunity for improvement. The Company works with clients to define
and apply appropriate measures, and compare their performance to
appropriate benchmarks.
Business Redesign. The Company aids clients in defining an end-state
vision of what their businesses require to achieve their primary
performance objectives. Once that vision is established, AnswerThink
helps clients identify and select the best strategies for achieving
their objectives. AnswerThink's process redesigns generally affect all
of a company's key processes, organizations, management practices,
people and technology, taking full advantage of enabling technologies
and reflecting both recognized best-practices and emerging trends.
Migration Planning. The Company's work in the area of migration
planning is focused on (i) deploying systems and infrastructure
hardware and software as planned, (ii) initiating systems management
and other delivery processes and (iii) initiating performance
measurement and other management processes. The Company's migration
planning services help clients to structure the process into a series
of change initiatives and develop alternative scenarios for the staging
and sequencing of those initiatives. The comparison and refinement of
these scenarios on the basis of costs, benefits and risks leads to
agreement on a master plan which details projects, schedules,
responsibilities, funding and expected business results.
Program Management. The Company establishes a single point of
coordination for all initiatives contributing to the transformation
process, including process redesign, organizational change, system
implementation and infrastructure enhancement. AnswerThink applies
proven project management disciplines, tools, techniques and systems to
the management of complex transformation programs.
Packaged Software Implementation. In the area of packaged software
implementation, the Company works with its clients to identify and integrate
"best-of-breed" solutions such as:
24
<PAGE>
. Oracle | solutions. AnswerThink is a Business Alliance Member with
Oracle, one of the world's leading suppliers of software for information
management. Oracle's enterprise automation products include applications
modules for financial management, supply chain management, manufacturing,
project systems, human resources, and sales force automation. The Company
serves as a sole source provider for procuring Oracle's packaged
software, complementary hardware, and AnswerThink's related consulting
and IT services. The Company's Oracle-based solutions support the full
life cycle implementation of Oracle and involve project-planning,
definition and management, configuration and implementation.
. PeopleSoft | solutions. The Company is a PeopleSoft Implementation
Partner. PeopleSoft offers a complete suite of enterprise software
applications that automate business processes including finance,
materials management, manufacturing, distribution, supply chain planning,
accounting and human resources. PeopleSoft's offerings also include a
rapid application development and reporting environment and customization
toolset. The Company's PeopleSoft-based solutions support the full life
cycle implementation of PeopleSoft and involve project-planning,
definition and management, configuration and implementation.
. Other Applications. The Company also provides comprehensive consulting
and IT services supporting the full life cycle implementation, including
project planning, definition and management, and application
configuration and implementation, for such software applications as Baan
(Aurum), Manugistics, i2 Technologies, Siebel, Point, Clarify and Scopus.
Advanced Technologies Integration. The Company helps clients to achieve
meaningful improvement in all aspects of their IT strategies by providing the
following services:
. Knowledge | solutionsSM. The Company provides consulting, design and
implementation services focused on enhancing intellectual capital and
knowledge resources across its clients' expanded enterprises. The
Company's knowledge solutions emphasize decision support, data
warehousing and knowledge management strategy and process design, content
storage and navigation concepts, and related enabling technologies
including groupware, collaborative tools and advanced knowledge-sharing
environments.
. Electronic Commerce | solutionsSM. The Company designs and develops
internet, intranet and extranet solutions, with an emphasis on business-
to-business digital commerce, messaging architectures, intranet enabled
data warehouses, web-based transaction facilities and internet and
extranet security.
. Systems | solutionsSM. The Company evaluates, designs and implements
complex enterprise-wide networks, large scale client/server technology,
systems and network integration solutions focused on systems management
and performance.
. Millennium | solutionsSM. The Company designs and implements solutions to
address the millennium challenge, focusing on applications assessment,
Year 2000 testing and remediation strategy and active integration
management.
25
<PAGE>
As illustrated on the following chart, the Company's solutions are marketed
across targeted business functions and are delivered through multidisciplinary
solution teams that focus on different aspects of an organization's business
and IT needs.
<TABLE>
<CAPTION>
INTERPRISE SUPPLY
CFO | SOLUTIONSSM CIO | SOLUTIONSSM CUSTOMER | SOLUTIONSSM CHAIN | SOLUTIONSSM
------------------ ------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
BENCHMARKING AND BUSINESS
PROCESS TRANSFORMATION
Benchmarking | solutionsSM.... Finance/ Information Sales, Marketing and Supply-Chain
Administration Management Customer Service Management, Inventory,
Accounting/ Process Manufacturing
HR Process
Transformation | solutionsSM.. Process Redesign, Architecture, Process Redesign, Process Redesign,
Migration Planning Network Migration Planning Migration Planning
Applications and
IT Strategy
PACKAGED SOFTWARE
IMPLEMENTATION
Oracle | solutions............ Financials IT Support Sales and Manufacturing
PeopleSoft | solutions........ and of Distribution and
Other Applications............ HR Modules Packages Modules Purchasing
ADVANCED TECHNOLOGIES
INTEGRATION
Knowledge | solutionsSM....... EIS and Enterprise Marketing and Product Demand
Decision Support Knowledge Merchandising Systems and
Management, and Decision Support Forecasting
Enterprise Data
Warehousing
Electronic Web-enhanced Mail/Messaging, Sales Force Automation, Purchasing EDI
Commerce | solutionsSM....... Finance and HR Intranets/Extranets Web Marketing, and
Process Interactive Kiosk Web-enabled transactions
Systems | solutionsSM......... _______________________________ Systems Acquisition ________________________________
Hardware Acquisition
Systems Development
Network Integration
Millennium | solutionsSM...... ______________________________ Year 2000 Integration _______________________________
Application Assessment
Renovation Strategy
Program Office
Test Planning and Execution
</TABLE>
CLIENTS AND REPRESENTATIVE SOLUTIONS
AnswerThink's clients consist primarily of Fortune 1000 companies and other
sophisticated buyers of IT consulting services. During 1997, AnswerThink's ten
most significant clients accounted for approximately 38%, and two clients
accounted for approximately 13%, of net revenues. Net revenues from the
Company's ten largest clients in 1997 ranged from $400,000 to $1.1 million.
AnswerThink has served a broad range of clients, including the following:
Avon Products, Inc. International Paper Company
IVAX Corporation
Bell Atlantic Corporation
Bestfoods Knight Ridder, Inc.
EXAR Corporation Lucent Technologies, Inc.
Flexible Products Company Norrell Corporation
Florida Power & Light Company Republic Industries, Inc.
General Motors Corporation Starbucks Corporation
Hayes Corporation Waste Management, Inc.
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Three recent examples of the Company's significant engagements include the
following:
Services Company. A services company retained AnswerThink to assess and
define the risks associated with enhancing and upgrading current processes and
IT systems in light of the company's strategy to develop additional service
offerings.
After completion of the initial assessment, an expanded AnswerThink project
team was engaged to develop a full strategy and architecture for the client's
core PeopleSoft applications. It was critical that the client develop an IT
infrastructure capable of supporting the client's planned migration to an
expanded business strategy while preserving the functionality of the legacy
platforms and systems used to manage its current service offerings. Working
closely with the client, the team of professionals from Oracle | solutions,
PeopleSoft | solutions, CFO | solutionsSM, Millennium | solutionsSM,
Electronic Commerce | solutionsSM and Systems | solutionsSM identified the
highest impact business areas, including branch office customer operations,
payroll and pricing systems. Subsequently, this multidisciplinary team
assisted in the design of a new set of processes and a new technology
infrastructure to support these processes.
AnswerThink's assessment helped the client view the business, technology
risks and opportunities in a new light and AnswerThink advised the client on
the architecture design, integration and execution of its new strategy and
architecture. The design of the new integrated IT system provided the client
with a comprehensive IT solution which the Company believes will result in a
more flexible, reliable and robust system as well as service enhancements.
Global Consumer Products Company. The Hackett Group was engaged by a global
consumer products company to reengineer core finance processes worldwide and
to identify opportunities for cost savings. The Hackett Group, through its
benchmarking process, discovered that the client's accounting and finance
organizations were performing less efficiently than those of comparable
companies.
Processes examined by the Hackett Group in this engagement included accounts
payable, general accounting, cost and inventory accounting, forecasting and
reporting. In determining appropriate strategies for improving these
processes, the Hackett Group sought input from a wide array of the client's
employees in ten countries in which the client operates. To address the
client's weaknesses, the Hackett Group formulated a plan to improve the
client's accounting and finance organization and implement technology-enabled
solutions.
The services initially provided by the Hackett Group included assessing the
client's processes, determining appropriate objectives, outlining an
implementation plan, presenting alternative solutions to the client and
building consensus for change. Once these actions were taken, the Hackett
Group focused on securing required resources, initiating a series of "quick
win" programs, selecting software and determining appropriate controls and
detailing specific recommendations for implementing its solutions. Examples of
specific recommendations that were implemented include the installation of a
purchasing card system, establishing electronic funds and intrabank transfer
procedures, and the creation of a North American shared services center. The
client has advised the Hackett Group that it expects that all of these actions
will result in significant cost savings.
High Tech Company. A high tech company decided to expand its product
offerings and service capabilities to better respond to customer market
demands. The client was experiencing problems with an ongoing enterprise
systems implementation project undertaken to achieve these goals and
AnswerThink was engaged to address the problems identified.
Working closely with the client, a team of AnswerThink professionals from
CFO | solutionsSM, CIO | solutionsSM, Oracle | solutions,
Systems | solutionsSM and Interprise Supply Chain | solutionsSM performed an
analysis of the client's financial, manufacturing, operations, logistics,
sales and marketing functions. AnswerThink identified several weaknesses in
the client's current systems as well as opportunities for improvement in the
current implementation, and concluded that the client's existing applications
suite could not adequately support the client's current and future business
demands. AnswerThink's engagement was
27
<PAGE>
restructured and expanded to span the enterprise. AnswerThink completed a
requirements analysis for integrated enterprise applications, created a
technical architecture for the enterprise and proposed a solution based on a
new suite of Oracle applications to restructure the client's financial and
administrative processes. AnswerThink is also assisting the client in
restructuring its logistics and supply chain processes through another set of
Oracle applications.
AnswerThink's solution is intended to significantly shorten cycle times for
the manufacturing and distribution of the client's products and to improve the
client's invoice, billing and collection process. Implementation of the
applications is underway. The client has advised the Company that it expects
these new systems to enable it to more effectively manage its entire
enterprise by improving manufacturing and billing efficiency and by reducing
transaction and administrative costs.
SALES AND MARKETING
AnswerThink has developed a national sales force that markets the Company's
consulting and IT services in major metropolitan areas. The Company's sales
organization is supported by its prospect database, which includes companies
and decision makers in targeted geographic markets. The extensive relationship
base and reputation of the Company's senior management team is also a
meaningful source of new business for AnswerThink.
AnswerThink sales executives establish contact with targeted prospects to
create awareness and preference for the Company. Thereafter, senior level
managers are assigned to accounts as client executives to establish and
maintain long-term relationships. Client executives are key sources of service
advice and overall coordinators of AnswerThink's multiple service offerings to
clients.
AnswerThink also markets and provides its services directly through its
solution teams and national office network. The Company's marketing strategy
includes contributing articles to industry publications, expert source
placements, speeches, analyst meetings and conferences, the creation of
collateral marketing materials and the Company's Internet site
(http://www.answerthink.com). This strategy is designed to strengthen the
AnswerThink brand name and generate new clients. The program can be expanded
and modified to take advantage of market-by-market or service-by-service
opportunities as new services or markets are pursued.
MANAGEMENT INFORMATION SYSTEMS
The Company is currently implementing various aspects of its national
service delivery infrastructure. The primary elements include a fully
integrated financial and project management system and a proprietary network
that is the foundation for AnswerThink's knowledge management system,
MindShareSM. The Company believes that MindShareSM will significantly enhance
the way clients are served by allowing the Company's knowledge-base to be
shared by all of its consultants. MindShareSM is projected to be implemented
nationally by mid-1998.
The financial and project management systems the Company has developed are
expected to provide AnswerThink with a fully integrated time and expense
reporting system which will serve as the backbone for the Company's engagement
management and related client billings, and drives the primary transaction
information to the Company's financial reporting systems. The Company has also
invested in the development of a comprehensive service delivery model which
tracks how clients are handled from initial contact, to risk management
assessments, to the delivery of the solution and the corresponding knowledge
capture.
HUMAN RESOURCES
A cornerstone of the Company's strategy is to promote the loyalty and
continuity of its consultants by offering packages of base and incentive
compensation that it believes are significantly more attractive than those
generally offered in the consulting industry. An important element of
AnswerThink's compensation program will be Company-wide participation in the
Stock Option Plan. See "Management--Stock Option Plan."
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The Company's success depends in large part upon its ability to attract,
develop, motivate and retain highly skilled professionals. Qualified
professionals are in great demand and are likely to remain a limited resource
for the foreseeable future. In connection with its hiring efforts, the Company
has appointed a senior executive to lead AnswerThink's national recruiting
team, which is further supported by executive search firms and AnswerThink's
internal associate referral program.
AnswerThink dedicates significant resources to recruiting consultants with
both technology consulting and business experience. Many consultants are
selected from among the largest and most successful IT services, consulting,
accounting and other professional services organizations. As of April 3, 1998,
the Company had 419 employees, 343 of whom were consultants. The Company is
also committed to training and developing its professionals. The Company's
present training strategy is solution or competency specific and in many cases
is done in conjunction with the Company's "best-of-breed" technologies
alliance strategy.
None of the Company's employees is subject to a collective bargaining
arrangement. AnswerThink has entered into nondisclosure and nonsolicitation
agreements with virtually all of its personnel. Although all consultants are
currently Company employees, the Company does engage consultants as
independent contractors from time to time.
STRATEGIC ALLIANCES
The Company owns the program concept and intellectual property assets of the
c.eraSM program, an industry-wide collaboration of companies aimed at
providing a more efficient and comprehensive solution to the Year 2000 Issue
and other enterprise mass change challenges by offering clients technology
solutions, process support technologies and skilled deployment services
through a single point of contact. Participants in the c.eraSM program include
Peritus, Inc., Software Emancipation, Inc., INTO 2000, Inc., MatriDigm
Corporation and Viasoft, Inc.
AnswerThink also seeks strategic relationships with business partners to
share technical and industry knowledge and pursue joint marketing
opportunities. The Company has established business partner relationships with
Oracle, PeopleSoft, IBM and Netscape, among others. These relationships
typically allow the Company to gain access to training, product support and
the technology developed by these partners. The training programs often enable
Company employees to become certified in the technologies demanded by
AnswerThink's clients. Establishing these relationships allows the Company to
use the business partner's name and the "business partner" designation in
marketing the Company's services. These relationships also facilitate the
Company's pursuit of marketing opportunities with the business partners.
These alliances do not require the Company to use technology developed by
the business partners in implementing IT solutions for clients. Nonetheless,
the Company may be retained by a client based in part upon one or more of the
Company's business partner relationships. Although the Company is not
obligated to resell products offered by the business partners, in the event it
does so, it is sometimes entitled to purchase discounts on products purchased
for resale.
COMPETITION
The market for consulting and IT services includes a large number of
competitors and is subject to rapid change. Primary competitors include
participants from a variety of market segments, including "Big Six" accounting
firms, systems consulting and implementation firms, application software
firms, service groups of computer equipment companies, systems integration
companies, general management consulting firms and programming companies. Many
competitors have significantly greater financial, technical and marketing
resources and name recognition than the Company. In addition, the Company
competes with its clients' internal resources, particularly where these
resources represent a fixed cost to the client. Such competition may impose
additional pricing pressures on the Company. See "Risk Factors--Competition."
29
<PAGE>
The Company believes that the most significant competitive factors it faces
are perceived value, breadth of services offered and price. The Company
believes that its multidisciplinary, knowledge-based approach, broad and
expanding framework of services and distinctive corporate culture allow it to
compete favorably by delivering strategic IT solutions that meet clients'
needs in an efficient manner. Other important competitive factors that the
Company believes are relevant to its business include technical expertise,
knowledge and experience in the industry, quality of service and
responsiveness to client needs and speed in delivering IT solutions.
INTELLECTUAL PROPERTY RIGHTS
AnswerThink's success has resulted, in part, from its methodologies and
other proprietary intellectual property rights. The Company relies upon a
combination of nondisclosure and other contractual arrangements and trade
secret, copyright and trademark laws to protect its proprietary rights and the
proprietary rights of third parties from whom the Company licenses
intellectual property. The Company enters into confidentiality agreements with
its employees and limits distribution of proprietary information. There can be
no assurance that the steps taken by the Company in this regard will be
adequate to deter misappropriation of proprietary information or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its intellectual property rights. See "Risk Factors--Intellectual
Property Rights."
The Company is in the process of registering the trademarks "ANSWERTHINK"
and "ANSWERTHINK CONSULTING GROUP" with the U.S. Patent and Trademark Office.
The Company intends to make such other state and federal filings as the
Company deems necessary and appropriate to protect its intellectual property
rights.
PROPERTY
AnswerThink's principal executive offices currently are located at 1401
Brickell Avenue, Suite 350, Miami, Florida 33131. The Company has entered into
a lease for space at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida
33131, and the Company intends to move into these offices in the second
quarter of 1998. The Company's lease on these premises covers 10,800 square
feet and expires March 31, 2003. The Company also leases facilities in
Atlanta, Boston, Chicago, Cleveland, Dallas, Iselin (NJ), Miami, New York,
Philadelphia and Silicon Valley. AnswerThink anticipates that additional space
will be required as its business expands and believes that it will be able to
obtain suitable space as needed.
LEGAL PROCEEDINGS
Certain of the Company's key executives and other management employees
resigned from a "Big Six" accounting firm during the first quarter of 1997.
The accounting firm initiated litigation in connection with such resignations
and the formation of the Company arising out of activities alleged to have
constituted a breach of non-competition and non-solicitation obligations. This
litigation was settled, and the Company, its key executives, certain other
management employees and certain of its shareholders are subject to certain
provisions contained in the Settlement Agreement among such persons and the
accounting firm. The Settlement Agreement prohibits the Company from
soliciting or hiring the accounting firm's employees and soliciting or
servicing certain of its clients, and prohibits the accounting firm from
soliciting the Company's employees, for a two-year period commencing December
31, 1996. Subsequent to the execution of the Settlement Agreement, the
accounting firm asserted through legal proceedings that the Company and its
executives and employees had conducted activities prohibited by the Settlement
Agreement. The Company vigorously denied such assertions, and the accounting
firm's claims in these respects were rejected by the court with jurisdiction
over the Settlement Agreement. The Company and its executives and management
believe that they can operate and grow the Company despite the limitations
imposed by the Settlement Agreement. The Company, its key executives and
management employees intend to continue to abide by the terms of the
Settlement Agreement. See "Risk Factors--Litigation and Settlement."
The Company is involved in legal proceedings, claims and litigation arising
in the ordinary course of business. In the opinion of management, the final
disposition of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the directors and
executive officers of the Company. The Company's board of directors is divided
into three classes serving staggered three-year terms.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION AND OFFICES HELD EXPIRES
---- --- ------------------------- --------
<S> <C> <C> <C>
Ted A. Fernandez........ 41 President, Chief Executive Officer and 2001
Chairman
Fernando Montero........ 52 Director 2001
Bruce V. Rauner......... 42 Director 2001
Allan R. Frank.......... 42 Executive Vice President, Chief Technology 2000
Officer and Director
William C. Kessinger.... 32 Director 2000
Edmund R. Miller........ 42 Director 1999
Ulysses S. Knotts, III.. 42 Executive Vice President, Sales and 1999
Marketing and Director
John F. Brennan......... 40 Executive Vice President, Acquisitions and
Strategic Planning and Secretary
Luis E. San Miguel...... 38 Executive Vice President, Finance and Chief
Financial Officer
</TABLE>
Ted A. Fernandez is a founder of the Company and has served as Chief
Executive Officer, President and Chairman of its Board of Directors since
inception. Mr. Fernandez served as the National Managing Partner of KPMG Peat
Marwick LLP's ("KPMG's") Strategic Services Consulting, the firm's
transformation and IT consulting group, from May 1994 to January 1997. Mr.
Fernandez also served as a member of KPMG's Management Committee from May 1995
to January 1997. From 1979 to 1993, Mr. Fernandez held several industry,
executive and client service positions with KPMG.
Fernando Montero was elected to the Board of Directors in April 1998. Mr.
Montero is President of Mentor Capital Corporation, which he founded in
January 1998. Mr. Montero has also served as a partner of the Latin America
Enterprise Fund since June 1995. From June 1987 through December 1997, Mr
Montero was President of Hanseatic Corporation, a private investment firm. Mr.
Montero served as Minister in the Ministry of Energy and Mines of the Republic
of Peru, from August 1982 through December 1983, and as Deputy Minister from
August 1980 through April 1982. From 1969 to 1978, Mr. Montero held a variety
of positions with Kuhn Loeb & Co., the International Finance Corporation,
Inversiones Abancay and Deltec International Group.
Bruce V. Rauner has served as a member of the Company's Board of Directors
since its inception. Mr. Rauner serves as managing principal of GTCR Golder
Rauner, LLC ("GTCR LLC"), which together with its predecessors manages
approximately $2 billion in six private equity funds. Mr. Rauner is also a
director of a number of other companies, including Province Healthcare
Company, Metamore Worldwide, Inc., Polymer Group, Inc., the Coinmach
Corporation and Lason, Inc.
Allan R. Frank is a founder of the Company and has served as Executive Vice
President and Chief Technology Officer and as a member of its Board of
Directors since inception. Prior to founding the Company, from May 1994 to
January 1997 Mr. Frank served as the Chief Technology Officer for KPMG and as
the Partner in Charge of Enabling Technologies with KPMG's Strategic Services
Consulting. Mr. Frank also served on KPMG's Board of Directors from September
1994 to January 1997. Prior to 1994, Mr. Frank held several executive and
client service responsibilities with KPMG.
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<PAGE>
William C. Kessinger has served as a member of the Board of Directors since
inception. Mr. Kessinger joined GTCR LLC's predecessor entity in May 1995 and
became a Principal in September 1997. Mr. Kessinger was a Principal with The
Parthenon Group from July 1994 to May 1995. From August 1992 to June 1994, Mr.
Kessinger attended Harvard Business School and received his MBA. Prior to that
time, Mr. Kessinger served as an Associate with Prudential Asset Management
Asia from August 1988 to June 1992. Mr. Kessinger is also a director of
Excaliber, Inc., Global Imaging Systems, Inc., National Equipment Services,
Inc., Users, Inc. and National Computer Print, Inc.
Edmund R. Miller is a founder of the Company and has served as a member of
the Board of Directors since inception. He is President of Miller Capital
Management, Inc. ("Miller Capital"), which he founded in June 1996. From 1984
through May 1996, Mr. Miller was employed by Goldman, Sachs & Co., serving
since 1988 as a Vice President in Private Client Services in the Miami office.
Prior to joining Goldman, Sachs & Co., Mr. Miller spent four years as an
International Tax Accountant at Price Waterhouse LLP in New York.
Ulysses S. Knotts, III is a founder of the Company and has served as
Executive Vice President, Sales & Marketing of the Company and as a member of
its Board of Directors since inception. Prior to founding the Company, Mr.
Knotts served as the Partner-in-Charge of Sales and Marketing and Enterprise
Integration Services from 1995 to January 1997 and as the Partner-in-Charge of
Enterprise Package Solutions from 1994 to 1995 with KPMG's Strategic Services
Consulting. Prior to joining KPMG, Mr. Knotts was employed by IBM from 1980 to
1993 where he held various executive positions in the consulting and sales and
marketing areas.
John F. Brennan has served as Executive Vice President, Acquisitions and
Strategic Planning, and as Secretary, since August 1997. Mr. Brennan was
employed by Ryder System, Inc. ("Ryder"), as Vice President and Treasurer from
June 1996 through August 1997. From January 1994 to June 1996, Mr. Brennan
served as Assistant Controller of Operations Accounting for Ryder. Mr. Brennan
held a variety of accounting and finance positions with Ryder from 1986
through 1994. Prior to joining Ryder, Mr. Brennan was a Manager with Arthur
Andersen & Co.
Luis E. San Miguel has served as Executive Vice President, Finance and Chief
Financial Officer of the Company since inception. From 1994 through April
1997, Mr. San Miguel served as the Chief Financial Officer of KPMG's Strategic
Services Consulting. Prior to joining KPMG, Mr. San Miguel spent three years
with Burger King Corporation in several positions, the last of which was
Director of Operations, Finance and Cash Management.
The Company's executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. There are no family relationships between any of the
directors or executive officers of the Company.
The Board of Directors has appointed a committee consisting of Messrs.
Fernandez, Miller and Mr. Rauner or Mr. Kessinger (as chosen by GTCR) to
select, by unanimous vote, three independent directors following completion of
the Offering. Certain of the Company's major shareholders, including Messrs.
Fernandez, Frank, Knotts and Miller and GTCR, currently are parties to a
shareholders agreement containing a number of provisions regarding
designations and elections for the Board of Directors. Messrs. Fernandez,
Frank, Knotts and Miller and GTCR have agreed that these provisions will be
suspended upon completion of the Offering. Such suspension will (i) become
permanent at such time as three independent directors are appointed to the
Board prior to January 1, 1999 or (ii) lapse if such directors are not
appointed by such date. See "Certain Transactions--Shareholders Agreement" and
"Risk Factors--Influence of Existing Shareholders."
COMMITTEES OF THE BOARD OF DIRECTORS
Following completion of the Offering, the Board of Directors will establish
a Compensation Committee consisting of Messrs. Fernandez, Miller and
Kessinger. The Compensation Committee will be responsible for determining
compensation for the Company's executive officers and administering the
Company's Stock Plans.
32
<PAGE>
Mr. Fernandez will not participate in the determination of his compensation.
Prior to April 1998, the Company had no separate compensation committee or
other board committee performing equivalent functions with respect to
determining compensation for the Company's executives, and those functions
were performed by the Company's Board of Directors which included Messrs.
Fernandez, Frank and Knotts. Following completion of the Offering, the Board
also will establish an Audit Committee comprised of Messrs. Kessinger, Miller
and Montero, which will be responsible for making recommendations concerning
the engagement of independent public accountants, reviewing the plans and
results of such engagement with the independent public accountants, reviewing
the independence of the independent public accountants, considering the range
of audit and non-audit fees and reviewing the adequacy of the Company's
internal accounting controls.
DIRECTOR COMPENSATION
Directors who are officers or employees of the Company or any subsidiary of
the Company will receive no additional compensation for serving on the Board
of Directors or any of its committees. Directors who are not executive
officers of the Company will receive upon initial election to the Board an
option to purchase 5,000 shares of Common Stock for a purchase price equal to
the market value of the underlying stock on the date of grant. Each option is
expected to have a term of ten years and to vest in three equal installments
beginning on the first anniversary of the date of grant, and all directors
will be reimbursed for travel expenses incurred in connection with attending
board and committee meetings. Directors are not entitled to additional fees
for serving on committees of the Board of Directors.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by the
Company's Chief Executive Officer and all other executive officers of the
Company whose salary and bonus for services rendered in all capacities to the
Company exceeded $100,000 during the Inception Period (the period from April
23, 1997 (inception) to January 2, 1998) (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------ ----------------
RESTRICTED STOCK ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY AWARDS(1) COMPENSATION
- - ------------------------------ ------------ ---------------- ------------
<S> <C> <C> <C>
Ted A. Fernandez................... $375,000 -- (2) $295,403(3)
President, Chief Executive Officer
and Chairman
Allan R. Frank .................... 375,000 -- (2) 307,185(3)
Executive Vice President and Chief
Technology Officer
Ulysses S. Knotts, III............. 375,000 -- (2) 216,185(3)
Executive Vice President, Sales
and Marketing
Luis E. San Miguel................. 132,708 -- (4) --
Executive Vice President, Finance
and Chief Financial Officer
</TABLE>
- - --------
(1) In connection with the formation of the Company, each of Messrs.
Fernandez, Frank, Knotts and San Miguel purchased restricted shares of
Common Stock for nominal consideration deemed to be equal to the fair
market value of such shares. Accordingly there was no compensation deemed
to have occurred at the time of such purchase.
(2) As of January 2, 1998, each of Messrs. Fernandez, Frank and Knotts held
1,400,000 shares of restricted Common Stock. No dividends have been paid
and no dividends are currently expected to be paid on this restricted
Common Stock. Based on a valuation study performed by an independent
valuation firm, the
Company has determined that the restricted Common Stock held by each of
Messrs. Fernandez, Frank and Knotts had an aggregate value of $1,400,000 on
January 2, 1998. Of the 1,400,000 shares of restricted
33
<PAGE>
Common Stock held by each of Messrs. Fernandez, Frank and Knotts, the
vesting of 600,000 held by each was accelerated pursuant to certain
agreements effective as of March 27, 1998, in the Company's first quarter
of 1998. See "Employment Agreements" and "Certain Transactions." The
remaining 800,000 shares held by each of Messrs. Fernandez, Frank and
Knotts, will vest according to the following schedule: 50% will vest on
April 23, 1999, 25% will vest on April 23, 2000 and 25% will vest on April
23, 2001.
(3) Represents cash payments made by the Company to each of Messrs. Fernandez,
Frank and Knotts relating to obligations assumed by the Company for
compensation earned during the Dispute Period (the period from December 1,
1996 to the date of the Company's inception). See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations--Settlement Costs."
(4) As of January 2, 1998, Mr. San Miguel held 160,000 shares of restricted
Common Stock. No dividends have been paid and no dividends are currently
expected to be paid on this restricted Common Stock. Based on a valuation
study performed by an independent valuation firm, the Company has
determined that the restricted Common Stock held by Mr. San Miguel had an
aggregate value of $160,000 on January 2, 1998.
The Common Stock held by Mr. San Miguel vests annually commencing on the
second anniversary of the purchase of the stock at rates of approximately
25%, 25%, 31%, 13% and 6%.
OPTION GRANTS
The following table summarizes the options to acquire Series A Convertible
Preferred granted to each of the Named Executive Officers during the Inception
Period:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES OR BASE EXPIRATION -------------------
NAME GRANTED(1) IN FISCAL YEAR(2) PRICE(3) DATE 5% 10%
- - ---- ---------- ----------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ted A. Fernandez........ 25,000 7.1% $6.00 10/23/97 N/A N/A
Allan R. Frank.......... 25,000 7.1% $6.00 10/23/97 N/A N/A
Ulysses S. Knotts, III.. 25,000 7.1% $6.00 10/23/97 N/A N/A
Luis E. San Miguel...... -- N/A N/A N/A N/A N/A
</TABLE>
- - --------
(1) On April 23, 1997, in connection with the formation of the Company, each
of Messrs. Fernandez, Frank and Knotts were granted six-month options to
purchase 25,000 shares of Series A Convertible Preferred.
(2) Represents the number of shares of Series A Convertible Preferred
underlying options granted to each of Messrs. Fernandez, Frank and Knotts
as a percentage of all options granted to employees to acquire shares of
Series A Convertible Preferred or shares of Common Stock assuming
conversion of all shares of Convertible Preferred Stock.
(3) The Board set the exercise price of $6.00 per share based on and equal to
the price per share of Series A Convertible Preferred being paid by
initial investors in the Company at the same time.
(4) All options were exercised or expired prior to the end of the fiscal year.
34
<PAGE>
YEAR-END OPTION TABLE
The following table sets forth certain information as of January 2, 1998
with respect to stock options owned by the Named Executive Officers as of such
date and for the Inception Period with respect to stock options exercised by
the Named Executive Officers during such period:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
-------------------- --------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(1) REALIZED(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- ----------- -------------------- --------------------
<S> <C> <C> <C> <C>
Ted A. Fernandez........ 16,667.5 -- 0/0 $0/$0
Allan R. Frank.......... 16,666.5 -- 0/0 0/0
Ulysses S. Knotts, III.. 16,666.5 -- 0/0 0/0
Luis E. San Miguel...... -- -- 0/0 0/0
</TABLE>
- - --------
(1) On April 23, 1997, in connection with the formation of the Company, each
of Messrs. Fernandez, Frank and Knotts were granted six-month options to
purchase 25,000 shares of Series A Convertible Preferred. The exercise
price for the options was $6.00 per share and was set by the Board of
Directors based on the price per share of Series A Convertible Preferred
being paid at the same time by initial investors in the Company. Messrs.
Fernandez, Frank and Knotts exercised a portion of these options to
purchase the indicated number of shares in July 1997. The Company does not
believe that the fair market value of the Series A Convertible Preferred
for which the options were exercised had appreciated from the fair market
value of the Series A Convertible Preferred at the date of issuance.
Accordingly, the Company determined that no value was realized in
connection with the exercise of these options.
EMPLOYMENT AGREEMENTS
Effective upon completion of the Offering, each of Messrs. Fernandez, Frank
and Knotts (collectively, the "Senior Executives") will enter into an
employment agreement with the Company (each, a "Senior Executive Agreement").
Each such Senior Executive Agreement will replace currently existing
employment agreements for the Senior Executives. Each of the Senior Executive
Agreements will be for a three-year term and provide for an annual salary of
$500,000 for the applicable Senior Executive, plus a bonus to be determined
and paid pursuant to a bonus plan to be adopted by the Board of Directors for
each fiscal year. In the event a Senior Executive is terminated by the Company
without cause, that Senior Executive will be entitled to severance payments
equaling that Senior Executive's annual salary for a one-year period from the
date of termination. The Company will have the option to extend such severance
payments for an additional one-year period. In the event the terminated Senior
Executive finds new employment, the Company will be able to cease making or
reduce the severance payments. Under the terms of the Senior Executive
Agreements, each of the Senior Executives will agree to preserve the
confidentiality and the proprietary nature of all information relating to the
Company and its business. Each Senior Executive also will agree to certain
non-competition and non-solicitation provisions.
The Senior Executive Agreements also will contain provisions affecting
800,000 shares of Common Stock held by each of the Senior Executives (the
"Time Vesting Stock"), of which 50% will vest on April 23, 1999, 25% will vest
on April 23, 2000 and 25% will vest on April 23, 2001, provided that if a
Senior Executive's employment with the Company is terminated by the Company
without cause prior to April 23, 2001, then all shares of Time Vesting Stock
which have vested up to that date plus one-half of all unvested Time Vesting
Stock held by such Senior Executive on such date shall be vested as of the
date of such termination.
Luis E. San Miguel will enter into an employment agreement with the Company
upon completion of the Offering which will replace his current employment
agreement with the Company. Mr. San Miguel's employment agreement will have a
three-year term and provide for an annual salary of $175,000, plus a bonus
35
<PAGE>
pursuant to a bonus plan to be adopted by the Board of Directors for each
fiscal year. In the event Mr. San Miguel is terminated by the Company without
cause Mr. San Miguel will be entitled to a severance payment at the rate of
his annual salary for a six-month period from the date of termination, which
may be extended at the option of the Company for an additional six-month
period. In the event Mr. San Miguel finds new employment after termination,
the Company may eliminate or reduce such severance payments. In addition, the
Company's employment agreement with Mr. San Miguel will contain provisions
regarding confidentiality, proprietary information and work product, non-
competition and non-solicitation. Mr. San Miguel does not own any Senior
Executive Restricted Stock.
STOCK OPTION PLAN
The Company's Stock Option Plan will permit the Board of Directors, or a
committee of the Board of Directors, to grant (i) options that are intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), to employees of the Company, as well as
non-qualifying options to employees and to any other individual whose
participation in the Stock Option Plan is determined to be in the best
interests of the Company, (ii) shares of Common Stock, subject to certain
restrictions (the "Restricted Common Stock"), to the Company's employees,
directors and other representatives and (iii) conditional rights to receive
Restricted Common Stock in the future ("Restricted Common Stock Units"). The
Stock Option Plan authorizes the issuance of up to 10,000,000 shares of Common
Stock pursuant to options or as Restricted Common Stock or Restricted Common
Stock Units, plus shares of Common Stock awarded under any prior stock option
plan of the Company that are forfeited or otherwise terminate without the
delivery of stock (subject to anti-dilution adjustments in the event of a
stock split, recapitalization or similar transaction), provided that no more
than 500,000 shares of Common Stock can be awarded as Restricted Common Stock.
During any calendar year, the maximum number of options that may be granted to
any one person is 3,000,000 and the maximum number of shares of Restricted
Common Stock and Restricted Common Stock Units that may be issued to any one
person is 3,000,000.
The Compensation Committee will administer grants of options, which will
include establishing the exercise price per share under each option and a
vesting schedule for any options to purchase shares of Common Stock. The
option exercise price per share for stock options granted under the Stock
Option Plan may not be less than 100% of the fair market value per share of
Common Stock on the date of grant of the option (or 110% of the fair market
value per share of Common Stock in the case of an incentive stock option
granted to an optionee beneficially owning more than 10% of the outstanding
Common Stock). The maximum option term is ten years (or five years in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Common Stock). Options may be exercised at any
time after grant, except as otherwise provided in the particular option
agreement. There is also a $100,000 limit on the value of shares of Common
Stock (determined at the time of grant) covered by incentive stock options
that become exercisable by an optionee in any year.
The Compensation Committee also will determine the number of shares, the
purchase price per share and a vesting schedule for any shares of Restricted
Common Stock or Restricted Common Stock Units that are to be issued under the
Stock Option Plan. In the event a holder of Restricted Common Stock or
Restricted Common Stock Units ceases to be employed by the Company for any
reason, the Stock Option Plan provides that any unvested Restricted Common
Stock or Restricted Common Stock Units held by such person will be forfeited
immediately to the Company.
The Board of Directors may amend or terminate the Stock Option Plan with
respect to shares of Common Stock as to which options have not been granted or
with respect to shares of Restricted Common Stock or Restricted Common Stock
Units which have not been granted.
36
<PAGE>
CERTAIN TRANSACTIONS
STOCK PURCHASE AGREEMENTS AND RELATED MATTERS
Purchase Agreements. The Company and the Initial Investors entered into a
stock purchase agreement, dated as of April 23, 1997 (the "Purchase
Agreement"), pursuant to which the Company sold 3,400,000 shares of Series A
Convertible Preferred to Golder, Thoma, Cressey, Rauner Fund V, L.P. ("GTCR
V"), MG Capital Partners II, L.P. ("MG"), Gator Associates, Ltd. ("Gator") and
Tara Ventures, Ltd. ("Tara" and, together with Gator, the "Miller Group")
(GTCR V, MG and the Miller Group are referred to collectively as the "Initial
Investors"), for total aggregate consideration of $20,400,000. In July 1997,
the Initial Investors converted 1,726,634 shares of Series A Convertible
Preferred into 1,726,634 shares of Common Stock and subsequently received an
additional 5,179,902 shares of Common Stock in respect of such shares in
connection with a four-for-one split of Common Stock by the Company on July
17, 1997. The remaining 1,673,366 shares of Series A Convertible Preferred
issued pursuant to the Purchase Agreement are convertible into 6,693,464
shares of Common Stock. On February 24, 1998, the Company sold an aggregate of
100,000 shares of Series A Convertible Preferred to certain of the Initial
Investors and their affiliates. GTCR V, Golder, Thoma, Cressey, Rauner
Associates V ("GTCR Associates V") and MG received an aggregate of 50,000
shares and Miller Capital received an aggregate of 50,000 shares. These
100,000 shares of Class A Preferred were sold for aggregate consideration of
$600,000 and are convertible into 400,000 shares of Common Stock. GTCR is the
general partner of GTCR V and a general partner in GTCR Associates V, and Mr.
Miller, a director of the Company, is the president and sole stockholder of
Miller Capital.
Mr. Miller was general partner of Gator and controlled Tara. Both Gator and
Tara have been dissolved, and investors in Gator and Tara received pro rata
shares of the Company's capital stock held by each respective entity upon such
dissolution. The investors in Gator and Tara included Mr. San Miguel, Mr.
Miller, individually, two entities controlled by Mr. Miller, six members of
Mr. Miller's immediate family, three members of Mr. Fernandez's immediate
family and four members of Mr. Frank's immediate family. Bruce Rauner and
William C. Kessinger, both directors of the Company, are employees of GTCR
which is the general partner of GTCR V. See "Management."
In connection with the Purchase Agreement, the Initial Investors, Messrs.
Fernandez, Frank, Knotts and Miller and the Company, became parties to a
Shareholders Agreement (the "Shareholders Agreement") and a Registration
Agreement (the "Investors and Executive Registration Agreement"), and the
Senior Executives, Mr. Miller and the Company became party to certain Senior
Management Agreements (the "Senior Management Agreements") and certain
restricted securities agreements all dated as of April 23, 1997.
Shareholders Agreement. Under the Shareholders Agreement, (i) GTCR has the
right to designate two members of the Board of Directors, (ii) the Miller
Group has the right to designate two members of the Board of Directors, (iii)
Messrs. Fernandez, Frank, Knotts and other executives party to the Agreement
(the "Senior Managers") have the right to designate three directors, (iv) Mr.
Miller and the directors designated by GTCR have the right, with the
consultation of the Senior Managers, to designate four independent directors
and (v) all parties to the Shareholders Agreement agree to vote their shares
in favor of any person designated pursuant to the foregoing provisions.
Messrs. Fernandez, Frank, Knotts and Miller and GTCR have agreed in a letter
agreement dated as of March 15, 1998 that these provisions will be suspended
temporarily upon completion of the Offering and permanently upon appointment
of three additional independent directors by the unanimous vote of a committee
of the Board of Directors consisting of Messrs. Fernandez, Miller and Mr.
Rauner or Mr. Kessinger (as chosen by GTCR) as long as such new directors are
appointed prior to January 1, 1999. If such appointments are not made prior to
that date, these provisions will resume full force and effect. See
"Management--Directors and Executive Officers" and "Risk Factors--Influence of
Existing Shareholders."
Registration Rights Agreement. Under the terms of the Investors and
Executives Registration Agreement the Initial Investors, the Executives and
certain other shareholders of the Company will have the right to require the
Company to register their shares under the Securities Act. (Shares owned by
GTCR V and MG are referred
37
<PAGE>
to as the "GTCR Shares," and shares owned by the former shareholders of Gator
and Tara are referred to as the "Miller Group Shares.") If the Company
proposes to register its securities under the Securities Act, either for its
own account or the account of others, these shareholders are entitled to
notice of such registration and are entitled to include their shares in such
registration; provided, among other conditions, that the underwriters of any
offering have the right to limit the number of such shares included in such
registration, subject to certain conditions. In addition, the holders of a
majority of the GTCR Shares and of a majority of the Miller Group Shares may
also require the Company to file under the Securities Act: (i) after the
completion of a public offering of the Common Stock, an unlimited number of
registrations on Form S-2 or S-3 (provided that the Company is qualified to
use such forms) at the Company's expense; (ii) up to two registration
statements on Form S-1 at the Company's expense; and (iii) an unlimited number
of registration statements on Form S-1 at their own expense. Demand
registrations under the Investors and Executives Registration Agreement must
be on Form S-2 or S-3 if the Company qualifies to use either of such forms,
and the Company has agreed following completion of the Offering to make demand
registrations on Form S-3 available.
The existence and exercise of the foregoing registration rights may hinder
efforts by the Company to arrange future financing for the Company and may
have an adverse effect on the market price of the Common Stock. See "Risk
Factors--Shares Eligible for Future Sale; Registration Rights Agreements."
Other Agreements with Directors and Named Executive Officers. The Senior
Management Agreements provided for the sale of an aggregate of 1,050,000
shares of the Company's Common Stock (350,000 each) to Messrs. Fernandez,
Frank and Knotts for consideration of $7,000 each, and the sale to Mr. Miller
of 150,000 shares of the Company's Common Stock for consideration of $3,000.
Such shares were purchased by the Senior Executives and Mr. Miller on April
23, 1997. The Senior Executives and Mr. Miller subsequently received an
additional 3,600,000 shares of Common Stock in respect of such shares in
connection with the four-for-one split of Common Stock by the Company on July
17, 1997. The Senior Management Agreements and the Restricted Securities
Agreements provide the terms on which such shares vest and place certain
restrictions on such shares. Pursuant to agreements effective as of March 27,
1998, the Company and the Board of Directors, Messrs. Fernandez, Frank, Knotts
and Miller amended certain agreements to which they were parties resulting in
the exchange of 600,000, 600,000, 600,000 and 300,000 shares of restricted
Common Stock, owned by Messrs. Fernandez, Frank, Knotts and Miller,
respectively, for equal numbers of shares of unrestricted Common Stock. The
respective Senior Management Agreements for each of Messrs. Fernandez, Frank
and Knotts provide for a salary at the rate of $500,000 per year, plus
bonuses. Mr. Miller's Senior Management Agreement does not provide for a
salary to be paid to Mr. Miller. The Company expects that the Senior
Management Agreement with Mr. Miller will be terminated prior to the Offering.
The Senior Management Agreements and related restricted securities agreements
with Messrs. Fernandez, Frank and Knotts will be terminated and replaced by
Senior Executive Agreements upon completion of the Offering. See "Management--
Employment Agreements."
On July 22, 1997, Mr. San Miguel entered into an employment agreement and a
restricted securities agreement with the Company. Under these agreements, Mr.
San Miguel has a salary of $175,000 per year, and he purchased 160,000 shares
of Common Stock for consideration of $800. These shares will vest over six
years and are subject to certain restrictions on transfer. Mr. San Miguel's
employment agreement will be terminated and replaced by a new employment
agreement upon completion of the Offering. See "Management--Employment
Agreements."
Pursuant to options in the Senior Management Agreements, on July 10, 1997
the Company sold an aggregate of 50,000 shares of Series A Convertible
Preferred to Messrs. Fernandez, Frank and Knotts for $6.00 per share. Of these
50,000 shares, 16,667.5 shares were sold to Mr. Fernandez, and 16,666.5 shares
were sold to each of Messrs. Knotts and Frank. All of these shares were
converted into common stock, and the Senior Executives subsequently received
an additional 150,001 shares of Common Stock in respect of such shares in
connection with the four-for-one split of Common Stock by the Company on July
17, 1997. See "Management--Executive Compensation."
Pursuant to the Purchase Agreement, the Senior Management Agreement and
certain other agreements with executives of the Company, the Initial Investors
and certain of the Company's executives have preemptive rights with respect to
certain proposed sales of Common Stock by the Company, not including any sale
in the Offering
38
<PAGE>
or any sales to employees of the Company pursuant to employment agreements or
benefit plans. In addition, these same parties were granted certain rights of
first refusal and participation rights with respect to any sales of Common
Stock by the other parties to these agreements. These preemptive rights,
rights of first refusal and participation rights will be terminated effective
upon the Offering.
The Company intends to enter into a sublease with Miller Capital whereby the
Company would lease to Miller Capital a portion of the premises at its new
corporate headquarters, at 1001 Brickell Bay Drive, Suite 3000, Miami,
Florida. The Company and Miller Capital have reached agreement on the
principal terms of this sublease, and the Company believes that the financial
terms of this sublease will be comparable to those that would be obtained in
an arms-length transaction.
NETSOL INTERNATIONAL, INC.
The Company is a party to an Alliance Agreement, dated as of December 10,
1997 (the "Alliance Agreement"), by and among the Company and NetSol
International, Inc., a Florida corporation ("NetSol"). Pursuant to the
Alliance Agreement, the Company will receive referrals and leads on
consulting, systems integration and other projects from NetSol in both the
U.S. and Latin American markets. NetSol will serve as a sales agent for the
Company on projects in Latin America, and the Company will have the right of
first refusal on systems integration and network integration projects in Latin
America when NetSol requires subcontracting to a third party in the U.S.
market. The Alliance Agreement also provides for the sharing of commissions on
hardware and software procurement, applications software and consulting
services.
The authorized capital stock of NetSol consists of 10,000 shares of common
stock, of which 6,624 are issued and outstanding. Pursuant to a stock purchase
agreement, dated as of August 29, 1997 (the "NetSol Stock Purchase
Agreement"), GTCR V purchased 2,206 shares of NetSol for aggregate
consideration of $662,500 from NetSol's stockholders, which include Messrs.
Fernandez, Frank, Knotts and Miller. Subsequent to the NetSol Stock Purchase
Agreement, and assuming the exercise of options granted to certain members of
NetSol's management, GTCR V will own 33.33%, and Messrs. Fernandez, Frank,
Knotts and Miller will own 12.59%, 5.03%, 5.03% and 2.52% of NetSol's common
stock, respectively.
NetSol has provided and is expected to continue to provide the Company with
such products as computer hardware and telephone systems and related
procurement services. For the Inception Period, payments to NetSol for such
goods and services totaled approximately $1.5 million. The Company believes
that the terms on which such goods and services were acquired are comparable
to those that would be obtained from a third-party vendor in arms-length
transactions.
39
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of April 3, 1998, assuming the Conversion and as
adjusted to reflect the sale of 3,850,000 shares of Common Stock in this
Offering: (i) by each person (or group of affiliated persons) known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock; (ii) by each of the Named Executive Officers; (iii) by each director of
the Company; (iv) by all of the Company's directors and executive officers as
a group; and (v) each shareholder selling shares in the Offering (each a
"Selling Shareholder").
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARED BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING (1) NUMBER OF AFTER OFFERING (1)
-------------------------- SHARES BEING --------------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- - ---- ------------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Ted A. Fernandez (2).... 1,466,670 4.8% -- 1,466,670 4.4%
Allan R. Frank (2),
(3).................... 1,534,666 5.0 -- 1,534,666 4.6
Ulysses S. Knotts, III
(2).................... 1,466,666 4.8 -- 1,466,666 4.4
Luis E. San Miguel (2).. 182,664 * -- 182,664 *
Bruce Rauner (4), (5)... 6,931,372 22.6 686,700(6) 6,244,672 18.7
William C. Kessinger
(4), (5)............... 6,931,372 22.6 686,700(6) 6,244,672 18.7
Fernando Montero (2).... 204,000 * -- 204,000 *
Golder, Thoma, Cressey,
Rauner Fund V, LP (4),
(5).................... 6,918,285 22.6 686,700(6) 6,232,585 18.6
Golder, Thoma, Cressey,
Rauner Associates V
(4), (5)............... 12,087 * -- 12,087 *
Edmund R. Miller (2).... 7,463,980(7) 24.4 --(8) 7,290,000(9) 21.8
Miller Capital
Management, Inc. (2)... 1,106,668(7) 3.6 -- 1,246,666(9) 3.7
Southeast Investments
International, Ltd.
(2).................... 226,668(7) * -- 226,668 *
Southeast Investments,
L.P. (2)............... 680,000(7) 2.2 -- 680,000 2.0
All directors and
executive officers as a
group (9 persons)...... 19,390,018 63.3 686,700(6) 18,390,018 54.9
<CAPTION>
OTHER SELLING
SHAREHOLDERS
- - -------------
<S> <C> <C> <C> <C> <C>
AB Hannells Industrier
(10)................... 34,000 * 34,000 -- --
BFC Holdings, Inc.
(11)................... 66,864 * 66,864 -- --
Leonardo F. Brito (12).. 15,864 * 3,172 12,692 *
Marcel Drier (13)....... 13,600 * 13,600 -- --
Steven L. Eber (14)..... 170,000 * 20,000 150,000 *
Pippa J. Ellis (15)..... 22,664 * 8,664 14,000 *
RBC Inc. (16)........... 266,000 * 133,000 133,000 *
Joseph M. Salvani (17).. 34,000 * 34,000 -- --
Total Selling
Shareholders........... 7,542,277 24.6 1,000,000 6,542,277 19.5
</TABLE>
- - --------
* Less than 1%.
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, a person has beneficial ownership of any securities as to which
such person, directly or indirectly, through any contract, arrangement,
undertaking, relationship or otherwise has or shares voting power and/or
investment power and as to which such person has the right to acquire
such voting and/or investment power within 60 days. Percentage of
beneficial ownership as to any person as of a particular date is
calculated by dividing the number of shares beneficially owned by such
person by the sum of the number of shares outstanding as of such date and
the number of shares as to which such person has the right to acquire
voting and/or investment power within 60 days.
(2) The address of each of Messrs. Fernandez, Frank, Knotts, San Miguel,
Montero and Miller and Miller Capital Management, Inc., Southeast
Investments International, Ltd. and Southeast Investments, LP is 1001
Brickell Bay Drive, Suite 3000, Miami, Florida 33131.
(3) Includes 68,000 shares of Common Stock with respect to which Mr. Frank
has voting power pursuant to proxies granted by the beneficial owners of
such shares. Mr. Frank disclaims beneficial ownership of these shares.
(4) The address of each of Messrs. Rauner and Kessinger, GTCR V and GTCR
Associates V is 6100 Sears Tower, Chicago, Illinois, 60606.
(5) Includes shares held by GTCR V and shares held by GTCR Associates V.
Messrs. Rauner and Kessinger are principals in GTCR which is the general
partner of GTCR V and a general partner in GTCR Associates
40
<PAGE>
V. Messrs. Rauner and Kessinger disclaim the beneficial ownership of the
shares held by such entities except to the extent of his proportionate
ownership interests therein.
(6) Consists solely of shares held by GTCR V for which each of Messrs. Rauner
and Kessinger disclaims beneficial ownership except to the extent of his
proportionate ownership interest therein.
(7) Includes 1,280,000 shares held by Mr. Miller individually. Also includes
(i) 200,000 shares held directly by Miller Capital, which is wholly owned
by Mr. Miller, (ii) 226,668 shares held directly by Southeast Investments
International, Ltd., which is an investment fund managed by Miller
Capital, (iii) 680,000 shares held directly by Southeast Investments,
L.P., which is an investment fund managed by Miller Capital and in which
Mr. Miller owns, indirectly, approximately a 39% interest, and (iv)
5,077,312 shares with respect to which Mr. Miller has voting power
pursuant to proxies granted by the beneficial owners of such shares. Mr.
Miller disclaims the beneficial ownership of the shares owned by
Southeast Investments International, Ltd. and Southeast Investments, L.P.
except to the extent of his proportionate interest therein, and Mr.
Miller disclaims beneficial ownership of all shares with respect to which
he has voting power pursuant to a proxy granted by the beneficial owner
thereof.
(8) Mr. Miller has voting power over 313,300 shares of Common Stock being
sold by certain Selling Shareholders pursuant to proxies granted by such
Selling Shareholders. Mr. Miller will not receive any of the proceeds
from the sale of these shares.
(9) Includes 140,000 shares which Miller Capital intends to purchase in the
Offering.
(10) The address of AB Hannells Industrier is Kvekatorpsvagen 25, Box 174,
Falkenberg 31122, Sweden.
(11) The address of BFC Holdings, Inc. is P.O. Box 662, Road Town, Tortola,
British Virgin Islands.
(12) The address of Leonardo F. Brito is 798 Crandon Boulevard, #9, Key
Biscayne, Florida 33149.
(13) The address of Marcel Dreier is 425 East 58th Street, Apartment 37A, New
York, New York 10022.
(14) The address of Steven L. Eber is 625 San Servando Avenue, Coral Gables,
Florida 33143.
(15) The address of Pippa J. Ellis is 14 Miller Road, Darien, Connecticut
06820.
(16) The address of RBC Inc. is c/o Bank Morgan Stanley AG, Bahnhofstrasse 92,
Zurich, CH-8023, Switzerland.
(17) The address of Joseph M. Salvani is Unit 318, 4800 Highway A-1-A, Vero
Beach, Florida 32963.
DESCRIPTION OF CAPITAL STOCK
The Company was incorporated as a Florida corporation on April 23, 1997. As
of April 3, 1998, after giving effect to the Reverse Stock Split, the Company
had 23,200,041 shares of Common Stock outstanding and 255 holders of record of
such Common Stock and 1,790,026 shares of convertible preferred stock
outstanding and 50 holders of record of such convertible preferred stock. The
Company expects to issue 269,166 shares of Common Stock in connection with the
Legacy Acquisition. Concurrent with the Offering, each share of outstanding
convertible preferred stock will be converted into four shares of Common
Stock. The following is a description of the material terms of the capital
stock of the Company after giving effect to the Reverse Stock Split and
amendments to the Company's Articles of Incorporation in connection therewith.
COMMON STOCK
The Company is authorized to issue 125,000,000 shares of Common Stock, $.001
par value per share. Upon completion of the Offering, each shareholder of
record will be entitled to one vote for each outstanding share of Common Stock
owned by such shareholder on every matter properly submitted to the
shareholders for their vote.
Subject to the dividend rights of holders of the Company's preferred stock,
par value $.001 per share ("Preferred Stock"), holders of Common Stock are
entitled to any dividend declared by the Board of Directors out of funds
legally available for such purpose, and, after the payment of liquidation
preferences to all holders of Preferred Stock, holders of Common Stock are
entitled to receive on a pro rata basis all remaining assets of the Company
available for distribution to the shareholders in the event of the
liquidation, dissolution, or winding up
41
<PAGE>
of the Company. Holders of Common Stock do not have any preemptive right to
become subscribers or purchasers of additional shares of any class of the
Company's capital stock.
PREFERRED STOCK
The Company's Articles of Incorporation, as amended, allow the Company to
issue without shareholder approval Preferred Stock having rights senior to
those of the Common Stock. As of the closing of the Offering, no shares of
Preferred Stock will be outstanding. Thereafter, the Board of Directors will
be authorized, without further shareholder approval, to issue up to 1,250,000
shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption and liquidation
preferences, and to fix the number of shares constituting any series and the
designations of such series.
The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. The Company currently has no plans to issue any
shares of Preferred Stock.
The Company currently has the authority to issue up to 3,600,000 shares of
Series A Convertible Preferred, of which 1,773,360 shares will be outstanding
immediately prior to the Offering, and up to 50,000 shares of Series B
Convertible Preferred, of which 16,666 shares will be outstanding immediately
prior to the Offering. Upon the signing of the underwriting agreement relating
to the Offering, the Conversion will occur whereby all outstanding shares of
Series A Convertible Preferred and Series B Convertible Preferred will
automatically be converted into shares of Common Stock on a four-for-one
basis. As of such time, the Company no longer will have authority to issue
shares of convertible preferred stock, and the Company's authorized capital
will consist only of 125,000,000 shares of Common Stock and 1,250,000 shares
of Preferred Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
To the fullest extent permitted by the Florida Business Corporation Act (the
"Florida Act"), the Company's Articles of Incorporation provide that directors
of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as a director.
Generally, the Florida Act permits indemnification of a director or officer
upon a determination that he or she 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, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The Articles of Incorporation and Bylaws of the Company provide for the
indemnification of the Company's directors and officers and any person who is
or was serving at the request of the Company as a director, officer, employee,
partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan to the
fullest extent authorized by, and subject to the conditions set forth in the
Florida Act against all expenses, liabilities and losses (including attorneys'
fees, judgments, fines, ERISA taxes or penalties and amounts paid or to be
paid in settlement) , except that the Company will indemnify a director or
officer in connection with a proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof) was authorized by the
Company's Board of Directors. The indemnification provided under the Bylaws
includes the right to be paid by the Company the expenses (including
attorneys' fees) in advance of any proceeding for which indemnification may be
had in advance of its final disposition, provided that the payment of such
expenses (including attorneys' fees) incurred by a director or officer in
advance of the final disposition of a proceeding may be made only upon
delivery to the Company of an undertaking by or on behalf of such director or
officer to repay all amounts so paid in advance if it is ultimately determined
that such director or officer is not entitled to be indemnified. Pursuant to
the Bylaws, if a claim for indemnification is not paid by the Company within
60 days after a written claim has been received by
42
<PAGE>
the Company, the claimant may at any time thereafter bring an action against
the Company to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant will be entitled to be paid also the expense of
prosecuting such action.
Under the Articles of Incorporation, the Company has the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, employee benefit plan
or other enterprise, against any liability asserted against such person or
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the provisions of the Florida Act.
The Company maintains director and officer liability insurance on behalf of
its directors and officers.
CERTAIN ANTI-TAKEOVER EFFECTS
The Company's Articles of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Company's Board of Directors and in the
policies formulated by the Board of Directors. In addition certain provisions
of Florida law may hinder or delay an attempted takeover of the Company other
than through negotiation with the Board of Directors. These provisions could
have the effect of discouraging certain attempts to acquire the Company or
remove incumbent management even if some or a majority of the Company's
shareholders were to deem such an attempt to be in their best interest,
including attempts that might result in the shareholders' receiving a premium
over the market price for the shares of Common Stock held by shareholders.
Classified Board of Directors; Removal; Vacancies. The Articles of
Incorporation provide that the Board of Directors is divided into three
classes of directors serving staggered three-year terms. The classification of
directors has the effect of making it more difficult for shareholders to
change the composition of the Board of Directors in a relatively short period
of time. The Articles of Incorporation further provides that directors may be
removed only for cause and then only by the affirmative vote of the holders of
at least two-thirds of the entire voting power of all the then-outstanding
shares of stock of the Company entitled to vote generally in the election of
directors, voting together as a single class. In addition, vacancies and newly
created directorships resulting from any increase in the size of the Board of
Directors may be filled only by the affirmative vote of a majority of the
directors then in office (even if such directors do not constitute a quorum)
or by a sole remaining director. The foregoing provisions could prevent
shareholders from removing incumbent directors without cause and filling the
resulting vacancies with their own nominees.
Advance Notice Provisions for Shareholder Proposals and Shareholder
Nominations of Directors. The Bylaws establish an advance notice procedure
with regard to the nomination, other than by the Board of Directors, of
candidates for election to the Board of Directors and with regard to certain
matters to be brought before an annual meeting of shareholders of the Company.
For nominations and other business to be brought properly before an annual
meeting by a shareholder, the shareholder must deliver notice to the Company
not less than 60 days nor more than 90 days prior to the first anniversary of
the preceding year's annual meeting. Separate provisions based on public
notice by the Company specify how this advance notice requirement operates in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date. The shareholder's
notice must set forth certain specified information regarding the shareholder
and its holdings, as well as certain background information regarding any
director nominee (together with such person's written consent to being named
as a nominee and to serving as a director if elected) and a brief description
of any business desired to be brought before the meeting, the reasons for
conducting the business at the meeting and any material interest of the
shareholder in the business proposed. In the case of a special meeting of
shareholders called for the purpose of electing directors, nominations by a
shareholder may be made only by delivery of notice to the Company no later
than the tenth day following the day on which public announcement of the
special meeting is made. Although the Bylaws do not give the Company's Board
of Directors any power to approve or disapprove shareholder nominations for
the election of directors or any other business desired by shareholders to be
conducted at an annual meeting, the Bylaws (i) may have the effect of
precluding a nomination for the election of directors or precluding the
conduct of certain business at a particular
43
<PAGE>
meeting if the proper procedures are not followed or (ii) may discourage or
deter a third party from conducting a solicitation of proxies to elect its own
slate of directors or otherwise attempting to obtain control of the Company,
even if the conduct of such solicitation or such attempt might be beneficial
to the Company and its shareholders.
Special Shareholders' Meetings. Under the Articles of Incorporation and the
Bylaws, special meetings of the shareholders, unless otherwise prescribed by
statute, may be called only (i) by the Board of Directors or by the Chairman
or President of the Company or (ii) by shareholders of the Company upon the
written request of the holders of at least 80% of the securities of the
Company outstanding and entitled to vote generally in the election of
directors.
Limitations on Shareholder Action by Written Consent. The Articles of
Incorporation also provide that any action required or permitted to be taken
at a shareholders' meeting may be taken without a meeting, without prior
notice and without a vote, if the action is taken by persons who would be
entitled to vote at a meeting and who hold shares having voting power equal to
not less than the greater of (a) 80% of the voting power of all shares of each
class or series entitled to vote on such action or (b) the minimum number of
votes of each class or series that would be necessary to authorize or take the
action at a meeting at which all shares of each class or series entitled to
vote were present and voted.
Provisions of Florida Law. In addition to the foregoing provisions of the
Articles of Incorporation and the Bylaws, the Company has also elected to be
subject to the "affiliated transaction" provision of the Florida Act. This
provision prohibits a publicly-held Florida corporation from engaging in a
broad range of business combinations or other extraordinary corporate
transactions with an "interested shareholder" unless (i) in addition to any
affirmative vote required by any other section of the Florida Act or by the
Articles of Incorporation of the corporation, the transaction is approved by
two-thirds of the corporation's outstanding voting shares other than the
shares beneficially owned by the interested shareholder, (ii) the transaction
is approved by a majority of the disinterested directors, (iii) the interested
shareholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for at least five (5) years preceding the date of
the transaction, or (iv) the interested shareholder is the beneficial owner of
at least 90% of the outstanding voting shares of the corporation, exclusive of
shares acquired directly from the corporation in a transaction not approved by
a majority of the disinterested directors. The term "interested shareholder"
is defined as a person who together with affiliates and associates
beneficially owns more than 10% of the corporation's outstanding voting
shares. These provisions could have the effect of delaying, deferring or
preventing a change in control of the Company or reducing the price that
certain investors might be willing to pay in the future for shares of Common
Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is BankBoston, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 33,479,311 shares of
Common Stock outstanding (assuming no exercise of outstanding options). Of
these shares, the 3,850,000 shares (4,427,500 shares if the Underwriters'
over-allotment option is exercised in full) to be sold in the Offering will be
freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by affiliates of the Company,
as that term is defined in Rule 144 under the Securities Act ("Affiliates"),
may generally only be sold in compliance with the limitations of Rule 144
described below. The remaining 29,629,311 shares of Common Stock outstanding
upon completion of the Offering are deemed "Restricted Shares" under Rule 144.
44
<PAGE>
SALES OF RESTRICTED SHARES
None of the Restricted Shares will be eligible for sale in the public market
on the date of this Prospectus. Following the period ending 180 days after the
date of this Prospectus, 18,804,005 shares of Common Stock will be eligible
for sale in the public market subject to Rule 144 under the Securities Act.
See "--Lock-up Agreements."
In general, under Rule 144, a person (or persons whose shares are
aggregated), including an Affiliate, who has beneficially owned Restricted
Shares for at least one year is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock (approximately 334,793
shares immediately after the Offering) or (ii) the average weekly trading
volume in the Common Stock on the Nasdaq National Market during the four
calendar weeks preceding the date on which notice of such sale is filed,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, Affiliates must
comply with the restrictions and requirements of Rule 144, other than the one-
year holding period requirement, in order to sell shares of Common Stock which
are not restricted securities. Under Rule 144(k), a person who is not an
affiliate and has not been an Affiliate for at least three months prior to the
sale and who has beneficially owned Restricted Shares for at least two years
may resell such shares without compliance with the foregoing requirements. In
meeting the one and two years holding periods described above, a holder of
Restricted Shares can include the holding periods of a prior owner who was not
an Affiliate. The one and two year holding periods described above do not
begin to run until the full purchase price or other consideration is paid by
the person acquiring the Restricted Shares from the issuer or an Affiliate.
OPTIONS AND WARRANT
At April 3, 1998, 1,367,169 shares of Common Stock were issuable pursuant to
outstanding options. None of these options are currently exercisable, and none
will be exercisable, prior to May 27, 1999. Following the Offering, the
Company intends to file one or more registration statements on Form S-8 under
the Securities Act to register approximately 10,750,000 shares of Common Stock
issued as subject to outstanding stock options or reserved for issuance under
the Company's Stock Plans. The Company also has reserved 37,500 shares for
issuance upon exercise of a warrant outstanding and exercisable as of April 3,
1998. In the event the warrant is exercised during the period ending 180 days
after the date of this Prospectus, the shares issued upon exercise of the
warrant will not be eligible for sale in the public market during such period
but will be eligible for sale in the public market upon completion of such
period subject to Rule 144 under the Securities Act.
LOCK-UP AGREEMENTS
Each of the Company, the Selling Shareholders, the directors, executive
officers and certain other shareholders of the Company have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the Underwriters, as defined, it will not, during the period ending
180 days after the date of this Prospectus, (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
or the Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The restrictions described in this paragraph
do not apply to (v) the sale of Shares to the Underwriters, (w) the issuance
by the Company of 269,166 shares of Common Stock to the stockholders of Legacy
in connection with the Legacy Acquisition, (x) the issuance by the Company of
shares of Common Stock upon the exercise of an option or a warrant or the
conversion of a security outstanding on the date of this Prospectus of which
the Underwriters have been advised in writing, (y) the grant by the Company of
(A) options to purchase shares of Common Stock in connection with the Legacy
Acquisition and (B) options to employees in the ordinary course of business
consistent with past practice, provided that no such options shall become
exercisable during the 180-day period, or (z) transactions by any person other
than the Company relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the Offering.
45
<PAGE>
REGISTRATION RIGHTS
Following the Offering, holders of 20,661,757 shares of Common Stock will
have the right to require the Company to register such shares under the
Securities Act pursuant to terms and conditions of registration agreements
with the Company. See "Certain Transactions." The existence and exercise of
the foregoing registration rights may hinder efforts by the Company to arrange
the financing for the Company and may have an adverse effect on the market
price of the Common Stock. See "Risk Factors--Shares Eligible for Future
Sales; Registration Rights Agreements."
46
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the
Underwriters named below for whom Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, NationsBanc Montgomery
Securities LLC and the Robinson-Humphrey Company, LLC are acting as
Representatives, have severally agreed to purchase, and the Company and the
Selling Shareholders have agreed to sell to them, severally, the respective
number of shares of Common Stock set forth opposite the names of such
Underwriters below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated.....................................
Donaldson, Lufkin & Jenrette Securities Corporation...................
NationsBanc Montgomery Securities LLC.................................
The Robinson-Humphrey Company, LLC....................................
----
Total...............................................................
====
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the over-allotment option described below) if any such shares
are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other Underwriters or to certain dealers. After the
initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representative.
The Company and certain Selling Shareholders have granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 577,500 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The Underwriters may exercise
such option solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of Common Stock offered hereby.
To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock as the number set forth
next to such Underwriter's name in the preceding table bears to the total
number of shares of Common Stock set forth next to the names of all
Underwriters in the preceding table.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "ANSR."
Each of the Company, the Selling Shareholders, the directors, executive
officers and certain other shareholders of the Company have agreed that,
without the prior written consent of Morgan Stanley on behalf of the
Underwriters, it will not, during the period ending 180 days after the date of
this Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
47
<PAGE>
option, right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership or the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The restrictions described in this paragraph do not apply to (v)
the sale of Shares to the Underwriters, (w) the issuance by the Company of
269,166 shares of Common Stock to the stockholders of Legacy in connection
with the Legacy Acquisition, (x) the issuance by the Company of shares of
Common Stock upon the exercise of an option or a warrant or the conversion of
a security outstanding on the date of this Prospectus of which the
Underwriters have been advised in writing, (y) the grant by the Company of (A)
options to purchase shares of Common Stock in connection with the Legacy
Acquisition and (B) options to employees in the ordinary course of business
consistent with past practice, provided that no such options shall become
exercisable during the 180-day period, or (z) transactions by any person other
than the Company relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the Offering.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover overallotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the Offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. 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.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be determined by negotiations between
the Company and the Underwriters. Among the factors to be considered in
determining the initial public offering price will be the future prospects of
the Company and its industry in general, sales, earnings and certain other
financial and operating information of the Company in recent periods, and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company. The estimated initial public offering price
range set forth on the cover page of this Prospectus is subject to change as a
result of market conditions and other factors.
At the request of the Company, the Underwriters have reserved for sale, at
the initial offering price, up to 231,000 shares offered hereby for directors,
officers, employees, business associates and related persons of the Company.
The number of shares of Common Stock available for sale to the general public
will be reduced to the extent such persons purchase such reserved Shares. Any
reserved shares which are not so purchased will be offered by the Underwriters
to the general public on the same basis as the other shares offered hereby.
48
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Hogan & Hartson L.L.P., Washington, D.C. Certain legal
matters in connection with the Offering will be passed upon for the
Underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The financial statements of AnswerThink Consulting Group, Inc., Delphi
Partners, Inc., The Hackett Group, Inc., Relational Technologies, Inc. and
Legacy Technology, Inc. included elsewhere in this Prospectus have been
included herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act, of which this
Prospectus is a part, with respect to the Common Stock offered hereby. This
Prospectus omits certain information contained in the Registration Statement,
and reference is made to the Registration Statement for further information
with respect to the Company and the Common Stock offered hereby. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents and when any such document is an exhibit to the
Registration Statement, each such statement is qualified in its entirety by
reference to the copy of such document filed with the Commission. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional
Offices at 75 Park Place, Room 1288, New York, New York 10017, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511, and
copies may be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Registration Statement, including all exhibits and schedules, and such reports
and other information may also be accessed electronically by means of the
Commission's site on the World Wide Web, at http://www.sec.gov.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF ANSWERTHINK CONSULTING GROUP, INC.
Report of Independent Certified Public Accountants...................... F-2
Consolidated Balance Sheets as of January 2, 1998 and April 3, 1998
(unaudited)............................................................ F-3
Consolidated Statements of Operations for the Period April 23, 1997
(date of inception) through January 2, 1998 and Quarter Ended April 3,
1998 (unaudited)....................................................... F-4
Consolidated Statements of Shareholders' Equity for the Period April 23,
1997 (date of inception) through January 2, 1998 and Quarter Ended
April 3, 1998 (unaudited) ............................................. F-5
Consolidated Statements of Cash Flows for the Period April 23, 1997
(date of inception) through January 2, 1998 and Quarter Ended April 3,
1998 (unaudited)....................................................... F-6
Notes to Financial Statements........................................... F-7
FINANCIAL STATEMENTS OF DELPHI PARTNERS, INC.
Report of Independent Accountants....................................... F-16
Balance Sheets as of October 24, 1997 and December 31, 1996............. F-17
Statements of Operations for the Period January 1, 1997 through October
24, 1997 and for the Years Ended December 31, 1995 and 1996............ F-18
Statements of Stockholders' Equity for the Period from January 1, 1997
through October 24, 1997 and for the Years Ended December 31, 1995 and
1996................................................................... F-19
Statements of Cash Flows for the period January 1, 1997 through October
24, 1997 and for the Years ended December 31, 1996 and 1995............ F-20
Notes to Financial Statements........................................... F-21
FINANCIAL STATEMENTS OF THE HACKETT GROUP, INC.
Report of Independent Accountants....................................... F-24
Balance Sheets as of September 30, 1997 and December 31, 1996........... F-25
Statements of Operations for the Period January 1, 1997 through
September 30, 1997 and for the Years Ended December 31, 1996 and 1995.. F-26
Statements of Stockholder's Equity for the Period January 1, 1997
through September 30, 1997 and for the Years Ended December 31, 1996
and 1995............................................................... F-27
Statements of Cash Flows for the Period January 1, 1997 through
September 30, 1997 and for the Years Ended December 31, 1996 and 1995.. F-28
Notes to Financial Statements........................................... F-29
FINANCIAL STATEMENTS OF RELATIONAL TECHNOLOGIES, INC.
Report of Independent Accountants....................................... F-32
Balance Sheets as of July 31, 1997 and December 31, 1996................ F-33
Statements of Operations for the Period January 1, 1997 through July 31,
1997 and for the Year Ended December 31, 1996.......................... F-34
Statements of Stockholders' Equity for the Period January 1, 1997
through July 31, 1997 and for the Year Ended December 31, 1996......... F-35
Statements of Cash Flows for the Period January 1, 1997 through July 31,
1997 and for the Year Ended December 31, 1996.......................... F-36
Notes to Financial Statements........................................... F-37
FINANCIAL STATEMENTS OF LEGACY TECHNOLOGY, INC.
Report of Independent Accountants....................................... F-41
Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited)... F-42
Statements of Operations for the Year Ended December 31, 1997 and Three
Months Ended
March 31, 1998 (unaudited) ............................................ F-43
Statements of Stockholders' Equity for the Year Ended December 31, 1997
and Three Months Ended
March 31, 1998 (unaudited)............................................. F-44
Statements of Cash Flows for the Year Ended December 31, 1997 and Three
Months Ended
March 31, 1998 (unaudited)............................................. F-45
Notes to Financial Statements........................................... F-46
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Basis of Presentation................................................... PF-1
Unaudited Pro Forma Consolidated Balance Sheet as of April 3, 1998...... PF-2
Notes to Unaudited Pro Forma Consolidated Balance Sheet................. PF-3
Unaudited Pro Forma Consolidated Statement of Operations for the Period
April 23, 1997 (date of inception) through January 2, 1998............. PF-4
Notes to Unaudited Pro Forma Consolidated Statement of Operations....... PF-5
Unaudited Pro Forma Consolidated Statement of Operations for the Quarter
Ended April 3, 1998.................................................... PF-6
Notes to Unaudited Pro Forma Consolidated Statement of Operations....... PF-7
</TABLE>
F-1
<PAGE>
The Consolidated Financial Statements included herein have been adjusted to
give effect to the anticipated one-for-two reverse stock split of all of the
Company's outstanding shares of capital stock (the "Reverse Stock Split") and
the amendments of the Company's Articles of Incorporation in connection
therewith prior to the effectiveness of an initial public offering as
described in Note 11 to the Company's Consolidated Financial Statements. We
expect to be in a position to render the following audit report upon the
effectiveness of the Reverse Stock Split assuming that through the effective
date of the Reverse Stock Split, no other events will have occurred that would
affect the Consolidated Financial Statements.
Coopers & Lybrand L.L.P.
Miami, Florida
March 12, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of AnswerThink Consulting Group, Inc.
Miami, Florida
We have audited the accompanying consolidated balance sheet of AnswerThink
Consulting Group, Inc. and subsidiaries as of January 2, 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the period April 23, 1997 (date of inception) through January 2, 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 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 consolidated financial position of AnswerThink
Consulting Group, Inc. and subsidiaries as of January 2, 1998 and the
consolidated results of their operations and their cash flows for the period
April 23, 1997 (date of inception) through January 2, 1998, in conformity with
generally accepted accounting principles.
F-2
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 2, 1998 APRIL 3, 1998
--------------- -------------
<S> <C> <C>
Current assets: (UNAUDITED)
Cash and cash equivalents...................... $ 3,173,262 $ 3,944,221
Accounts receivable and unbilled revenue, net.. 10,157,720 14,010,003
Prepaid expenses and other current assets...... 412,388 631,898
----------- -----------
Total current assets......................... 13,743,370 18,586,122
Property and equipment, net...................... 2,495,295 2,382,023
Other assets..................................... 467,370 1,979,198
Goodwill, net.................................... 11,943,610 14,893,924
----------- -----------
Total assets................................. $28,649,645 $37,841,267
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 1,437,292 $ 1,823,813
Accrued expenses and other liabilities......... 4,126,254 6,562,561
Notes payable to shareholders, current
portion....................................... -- 5,950,000
----------- -----------
Total current liabilities.................... 5,563,546 14,336,374
----------- -----------
Obligations under capital leases................. -- 324,048
Borrowings under revolving credit facility ...... 8,150,000 7,500,000
Notes payable to shareholders.................... 4,050,000 1,896,000
----------- -----------
Total long-term liabilities.................. 12,200,000 9,720,048
----------- -----------
Total liabilities............................ 17,763,546 24,056,422
----------- -----------
Commitments and contingencies
Convertible preferred stock ..................... 10,040,196 11,140,191
----------- -----------
Shareholders' equity:
Preferred stock, $.001 par value, 1,250,000
authorized, none issued and outstanding....... -- --
Common stock, $.001 par value, authorized
125,000,000 shares; issued and outstanding:
23,378,592 shares at January 2, 1998;
23,200,041 shares at April 3, 1998............ 23,379 23,200
Additional paid-in capital..................... 13,569,279 55,779,486
Unearned compensation--restricted stock........ (656,303) (1,614,407)
Accumulated deficit............................ (12,090,452) (51,543,625)
----------- -----------
Total shareholders' equity................... 845,903 2,644,654
----------- -----------
Total liabilities and shareholders' equity... $28,649,645 $37,841,267
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 23,
1997 (DATE OF INCEPTION) QUARTER ENDED
THROUGH JANUARY 2, 1998 APRIL 3, 1998
------------------------ -------------
<S> <C> <C>
(UNAUDITED)
Net revenues............................ $ 14,848,172 $ 18,531,770
Costs and expenses:
Project personnel and expenses........ 13,333,921 11,193,806
Selling, general and administrative... 8,084,558 5,654,019
Compensation related to vesting of
restricted shares.................... -- 40,843,400
Settlement costs...................... 1,902,608 --
In-process research and development
technology........................... 4,000,000 --
------------ ------------
Total costs and operating expenses.. 27,321,087 57,691,225
------------ ------------
Loss from operations.................. (12,472,915) (39,159,455)
Other income (expense):
Interest income....................... 498,018 28,047
Interest expense...................... (115,555) (321,765)
------------ ------------
Net loss................................ $(12,090,452) $(39,453,173)
============ ============
Net loss per common share--basic and
diluted................................ $ (1.91) $ (3.86)
============ ============
Weighted average common shares
outstanding............................ 6,342,319 10,226,330
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD APRIL 23, 1997 (DATE OF INCEPTION) THROUGH JANUARY 2, 1998 AND
FOR THE QUARTER ENDED APRIL 3, 1998
<TABLE>
<CAPTION>
UNEARNED
COMMON STOCK ADDITIONAL COMPENSATION TOTAL
------------------- PAID-IN RESTRICTED ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY
---------- ------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 23,
1997................... -- $ -- $ -- $ -- $ -- $ --
Issuance of 13,734,850
shares of restricted
common stock........... 13,734,850 13,735 757,879 (702,447) -- 69,167
Conversion of 1,826,634
shares of Class A
preferred stock to
common stock .......... 7,306,536 7,307 10,952,497 -- -- 10,959,804
Issuance of 2,337,206
shares of restricted
common stock for
business acquisitions.. 2,337,206 2,337 1,858,903 -- -- 1,861,240
Amortization of deferred
compensation expense... -- -- -- 46,144 -- 46,144
Net loss................ -- -- -- -- (12,090,452) (12,090,452)
---------- ------- ----------- ----------- ------------ ------------
Balance, January 2,
1998................... 23,378,592 23,379 $13,569,279 $ (656,303) $(12,090,452) $ 845,903
Issuance of 25,100
shares of restricted
common stock
(unaudited) ........... 25,100 25 101 -- -- 126
Purchase and retirement
of restricted common
stock (unaudited) ..... (203,651) (204) (814) -- -- (1,018)
Restricted shares vested
(unaudited)............ -- -- 42,210,920 (1,045,440) -- 41,165,480
Amortization of deferred
compensation expense
(unaudited)............ -- -- -- 87,336 -- 87,336
Net loss (unaudited).... -- -- -- -- (39,453,173) (39,453,173)
---------- ------- ----------- ----------- ------------ ------------
Balance at April 3, 1998
(unaudited) ........... 23,200,041 $23,200 $55,779,486 $(1,614,407) $(51,543,625) $ 2,644,654
========== ======= =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 23, 1997
(DATE OF
INCEPTION) THROUGH QUARTER ENDED
JANUARY 2, 1998 APRIL 3, 1998
------------------ -------------
<S> <C> <C>
Cash flows from operating activities: (UNAUDITED)
Net loss.................................... $(12,090,452) $(39,453,173)
Adjustments to reconcile net loss to net
cash used in operating activities:
Compensation charge related to vesting in
restricted shares........................ -- 40,843,400
In-process research and development
technology............................... 4,000,000 --
Depreciation and amortization............. 462,073 593,126
Changes in assets and liabilities, net of
effects from acquisitions:
Increase in accounts receivable and unbilled
revenue.................................... (4,481,152) (3,852,283)
Increase in prepaid expenses and other
current and non-current assets............. (736,166) (414,997)
Increase in accounts payable................ 825,545 386,521
Increase in accrued expenses and other
liabilities................................ 784,906 1,864,872
------------ ------------
Net cash used in operating activities... (11,235,246) (32,534)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment.......... (2,089,249) (583,552)
Sale of property and equipment under
sale/leaseback arrangement................. -- 456,041
Cash used in acquisition of businesses, net
of cash acquired........................... (12,728,991) --
------------ ------------
Cash used in investing activities....... (14,818,240) (127,511)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock...... 76,748 126
Proceeds from repurchase of common stock.... -- (1,018)
Proceeds from issuance of Class A,
convertible preferred stock................ 21,000,000 1,099,995
Proceeds from revolving credit facility..... 8,150,000 1,500,000
Repayment of revolving credit facility...... -- (2,150,000)
Proceeds from capital lease obligation...... -- 481,901
------------ ------------
Net cash provided by financing
activities............................. 29,226,748 931,004
------------ ------------
Net increase in cash and cash equivalents..... 3,173,262 770,959
Cash and cash equivalents at beginning of
period....................................... -- $ 3,173,262
------------ ------------
Cash and cash equivalents at end of period.... $ 3,173,262 $ 3,944,221
============ ============
Supplemental disclosure of cash flows informa-
tion:
Cash paid for interest...................... $ -- $ 224,050
Cash paid for income taxes.................. $ -- $ --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
AnswerThink Consulting Group, Inc. (the "Company") is a rapidly growing
provider of knowledge-based consulting and information technology ("IT")
services to Fortune 1000 companies and other sophisticated buyers. The Company
addresses its clients' strategic business needs by offering a wide range of
integrated services or solutions, including benchmarking, process
transformation, software package implementation, electronic commerce, decision
support technology, technology architecture and integration and Year 2000
solutions.
Organization
On April 23, 1997, the Company and the initial investors in the Company (the
"Initial Investors") entered into a stock purchase agreement (the "Stock
Purchase Agreement") pursuant to which the Company sold 3,400,000 shares to
the Initial Investors of the Company's Class A Convertible Preferred Stock
(the "Class A Preferred Stock"). Such shares of Class A Preferred Stock were
sold at $6.00 per share, for total proceeds of $20.4 million.
In May 1997, certain senior executives of the Company purchased an
additional 100,000 shares of Class A Preferred Stock at $6.00 per share. Each
share of Class A Preferred Stock is convertible into four shares of the
Company's Common Stock (the "Common Stock").
Pursuant to the Stock Purchase Agreement, certain of the Initial Investors
had the option to purchase from the Company an additional 100,000 shares of
Class A Preferred Stock at $6.00 per share which shares were purchased on
February 24, 1998.
Management's 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.
Principles of Consolidation
The Consolidated Financial Statements include AnswerThink Consulting Group,
Inc. and its subsidiaries. All material intercompany accounts and transactions
have been eliminated.
Interim Financial Statements
The consolidated financial statements for the quarter ended April 3, 1998,
and all related footnote information for the quarter, are unaudited, and
reflects all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position,
operating results and cash flows for the interim period. The results of
operation for the quarter ended April 3, 1998 are not necessarily indicative
of the results to be achieved for the 1998 fiscal year.
Revenue Recognition
The Company recognizes revenues as work is performed on a contract by
contract basis, adjusted for any anticipated losses in the period in which any
such losses are identified. To date, the Company has not experienced any
material losses. Out-of-pocket expenses are reimbursed by clients and are
offset against expenses incurred.
Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period. The
calculation includes only the vested portion of common
F-7
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
shares issued to employees under employment agreements and does not include
shares which have not yet vested. The calculation also does not include shares
which vest only if certain future events occur. Accordingly, common shares
outstanding for per share purposes, is significantly lower than actual shares
issued and outstanding.
Loss per share assuming dilution is computed by dividing net loss by the
weighted average number of common shares outstanding, increased by assumed
conversion of other potentially dilutive securities during the period.
Potentially dilutive shares, as of January 2, 1998 and April 3, 1998, which
have not been included in the diluted per share calculation include 8,901,652
and 9,797,442 unvested shares, respectively under the employment agreements
and 8,928,404 and 6,881,742 shares, respectively from assumed conversion of
convertible preferred stock because their effects would be anti-dilutive due
to the loss incurred by the Company. Accordingly, for the periods presented,
diluted net loss per common share is the same as basic net loss per common
share.
Fiscal Year
The Company's fiscal year ends on the Friday closest to December 31. The
fiscal year for the Company will generally consist of a 52-week period. Fiscal
year 1997 ended on January 2, 1998. References to a year in these financial
statements relate to a fiscal year rather than a calendar year.
Cash and Cash Equivalents
The Company considers all short-term investments with maturities of three
months or less when purchased to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions. At
times, such investments may be in excess of the F.D.I.C. insurance limits. The
Company has not experienced any loss to date on these investments.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets ranging from three to five years. Expenditures for
repairs and maintenance are charged to expense as incurred. Expenditures for
betterments and major improvements are capitalized. The carrying amount of
assets sold or retired and related accumulated depreciation are removed from
the accounts in the year of disposal and any resulting gains or losses are
included in the statement of operations.
Intangible Assets
Goodwill, related to the acquisitions, is being amortized over 15 years on a
straight-line basis. The Company recorded amortization expense of $137,729 for
the period April 23, 1997 (date of inception) through January 2, 1998. The
carrying value of goodwill is subject to periodic review of realizability.
Income Taxes
The Company records income taxes using the liability method. Under this
method, the Company records deferred taxes based on temporary taxable and
deductible differences between the tax bases of the Company's assets and
liabilities and their financial reporting bases. A valuation allowance is
established when it is more likely than not that some or all of the deferred
tax assets will not be realized.
Concentration of Credit Risk
The Company provides its services primarily to Fortune 1000 companies and
other sophisticated buyers of IT consulting services. The Company performs
ongoing credit evaluations of its major customers and maintains reserves for
potential credit losses. Such losses have been insignificant. During the
period April 23, 1997 (date of inception) through January 2, 1998, two
customers accounted for approximately 13% of net revenues.
F-8
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement is effective for
financial statements for periods beginning after December 15, 1997. Management
believes that this standard will not result in significantly greater
disclosure than what is already contained in these financial statements.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997. In light of the Company's formation during
the current year, management is evaluating the requirements of this standard
and its applicability to the Company.
2. ACQUISITIONS AND INVESTING ACTIVITIES:
On August 1, 1997, the Company acquired Relational Technologies, Inc.,
("RTI") an Atlanta, Georgia, based information technology consulting and
Oracle software implementation company for 1,220,700 restricted shares of
Common Stock issued to RTI's stockholders valued at approximately $610,000.
On October 13, 1997, the Company acquired all of the outstanding shares of
The Hackett Group, Inc. ("Hackett") an Ohio based consulting firm specializing
in benchmarking and process transformation primarily to Fortune 500 companies.
The original purchase price payable to the sole stockholder of Hackett
consisted of approximately $6,500,000 in cash, a $5,143,000 promissory note
and 444,000 restricted shares of Common Stock valued at approximately
$355,000. The note and the restricted shares are subject to certain earn-out
provisions. The note is payable in three separate installments. As of January
2, 1998, the Company had recorded $3,750,000 bearing interest at a rate of 12%
per annum, for additional purchase consideration under the promissory note due
to the seller on March 31, 1998 based on achievement of earnings targets for
1997. The second installment obligation of $497,000 is due March 31, 1999, and
the third installment obligation of $896,000 is due March 31, 2000. The
obligations for the second and third installment payments bear interest at a
rate of 8% per annum. A significant portion of the purchase price for the
Hackett acquisition was allocated to in-process research and development
technology, resulting in a $4,000,000 charge to the Company's operations in
the quarter ended January 2, 1998. These charges were valued using a risk
adjusted cash flow model, under which projected income and expenses
attributable to the purchased technology were identified, and potential income
streams were discounted for risks and uncertainties, including the stage of
development of the technology, viability of target markets, rapidly changing
nature of the industry and other factors.
On November 12, 1997, the Company acquired all of the outstanding shares of
Delphi Partners, Inc. ("Delphi") for approximately $7,400,000 in cash plus
560,000 restricted shares of Common Stock valued at $840,000. The sellers are
also entitled to contingent consideration of up to a maximum of $2,500,000 to
be paid by April 30, 1999 based on the achievement of certain pre-tax profit
targets as defined. Delphi is an information systems consulting services firm
focused primarily on applications developed by PeopleSoft, Inc.
All the acquisitions made by the Company have been accounted for using the
purchase method of accounting. Accordingly, the results of operations of the
acquired companies are included in the Company's consolidated results of
operations from the respective dates of acquisition. Contingent consideration,
to the extent earned, will be recorded as additional goodwill.
F-9
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate consideration for the Company's acquisitions has been
allocated to the assets and liabilities acquired based upon their respective
fair values. The components of the purchase price allocation, including fees
and expenses, are as follows:
<TABLE>
<S> <C>
Fair value of net assets acquired (primarily accounts
receivable) excluding cash acquired......................... $ 2,258,892
Goodwill..................................................... 12,081,339
In-process research and development technology............... 4,000,000
Common Stock issued.......................................... (1,861,240)
Note payable-earned additional purchase consideration........ (3,750,000)
-----------
Cash used in acquisitions of businesses, net of cash ac-
quired...................................................... $12,728,991
===========
</TABLE>
The following information presents the unaudited pro forma condensed results
of operations for the period April 23, 1997 (date of inception) through
January 2, 1998 as if the Company's acquisitions of RTI, Hackett and Delphi
had occurred on April 23, 1997. The pro forma adjustments include additional
amortization and interest expense in the amount of approximately $362,000 and
$420,000, respectively. The pro forma results are presented for informational
purposes only and are not necessarily indicative of the future results of
operations of the Company or the results of operations of the Company had the
acquisitions occurred on April 23, 1997.
<TABLE>
<CAPTION>
PRO FORMA RESULTS
OF OPERATIONS
-----------------
<S> <C>
Net revenues............................................... $ 28,816,510
Net loss................................................... $(11,102,240)
Net loss per common share--basic and diluted............... $ (0.73)
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of January 2, 1998 and
April 3, 1998:
<TABLE>
<CAPTION>
JANUARY 2, APRIL 3,
1998 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
Equipment........................................... $2,446,319 $ 2,555,225
Furniture and fixtures.............................. 235,257 226,084
Leasehold improvements.............................. 51,375 51,375
---------- -----------
Total cost........................................ 2,732,951 2,832,684
Less accumulated depreciation....................... (237,656) (450,661)
---------- -----------
$2,495,295 $ 2,382,023
========== ===========
</TABLE>
4. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consists of the following as of
January 2, 1998 and April 3, 1998:
<TABLE>
<CAPTION>
JANUARY 2, APRIL 3,
1998 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
Accrued payroll and payroll related expenses.......... $3,019,519 $5,508,937
Other accrued expenses................................ 1,106,735 1,053,624
---------- ----------
$4,126,254 $6,562,561
========== ==========
</TABLE>
F-10
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. BORROWINGS UNDER REVOLVING CREDIT FACILITY:
On November 7, 1997, the Company entered into an agreement, as amended with
BankBoston, N.A. ("BankBoston") for a $10 million revolving credit facility
(the "Credit Facility"), maturing on November 7, 2000. The Company's
obligation under the Credit Facility is collateralized by all of the assets of
the Company. The Credit Facility may be increased to $20 million if certain
future earnings and performance criteria are satisfied. The total amount
outstanding as of January 2, 1998 and April 3, 1998 was $8,150,000 and
$7,500,000, respectively at varying rates, principally LIBOR plus 2.25-3.25%
(weighted average 8.5% rate at January 2, 1998 and April 3, 1998).
The Credit Facility contains, among other things, the maintenance of certain
financial covenants such as minimum levels of earnings, minimum liquidity
ratios, and debt as a percentage of cash flow.
Pursuant to the Credit Facility, BankBoston was granted an option to
purchase up to 16,666 shares of Class B Preferred Stock. See Note 10.
6. NOTES PAYABLE TO SHAREHOLDERS:
Notes payable to shareholders consists of the following as of January 2,
1998 and April 3, 1998:
<TABLE>
<CAPTION>
AS OF
JANUARY 2, APRIL 3,
1998 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
Notes payable-earned
additional purchase
consideration............ $3,750,000 $5,143,000
Other notes payable....... 300,000 2,703,000
---------- ----------
Total notes payable to
shareholders........... 4,050,000 7,846,000
Less current portion.... -- 5,950,000
---------- ----------
Long-term portion....... $4,050,000 $1,896,000
========== ==========
</TABLE>
The Company issued a note for $5,143,000 payable to Gregory P. Hackett in
connection with the Company's purchase of Hackett. Payment of the note is
contingent on achievement of earnings targets as defined. As of January 2,
1998, $3,750,000 had been earned by Mr. Hackett. The note bears interest at
12%. See Note 14.
The Company has two notes amounting to $300,000 payable to the two former
principals of Delphi. The notes bear interest at 6% per annum with principal
and accrued interest due on March 31, 1999.
7. LEASE COMMITMENTS:
The Company and its subsidiaries have operating lease agreements for its
premises that expire on various dates through 2004. The operating lease
agreements for premises are subject to escalation. Rent expense for the period
April 23, 1997 (date of inception) through January 2, 1998, was approximately
$300,000.
Minimum future lease commitments under noncancelable operating leases in
effect at January 2, 1998, are presented as follows:
<TABLE>
<S> <C>
1998............................................................. $ 920,000
1999............................................................. 1,064,000
2000............................................................. 992,000
2001............................................................. 906,000
2002............................................................. 912,000
Thereafter....................................................... 658,000
----------
Total minimum lease payments................................... $5,452,000
==========
</TABLE>
F-11
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES:
The Company generated a loss for financial reporting purposes of
approximately $12.1 million and $39.5 million for the period April 23, 1997
(date of inception) through January 2, 1998 and the quarter ended April 3,
1998, respectively. The temporary differences between the loss for financial
reporting purposes and the loss for tax purposes arise primarily from
differences in the lives of depreciable assets and the accrual of certain
expenses for financial reporting purposes that are not allowable deductions
for tax purposes until the year they are paid. The amounts of those temporary
differences as of January 2, 1998 and April 3, 1998 are not significant.
The Net Operating Loss ("NOL") for tax purposes differs from the NOL for
financial reporting purposes due to the write-off of acquired in-process
research and development technology and the amortization of goodwill and, for
the quarter ended April 3, 1998, the non-deductibility for income tax purposes
of the approximate $40.8 million expense relating to vesting of restricted
shares.
For the period April 23, 1997 (date of inception) through January 2, 1998
and for the quarter ended April 3, 1998, the Company generated a net operating
loss of $8.0 million and taxable income of $1.5 million, respectively. During
the quarter ended April 3, 1998, the Company utilized net operating loss
carryforwards of $1.5 million to offset taxable income. Consequently, a future
tax benefit of $3.2 million and $2.6 million comprised fully of net operating
losses are required to be recognized at January 2, 1998 and the quarter ended
April 3, 1998, respectively, to the extent that realization of such benefit is
more likely than not. In light of the recent organization of the Company and
the loss experienced for the period ended January 2, 1998, a valuation
allowance has been established for the entire deferred tax asset attributed to
the net operating loss carryforward at January 2, 1998 and April 3, 1998,
respectively. The net operating loss carryforward will expire on December 31,
2013.
9. RESTRICTED STOCK AND STOCK OPTIONS:
As of January 2, 1998, the Company has sold an aggregate of 13,734,850
restricted shares to employees of the Company at nominal purchase prices per
share. Each employee executed an employment agreement or a restricted stock
agreement with the Company providing for, among other things, the manner in
which restricted shares will vest. In general, a certain percentage of
restricted shares will begin to vest upon the second anniversary from the
purchase date of such shares and will become fully vested either by the fourth
or sixth anniversary from the purchase date so long as the holder remains an
employee.
In connection with the formation of the Company, certain of the Company's
employees and one director received 3,520,000 restricted shares of Common
Stock subject to performance vesting criteria. The Company recorded a charge
of approximately $40.8 million relating to the accelerated vesting of these
restricted shares pursuant to agreements dated as of March 27, 1998 by and
among the relevant stockholders, the Company and its Board of Directors which
accelerated, the vesting of 3,320,000 shares (the remaining 200,000 were
cancelled) in the first quarter of 1998 based on the Company's results to date
and the expectation of completion of the Offering during the second quarter of
1998. There are no additional restricted shares outstanding that are subject
to performance criteria for vesting.
Shares of restricted stock are issued to employees and other representatives
of acquired companies. Employees vest in these shares over periods up to five
years and, in certain cases, upon achieving certain revenue targets. The
market value of the restricted stock at the time of grant is recorded as
unearned compensation in a separate component of stockholders' equity and
amortized as compensation expense ratably over the vesting periods. At January
2, 1998, 931,650 shares of such restricted stock had been issued.
F-12
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of January 2, 1998, the Company has granted options to purchase an
aggregate of 707,906 shares of Common Stock to employees at an exercise price
of $2.50 per share which was at or above the estimated market price of the
Common Stock at the dates of grants. Options granted will be exercisable in
accordance with the terms specified in each option agreement entered into
between the Company and each optionee. As long as the optionee remains an
employee, all such options become exercisable in increments of 50%, 25%, and
25% on the second, third and fourth anniversary of the date of issuance
thereof, respectively.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company is
required to disclose pro forma net income (loss) information as if
compensation expense related to the fair value of the options granted had been
included in earnings (losses). The fair value of option grants is estimated
using the Black-Scholes option pricing model with the following assumptions
used for the 1997 grants: a ten-year expected life, a volatility factor of
zero, a risk-free interest rate of 6.0% and no dividend payments.
The weighted average remaining life of the options granted at January 2,
1998 is 9.7 years. In light of the loss experienced during the year and that
the current year is the first year of operations, the Company's options had
essentially no value. Had the fair value method of accounting been applied to
the Company's stock options, the Company's net loss and loss per share, on a
pro forma basis, would not be materially different from the net loss and loss
per share reported.
10. CONVERTIBLE PREFERRED STOCK:
Holders of Class A Convertible Preferred Stock are entitled to a $6.00
liquidation preference per share in the event of liquidation, dissolution or
winding up of the Company. Each share of Class A Convertible Preferred Stock
is convertible on a four-for-one basis to Common Stock and is entitled to non-
cumulative dividends if and when declared by the Board of Directors. Holders
of Class A Convertible Preferred Stock have certain redemption rights defined
in the Amended and Restated Articles of Incorporation but do not have
preemptive rights. To the extent not redeemed or converted, remaining shares
of the Class A Convertible Preferred Stock will be redeemed at their
liquidation value on April 22, 2004.
On March 5, 1998, the Company issued 16,666 shares of Class B Convertible
Preferred Stock with a liquidation value of $30.00 per share to an affiliate
of BankBoston at a price of $30.00 per share. Each share of Class B
Convertible Preferred Stock is convertible into four shares of Common Stock.
The Class B Convertible Preferred Stock contains the same redemption
provisions as the Class A Convertible Preferred Stock.
11. SHAREHOLDERS' EQUITY:
In connection with the Company's proposed initial public offering, the
Company will declare a one-for-two reverse stock split of all of the Company's
outstanding shares of capital stock (the "Reverse Stock Split") and amend its
Articles of Incorporation in connection therewith prior to the effectiveness
of the Offering. Accordingly, all share and per share amounts for all periods
presented have been retroactively adjusted to give effect to the Reverse Stock
Split and the shareholders' equity has been restated to reflect the capital
structure of the Company following the contemplated amendments of the Articles
of Incorporation.
12. SETTLEMENT COSTS:
Certain of the Company's key executives and other management employees
resigned from a "Big Six" accounting firm during the first quarter of 1997.
The accounting firm initiated litigation in connection with such resignations
and the formation of the Company arising out of activities alleged to have
constituted a breach of non-competition and non-solicitation obligations. This
litigation was settled, and the Company, its key
F-13
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
executives, certain other management employees and certain of its shareholders
are subject to certain provisions contained in the settlement agreement.
Settlement costs consist primarily of payments to certain key executives and
certain other management employees of the Company relating to the obligations
assumed by the Company for compensation earned during the period from December
1, 1996 to the date of the Company's inception by such employees and legal
fees incurred in connection with the ensuing litigation.
13. LITIGATION:
The Company is involved in legal proceedings, claims, and litigation arising
in the ordinary course of business. In the opinion of management, the final
disposition of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.
14. RELATED PARTY TRANSACTION:
The Company purchases most of its computer hardware and software from a
distributor that is owned in part by three senior executives and directors of
the Company. During the year, the Company purchased approximately $1.5 million
from this distributor.
On March 12, 1998, the Company entered into an amendment with the sole
stockholder of Hackett to waive the earn-out provisions and to extend the due
date on the $3,750,000 note obligation owed to such stockholder from March 31,
1998 to the earlier of the completion of a public offering of shares by the
Company or January 15, 1999. In connection with such amendment, the Company
recorded additional goodwill amounting to $3.1 million.
15. SUBSEQUENT EVENTS (UNAUDITED):
Legacy Acquisition
On April 25, 1998, the Company entered into an agreement to acquire all of
the outstanding shares of common stock of Legacy Technology, Inc. ("Legacy"),
a Massachusetts based provider of decision support and data warehouse
solutions to Fortune 1000 companies. The terms of the agreement provide for
acquisition consideration of 269,166 restricted shares of Common Stock and a
$2.8 million promissory note. The promissory note will be payable over a 12-
month period commencing October 1, 1998 or, if earlier, on the date the
Company completes a public offering of its Common Stock. The stockholders of
Legacy will also receive up to $1.3 million in additional consideration, half
of which will be in the form of cash and half of which will be in the form of
shares of Common Stock, upon the achievement of certain revenue and pre-tax
profit targets related to the performance of Legacy during the 12-month period
ended April 30, 1999, which will be recorded when earned as additional
goodwill. Although there can be no assurance that the acquisition will be
completed, management expects that the Legacy Acquisition will be completed
during the second quarter of 1998.
F-14
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Option Plan
The Company intends to adopt a stock option plan (the "Stock Option Plan")
that will provide for grants of (i) options that are intended to qualify as
"incentive stock options" to employees as well as non-qualifying options to
individuals whose participation in the plan is determined to be in the best
interest of the Company, (ii) shares of Common Stock subject to certain
restrictions, and (iii) conditional rights to receive restricted Common Stock
in the future. The Stock Option Plan authorizes the issuance of up to
10,000,000 shares of Common Stock pursuant to options or as Restricted Common
Stock or Restricted Common Stock Units, plus shares of Common Stock awarded
under any prior stock option plan of the Company that are forfeited or
otherwise terminate without the delivery of stock.
The option exercise price per share for stock options granted under the
Stock Option Plan may not be less than 100% of the fair market value per share
of Common Stock on the date of grant of the option (or 110% of the fair market
value per share of Common Stock in the case of an incentive stock option
granted to an optionee beneficially owning more than 10% of the outstanding
Common Stock). The maximum option term is ten years (or five years in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Common Stock).
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Delphi Partners, Inc.
Marlton, New Jersey
We have audited the accompanying balance sheets of Delphi Partners, Inc. as
of October 24, 1997 and December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the period January 1,
1997 through October 24, 1997 and for the years ended December 31, 1996 and
1995. 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 Delphi Partners, Inc. as
of October 24, 1997 and December 31, 1996 and the results of its operations
and its cash flows for the period January 1, 1997 through October 24, 1997 and
for the years ended December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Miami, Florida
February 27, 1998
F-16
<PAGE>
DELPHI PARTNERS, INC.
BALANCE SHEETS
OCTOBER 24, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
AS OF
------------------------
OCTOBER 24, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 960,402 $ 270,325
Accounts receivable and unbilled revenue............ 2,681,315 2,693,499
Prepaid expenses and other current assets........... 47,989 12,796
---------- ----------
Total current assets.............................. 3,689,706 2,976,620
Property and equipment, net........................... 275,650 160,445
Other assets.......................................... 18,228 10,725
---------- ----------
Total assets...................................... $3,983,584 $3,147,790
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 407,083 $ 351,452
Accrued expenses.................................... 1,311,046 818,072
Deferred income taxes............................... 91,200 91,200
---------- ----------
Total current liabilities......................... 1,809,329 1,260,724
Notes payable to stockholders......................... 300,000 --
Long-term portion of capital leases................... 39,707 --
---------- ----------
Total liabilities................................. 2,149,036 1,260,724
---------- ----------
Stockholders' equity:
Common stock, $.01 par value, authorized 30,000
shares; issued and outstanding 20,000 and 100
shares at October 24, 1997 and December 31, 1996,
respectively....................................... 200 1
Additional paid-in capital.......................... 9,800 9,999
Retained earnings................................... 1,824,548 1,877,066
---------- ----------
Total stockholders' equity........................ 1,834,548 1,887,066
---------- ----------
Total liabilities and stockholders' equity........ $3,983,584 $3,147,790
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
DELPHI PARTNERS, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 24, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues................................... $9,773,836 $7,843,972 $3,158,812
Costs and expenses:
Project personnel and expenses............... 4,429,935 3,981,245 1,642,405
Selling, general and administrative.......... 4,666,891 2,684,245 1,219,560
---------- ---------- ----------
Total costs and operating expenses......... 9,096,826 6,665,490 2,861,965
---------- ---------- ----------
Income from operations......................... 677,010 1,178,482 296,847
Interest income.............................. -- 25,225 3,058
---------- ---------- ----------
Income before income taxes..................... 677,010 1,203,707 299,905
Provision for income taxes..................... 99,275 67,131 17,600
---------- ---------- ----------
Net income..................................... $ 577,735 $1,136,576 $ 282,305
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
DELPHI PARTNERS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 24, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance as of December 31,
1994........................ 100 $ 1 $9,999 $ 458,185 $ 468,185
Net income................... -- -- -- 282,305 282,305
------ ---- ------ ---------- ----------
Balance as of December 31,
1995........................ 100 1 9,999 740,490 750,490
Net income................... -- -- -- 1,136,576 1,136,576
------ ---- ------ ---------- ----------
Balance as of December 31,
1996........................ 100 1 9,999 1,877,066 1,887,066
Net income................... -- -- -- 577,735 577,735
Stockholders' distributions.. -- -- -- (630,253) (630,253)
Two hundred-for-one stock
split....................... 19,900 199 (199) -- --
------ ---- ------ ---------- ----------
Balance as of October 24,
1997........................ 20,000 $200 $9,800 $1,824,548 $1,834,548
====== ==== ====== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
DELPHI PARTNERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 24, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 577,735 $ 1,136,576 $ 282,305
---------- ----------- ---------
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization.......... 81,848 47,652 27,361
Deferred income taxes.................. -- 54,800 10,200
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable and unbilled revenue....... 12,184 (1,750,925) (346,882)
(Increase) decrease in prepaid expenses
and other current assets.............. (35,193) 1,627 (8,898)
Increase in other assets............... (7,503) (8,525) --
Increase in accounts payable........... 55,631 231,597 81,247
Increase in accrued expenses........... 492,974 597,171 132,345
---------- ----------- ---------
Total adjustments.................... 599,941 (826,603) (104,627)
---------- ----------- ---------
Net cash flows provided by
operations........................ 1,177,676 309,973 177,678
---------- ----------- ---------
Cash flows from investing activities:
Purchases of property and equipment...... (157,346) (98,499) (119,053)
---------- ----------- ---------
Net cash flows used in investing
activities........................ (157,346) (98,499) (119,053)
---------- ----------- ---------
Cash flows from financing activities
Stockholders' distributions.............. (630,253) -- --
Stockholders' advances................... 300,000 -- (4,295)
---------- ----------- ---------
Net cash flows used in financing
activities........................ (330,253) -- (4,295)
---------- ----------- ---------
Net increase in cash and cash equivalents.. 690,077 211,474 54,330
Cash and cash equivalents at beginning of
year...................................... 270,325 58,851 4,521
---------- ----------- ---------
Cash and cash equivalents at end of year... $ 960,402 $ 270,325 $ 58,851
========== =========== =========
Supplemental disclosure of cash flows
information:
Cash paid for interest................... $ 295 $ 65 $ 211
Cash paid for taxes...................... $ 29,935 $ 3,895 $ 3,600
Non cash purchases of property and
equipment recorded as capital leases.... $ 39,707 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
DELPHI PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
Delphi Partners, Inc. ("the Company") is a specialist software consulting
firm, offering a broad range of consulting and related training services to
clients implementing client/server human resources and financial applications.
Its primary service offering is the implementation of PeopleSoft software.
The Company provides its services to clients in a broad range of industries
including high technology, retail, and consumer and industrial products.
Management's 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.
Income Taxes
The Company has elected to be taxed as an S corporation under the provisions
of the Internal Revenue Code. Under those provisions, the Company does not pay
federal income taxes on its taxable income. The stockholders reflect on their
individual federal income tax returns their respective share of the Company's
taxable income or loss subject to statutory limitations.
The Company accounts for state income taxes (in those states which do not
recognize S-Corporation status) in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" which requires the
use of the "liability method" of accounting for income taxes. Accordingly,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities, using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Current income taxes are based on the year's income taxable for
state income tax reporting purposes.
Revenue Recognition
The Company derives substantially all of its revenues from information
technology and management consulting, software development and implementation,
and package software evaluation and implementation services. Revenues from
management consulting and package software evaluation and implementation
services are recognized as the service is provided, principally on a time and
material basis. Losses on projects in progress are recognized when known. Net
revenues exclude reimbursable expenses charged to clients.
Fiscal Year
The Company's fiscal year ends on the Friday closest to December 31. The
fiscal year for the Company will generally consist of a 52-week period.
References to a year in these financial statements relate to a fiscal year
rather than a calendar year.
Cash and Cash Equivalents
The Company considers all short-term investments with maturities of three
months or less when purchased to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions. At
times, such investments may be in excess of the F.D.I.C. insurance limits. The
Company has not experienced any loss to date on these investments.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets of five years. Expenditures for repairs and
maintenance are charged to expense as incurred. Expenditures for betterments
and major improvements are
F-21
<PAGE>
DELPHI PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
capitalized. The carrying amounts of assets sold or retired and related
accumulated depreciation are removed from the accounts in the year of disposal
and any gains or losses are included in the statement of operations.
Concentration of Credit Risk
The Company provides its services primarily to Fortune 1000 companies and
other sophisticated buyers of IT consulting services. The Company performs
ongoing credit evaluations of its major customers and maintains reserves for
potential credit losses to the extent they are identified. Such losses have
been insignificant and are within management's expectations. Three, six and
seven major customers comprised approximately 25%, 53% and 65% of net revenues
for the period January 1, 1997 through October 24, 1997 and for the years
ended December 31, 1996 and 1995, respectively.
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement is effective for fiscal
years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No. 130 and No.
131 and their applicability to the Company. See Note 9.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of October 24, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
OCTOBER 24, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C> <C>
Furniture and equipment............................. $ 434,801 $237,748
Less accumulated depreciation....................... (159,151) (77,303)
--------- --------
$ 275,650 $160,445
========= ========
3. NOTES PAYABLE TO STOCKHOLDERS:
The Company has two notes amounting to $300,000 payable to its principal
stockholders who are also current employees. The notes bear interest at 6% per
annum with principal and accrued interest due on March 31, 1999.
4. PROVISION FOR TAXES:
The provision for state taxes consists of the following for the period
January 1, 1997 through October 24, 1997 and for the years ended December 31,
1996 and 1995:
<CAPTION>
1997 1996 1995
------- ----------- ------------
<S> <C> <C> <C>
Current..................................... $99,275 $ 12,331 $ 7,400
======= ========= ========
Deferred.................................... $ -- $ 54,800 $ 10,200
======= ========= ========
</TABLE>
F-22
<PAGE>
DELPHI PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. LEASE COMMITMENTS:
The Company has two operating lease agreements for premises. One expires on
March 31, 2000 and the other is month-to-month. The operating lease agreement
is subject to real estate escalation and reimbursement of operating costs.
Rent expense for the period January 1, 1997 through October 24, 1997 and for
the years ended December 31, 1996 and 1995 was approximately $90,000, $72,000
and $31,000, respectively.
Minimum future lease commitments under the noncancelable operating lease in
effect at October 24, 1997, is presented as follows:
<TABLE>
<S> <C>
1998............................................................... $ 69,003
1999............................................................... 52,773
2000............................................................... 13,332
--------
Total minimum lease payments..................................... $135,108
========
</TABLE>
6. ACCRUED EXPENSES:
Accrued expenses consists of the following as of October 24, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
OCTOBER 24, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
Accrued payroll and payroll related expenses....... $1,117,263 $765,472
State income taxes payable......................... 75,729 6,331
Profit sharing plan payable........................ 55,059 45,700
Other.............................................. 62,995 569
---------- --------
$1,311,046 $818,072
========== ========
</TABLE>
7. PROFIT SHARING PLAN:
On January 1, 1996, the Company adopted a 401(K) plan (the "Plan") which
covers substantially all of its employees. Under the Plan, the Company matches
25% of the employee contributions up to a maximum of $1,000 per year and may
contribute an additional discretionary amount. The Company contributed $61,376
for the period January 1, 1997 through October 24, 1997 and $45,700 for the
year ended December 31, 1996.
8. COMMON STOCK:
On April 30, 1997, the directors of the Company increased the number of
authorized shares of common stock from 100 shares to 20,000 shares, and in
connection with such amendment, effected a 200 for 1 split of each share of
the outstanding common stock.
9. SUBSEQUENT EVENT:
On November 12, 1997, the Company agreed to be acquired by AnswerThink
Consulting Group, Inc. ("AnswerThink"). Under the terms of that transaction,
AnswerThink acquired all of the outstanding stock of the Company in exchange
for cash and AnswerThink stock.
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of The Hackett Group, Inc.
Hudson, Ohio
We have audited the accompanying balance sheets of The Hackett Group, Inc.
as of September 30, 1997 and December 31, 1996, and the related statements of
operations, stockholder's equity, and cash flows for the period January 1,
1997 through September 30, 1997 and for the years ended December 31, 1996 and
1995. 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 The Hackett Group, Inc. as
of September 30, 1997 and December 31, 1996 and the results of its operations
and its cash flows for the period January 1, 1997 through September 30, 1997
and for the years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Miami, Florida
February 27, 1998
F-24
<PAGE>
THE HACKETT GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF
--------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 3,118,511 $ 240,532
Accounts receivable and unbilled revenue.......... 1,368,626 1,097,129
Prepaid expenses and other current assets......... -- 25,000
----------- ----------
Total current assets............................ 4,487,137 1,362,661
Property and equipment, net......................... 419,545 447,538
Other assets........................................ 1,596 1,088
----------- ----------
Total assets.................................... $ 4,908,278 $1,811,287
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................. $ 115,676 $ 13,511
Accrued expenses and other current liabilities.... 2,096,212 240,346
Deferred revenue.................................. 300,000 140,000
----------- ----------
Total current liabilities....................... 2,511,888 393,857
----------- ----------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value, authorized 750 shares;
issued and outstanding 100 shares at September
30, 1997 and December 31, 1996................... 10,000 10,000
Retained earnings................................. 2,386,390 1,407,430
----------- ----------
Total stockholder's equity...................... 2,396,390 1,417,430
----------- ----------
Total liabilities and stockholder's equity...... $ 4,908,278 $1,811,287
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
THE HACKETT GROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues................................. $6,453,588 $6,119,195 $7,648,257
Costs and expenses:
Project personnel and expenses............. 4,225,353 4,774,989 5,008,046
Selling, general and administrative........ 870,988 1,528,048 1,661,703
---------- ---------- ----------
Total costs and operating expenses......... 5,096,341 6,303,037 6,669,749
---------- ---------- ----------
Income (loss) from operations................ 1,357,247 (183,842) 978,508
Interest income............................ 78,713 70,170 81,544
---------- ---------- ----------
Net income (loss)............................ $1,435,960 $ (113,672) $1,060,052
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
THE HACKETT GROUP, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON
STOCK COMMON RETAINED
SHARES STOCK EARNINGS TOTAL
------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance as of December 31, 1994...... 100 $ 10,000 $ 660,111 $ 670,111
Stockholder's distributions.......... -- -- (199,061) (199,061)
Net income........................... -- -- 1,060,052 1,060,052
--- -------- ----------- -----------
Balance as of December 31, 1995...... 100 10,000 1,521,102 1,531,102
Net loss............................. -- -- (113,672) (113,672)
--- -------- ----------- -----------
Balance as of December 31, 1996...... 100 10,000 1,407,430 1,417,430
Stockholder's distributions.......... -- -- (457,000) (457,000)
Net income........................... -- -- 1,435,960 1,435,960
--- -------- ----------- -----------
Balance as of September 30, 1997..... 100 $ 10,000 $ 2,386,390 $ 2,396,390
=== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
THE HACKETT GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................... $1,435,960 $(113,672) $1,060,052
---------- --------- ----------
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation and amortization............. 85,348 83,015 52,705
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
and unbilled revenue..................... (271,497) 99,955 (739,094)
Decrease (increase) in prepaid expenses
and other current and non-current
assets................................... 24,492 (25,600) 119
Increase in accounts payable.............. 102,165 98,611 --
Increase (decrease) in accrued expenses
and other current liabilities............ 1,398,866 (12,841) (37,158)
Increase in deferred revenue.............. 160,000 140,000 --
---------- --------- ----------
Total adjustments....................... 1,499,374 383,140 (723,428)
---------- --------- ----------
Net cash flows provided by operations... 2,935,334 269,468 336,624
---------- --------- ----------
Cash flows from investing activities:
Purchases of property and equipment........ (57,355) (124,788) (165,086)
---------- --------- ----------
Net cash flows used in investing
activities............................. (57,355) (124,788) (165,086)
---------- --------- ----------
Cash flows from financing activities:
Stockholder's distributions................ -- -- (199,061)
---------- --------- ----------
Net cash flows used in financing
activities............................. -- -- (199,061)
---------- --------- ----------
Net increase (decrease) in cash and cash
equivalents................................ 2,877,979 144,680 (27,523)
Cash and cash equivalents at beginning of
period..................................... 240,532 95,852 123,375
---------- --------- ----------
Cash and cash equivalents at end of period.. $3,118,511 $ 240,532 $ 95,852
========== ========= ==========
Supplemental disclosure of cash flows
information:
Cash paid for interest.................... $ -- $ -- $ --
Cash paid for taxes....................... $ -- $ -- $ --
Non cash stockholder's distributions...... $ 457,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
THE HACKETT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
The Hackett Group, Inc. (the "Company") is a consulting firm, principally
focused on providing benchmarking and business process redesign services in
the finance and human resources functional areas. The Company provides its
services mostly to Fortune 500 companies located in the United States and
Canada.
Management's 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.
Revenue Recognition
The Company derives substantially all of its revenues from benchmarking and
management consulting. Revenues are recognized as the service is provided,
principally on a fixed fee basis. Losses on projects in progress are
recognized when known. Net revenues exclude reimbursable expenses charged to
clients. Deferred revenue arises whenever clients pay the Company in advance
of services provided.
Cash and Cash Equivalents
The Company considers all short-term investments with maturities of three
months or less when purchased to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions. At
times, such investments may be in excess of the F.D.I.C. insurance limits. The
Company has not experienced any loss to date on these investments.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets of five years. Expenditures for repairs and
maintenance are charged to expense as incurred. Expenditures for betterments
and major improvements are capitalized. The carrying amounts of assets sold or
retired and related accumulated depreciation are eliminated in the year of
disposal and the resulting gains and losses are included in income.
Income Taxes
The Company has elected to be taxed as an S corporation under the provisions
of the Internal Revenue Code. Under those provisions, the Company does not pay
federal income taxes on its taxable income. The stockholder reflects on his
individual federal income tax return the Company's taxable income or loss
subject to statutory limitations.
Concentration of Credit Risk
The Company provides its services primarily to Fortune 500 companies. The
Company performs ongoing credit evaluations of its major customers and
maintains reserves for potential credit losses to the extent they are
identified. Such losses have been insignificant and are within management's
expectations. Six, five and six major customers comprised approximately 53%,
41% and 57% of net revenues for the period January 1, 1997 through September
30, 1997 and for the years ended December 31, 1996 and 1995, respectively.
F-29
<PAGE>
THE HACKETT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement is effective for fiscal
years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No. 130 and No.
131 and their applicability to the Company. (See Note 6).
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of September 30, 1997
and December 31, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Equipment........................................ $ 595,512 $ 541,157
Furniture and fixtures........................... 111,413 108,413
Leasehold improvements........................... 23,049 23,049
--------- ---------
Total cost....................................... 729,974 672,619
Less accumulated depreciation.................... (310,429) (225,081)
--------- ---------
$ 419,545 $ 447,538
========= =========
3. LEASE COMMITMENTS:
The Company has an operating lease agreement for its premises that expires
in September 2000. The future minimum rental is currently $8,317 per month and
is subject to an annual adjustment based on the Consumer Price Index which
will be capped between 3% and 6%. The Company subleases a portion of its
premises at $1,425 per month, subject to the same increases as the Company's
lease and during the same term.
The Company has also entered into two operating leases for office equipment.
Rent expense for the period January 1, 1997 through September 30, 1997 and for
the years ended December 31, 1996 and 1995 was $90,054, $80,505 and $50,528,
respectively.
Minimum future lease and sublease commitments under noncancelable operating
leases in effect at September 30, 1997, are presented as follows:
<CAPTION>
LEASES SUBLEASE
------------- ------------
<S> <C> <C>
1998............................................. $109,211 $ 17,789
1999............................................. 107,901 18,323
2000............................................. 73,666 12,457
2001............................................. 240 --
--------- ---------
Total minimum lease and sublease payments...... $291,018 $ 48,569
========= =========
</TABLE>
F-30
<PAGE>
THE HACKETT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consist of the following as
of September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Accrued payroll and payroll-related expenses.... $1,623,000 $233,401
Shareholder distribution........................ 457,000 --
Other accrued expenses.......................... 16,212 6,945
---------- --------
$2,096,212 $240,346
========== ========
</TABLE>
5. PROFIT SHARING PLAN:
The Company maintains a 401(K) and profit sharing plan (the "Plan") which
covers substantially all of its employees. Under the Plan, employees may
contribute up to 15% of their compensation through salary deferrals. The
Company matches such contributions on a discretionary basis. The Company did
not record any expense relating to profit sharing for the period January 1,
1997 through September 30, 1997. The Company recorded an expense in the amount
of $212,379 and $87,589 for the years ended December 31, 1996 and 1995,
respectively.
6. SUBSEQUENT EVENT:
On October 13, 1997, the Company agreed to be acquired by AnswerThink
Consulting Group, Inc. ("AnswerThink"). Under the terms of that transaction,
AnswerThink acquired all of the outstanding stock of the Company in exchange
for cash and AnswerThink stock.
F-31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Relational Technologies, Inc.
Norcross, Georgia
We have audited the accompanying balance sheets of Relational Technologies,
Inc. as of July 31, 1997 and December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the period January 1,
1997 through July 31, 1997 and for the year ended December 31, 1996. 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 Relational Technologies,
Inc. as of July 31, 1997 and December 31, 1996 and the results of its
operations and its cash flows for the period January 1, 1997 through July 31,
1997 and for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Miami, Florida
February 27, 1998
F-32
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
BALANCE SHEETS
JULY 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
AS OF
-----------------------
JULY 31, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 157,195 $ --
Accounts receivable and unbilled revenue............. 1,643,528 879,738
Other current assets................................. 70,049 52,821
---------- ----------
Total current assets............................... 1,870,772 932,559
Property and equipment, net............................ 57,574 55,776
Other assets........................................... 11,287 8,910
Goodwill, net of amortization of $72,076 and $50,140,
respectively.......................................... 490,000 511,936
---------- ----------
Total assets....................................... $2,429,633 $1,509,181
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft....................................... $ -- $ 115,562
Accounts payable..................................... 89,666 146,029
Accrued expenses and other current liabilities....... 1,262,572 368,448
Line of credit....................................... -- 26,073
Long-term debt, current portion...................... -- 33,642
Deferred revenue..................................... 155,775 38,000
---------- ----------
Total current liabilities.......................... 1,508,013 727,754
Long-term debt and note payable to stockholder....... -- 206,008
---------- ----------
Total liabilities.................................. 1,508,013 933,762
---------- ----------
Stockholders' equity:
Common stock, no par value, authorized 1,000,000
shares; issued and outstanding 100,000 shares at
July 31, 1997 and December 31, 1996................. 100,000 100,000
Retained earnings.................................... 821,620 475,419
---------- ----------
Total stockholders' equity......................... 921,620 575,419
---------- ----------
Total liabilities and stockholders' equity......... $2,429,633 $1,509,181
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1997 THROUGH JULY 31, 1997 AND FOR THE YEAR ENDED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net revenues............................................ $4,529,401 $4,378,789
Costs and expenses:
Project personnel and expenses........................ 2,392,033 2,421,739
Selling, general and administrative................... 1,200,111 1,199,926
---------- ----------
Total costs and operating expenses.................... 3,592,144 3,621,665
---------- ----------
Income from operations.................................. 937,257 757,124
Interest expense........................................ (60,312) (111,289)
---------- ----------
Income before income taxes.............................. 876,945 645,835
Provision for income taxes.............................. -- (251,889)
---------- ----------
Net income.............................................. $ 876,945 $ 393,946
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1997 THROUGH JULY 31, 1997 AND FOR THE YEAR ENDED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON COMMON RETAINED
STOCK SHARES STOCK EARNINGS TOTAL
------------ --------- --------- ---------
<S> <C> <C> <C> <C>
Balance as of December 31, 1995... 100,000 $ 100,000 $ 81,473 $ 181,473
Net income........................ -- -- 393,946 393,946
------- --------- --------- ---------
Balance as of December 31, 1996... 100,000 100,000 475,419 575,419
Net income........................ -- -- 876,945 876,945
Stockholders' distributions....... -- -- (530,744) (530,744)
------- --------- --------- ---------
Balance as of July 31, 1997....... 100,000 $ 100,000 $ 821,620 $ 921,620
======= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 THROUGH JULY 31, 1997 AND FOR THE YEAR ENDED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 876,945 $ 393,946
--------- ---------
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation and amortization......................... 54,805 78,149
Changes in assets and liabilities:
Increase in accounts receivable and unbilled revenue.. (763,790) (486,874)
Increase in other current assets...................... (17,228) (14,868)
Decrease in accounts payable.......................... (56,363) (5,408)
Increase in accrued expenses and other current
liabilities.......................................... 712,061 278,857
Increase (decrease) in deferred revenue............... 117,775 (9,725)
Increase in other assets.............................. (2,377) (8,910)
--------- ---------
Total adjustments.................................... 44,883 (168,779)
--------- ---------
Net cash flows provided by operations.................... 921,828 225,167
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment..................... (34,667) (69,813)
--------- ---------
Net cash flows used in investing activities.......... (34,667) (69,813)
--------- ---------
Cash flows from financing activities:
Stockholders' distributions............................. (348,681) --
Proceeds from issuance of long-term debt................ -- 250,000
Principal payments on long-term debt.................... (239,650) (10,350)
Decrease in bank line of credit......................... (26,073) (110,854)
Payments under earn-out termination agreement........... -- (360,000)
--------- ---------
Net cash flows used in financing activities.............. (614,404) (231,204)
--------- ---------
Net increase (decrease) in cash and cash equivalents..... 272,757 (75,850)
Cash and cash equivalents at beginning of period......... (115,562) (39,712)
--------- ---------
Cash and cash equivalents at end of period............... $ 157,195 $(115,562)
========= =========
Supplemental disclosure of cash flows information:
Cash paid for interest................................ $ 60,312 $ 111,289
Cash paid for taxes................................... $ -- $ 336,000
Non cash stockholders' distributions.................. $ 182,063 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
Relational Technologies, Inc. ("the Company") is a nationwide provider of a
wide range of technology consulting services. Its primary offerings are:
Management Consulting (business process reengineering, technology assessments
and financial modeling), Oracle software package implementation, Technical
Services (customization, product development, RDBMS, and Unix), and IS
facilities management.
The Company provides its services to clients in a broad range of industries
including high technology, consumer and industrial products, diversified
services and government.
Management's 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.
Revenue Recognition
The Company derives substantially all of its revenues from information
technology and management consulting, software development and implementation,
and package software evaluation and implementation services. Revenues from
management consulting and package software evaluation and implementation
services are recognized as the service is provided, principally on a time and
material basis. Losses on projects in progress are recognized when known. Net
revenues exclude reimbursable expenses charged to clients. Deferred revenue
arises whenever clients pay the Company in advance of services provided.
Cash and Cash Equivalents
The Company considers all short-term investments with maturities of three
months or less when purchased to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions. At
times, such investments may be in excess of the F.D.I.C. insurance limits. The
Company has not experienced any loss to date on these investments.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets ranging from 3 to 7 years. Expenditures for repairs
and maintenance are charged to expense as incurred. Expenditures for
betterments and major improvements are capitalized. The carrying amounts of
assets sold or retired and related accumulated depreciation are removed from
the accounts in the year of disposal and any resulting gains or losses are
included in the statement of operations.
Intangible Assets
Goodwill, related to the acquisition of the Company during 1995, is being
amortized over fifteen years on a straight-line basis. The Company recorded
amortization expense of $21,936 and $37,605 for the period January 1, 1997
through July 31, 1997 and for the year ended December 31, 1996, respectively.
The carrying value of goodwill is subject to periodic review of realizability.
F-37
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
On January 1, 1997, the Company elected to be taxed as an S corporation
under the provisions of the Internal Revenue Code. Under those provisions, the
Company does not pay federal income taxes on its taxable income. The
stockholders will reflect on their individual income tax returns their
respective share of the Company's taxable income or loss subject to statutory
limitations.
Concentration of Credit Risk
The Company provides its services primarily to Fortune 1000 companies. The
Company performs ongoing credit evaluations of its major customers and
maintains reserves for potential credit losses to the extent they are
identified. Such losses have been insignificant and are within management's
expectations. Nine and seven major customers comprised approximately 83% and
74% of net revenues for the period January 1, 1997 through July 31, 1997 and
for the year ended December 31, 1996, respectively.
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement is effective for fiscal
years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No. 130 and No.
131 and their applicability to the Company. (See Note 8).
F-38
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of July 31, 1997 and
December 31, 1997:
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Computer equipment.................................... $125,453 $92,761
Software.............................................. 15,116 15,116
Furniture and leasehold improvements.................. 4,611 2,636
-------- -------
Total cost.......................................... 145,180 110,513
Less accumulated depreciation......................... (87,606) (54,737)
-------- -------
$ 57,574 $55,776
======== =======
</TABLE>
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consists of the following as
of July 31, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Accrued payroll and payroll related expenses......... $ 749,853 $295,482
Other accrued expenses............................... 330,656 72,966
Stockholder distribution............................. 182,063 --
---------- --------
$1,262,572 $368,448
========== ========
</TABLE>
4. DEBT:
The Company has a $700,000 bank line of credit which bears interest at the
prime rate and expires on August 31, 1997. The line of credit is
collateralized by the personal assets of a stockholder of the Company. As of
July 31, 1997 and December 31, 1996, the Company had a balance outstanding of
$0 and $26,073, respectively.
The Company had a $200,000 note payable to a stockholder which bore interest
at 12% per annum with a maturity date of February 28, 1998. The terms of the
note required monthly interest payments with the principal balance due at
maturity. The note was collateralized by the accounts receivable of the
Company. The note was paid during 1997.
The Company had a $50,000 note payable to an unaffiliated lender which bore
interest at 12% per annum. The terms of the note required monthly installments
of principal and interest through the maturity date of March 1, 1998. The note
was collateralized by the accounts receivable of the Company. The principal
balance as of December 31, 1996 was $39,650. The note was paid during 1997.
Maturities of long-term debt as of December 31, 1996 is presented as
follows:
<TABLE>
<S> <C>
Total debt......................................................... $239,650
Less current portion............................................... (33,642)
--------
Long-term portion.................................................. $206,008
========
</TABLE>
F-39
<PAGE>
RELATIONAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. LEASE COMMITMENTS:
The Company has operating lease agreements for premises and equipment that
expire on various dates through March, 2000. The operating lease agreements
for premises are subject to escalation. Rent expense for the period January 1,
1997 through July 31, 1997 and for the year ended December 31, 1996 was
$66,401 and $99,833, respectively.
Minimum future lease commitments under noncancelable operating leases in
effect at July 31, 1997 are presented as follows:
<TABLE>
<S> <C>
1998................................................................ $37,653
1999................................................................ 15,045
2000................................................................ 3,825
-------
Total minimum lease payments...................................... $56,523
=======
</TABLE>
6. PROFIT SHARING PLAN:
The Company maintains a 401(K) plan (the "Plan") which covers substantially
all of its employees. Under the Plan, employer contributions are
discretionary. There were no contributions to the Plan for the period January
1, 1997 through July 31, 1997 and for the year ended December 31, 1996,
contributions totaled $30,000.
7. EARN-OUT TERMINATION AGREEMENT:
The asset purchase agreement dated September 1, 1995 between the current
stockholders and the prior owners of the Company, contained earn-out
provisions as a part of the purchase price. On January 25, 1996, an agreement
was reached with the seller to settle future payments under the agreement for
a sum of $360,000. The amount due was accrued as of December 31, 1995, and was
paid during the first quarter of 1996.
8. SUBSEQUENT EVENT:
On August 1, 1997, the Company agreed to be acquired by AnswerThink
Consulting Group, Inc. ("AnswerThink"). Under the terms of that transaction,
AnswerThink acquired all of the outstanding stock of the Company in exchange
for AnswerThink stock.
F-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Legacy Technology, Inc.
Burlington, Massachusetts
We have audited the accompanying balance sheet of Legacy Technology, Inc. as
of December 31, 1997, and the related statement of operations, stockholders'
equity, and 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 financial position of Legacy Technology, Inc. as
of December 31, 1997 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Miami, Florida
February 27, 1998
F-41
<PAGE>
LEGACY TECHNOLOGY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 151,292 $ 44,687
Accounts receivable and unbilled revenue, net....... 1,024,103 683,027
Prepaid expenses and other current assets........... 59,535 83,558
---------- --------
Total current assets.............................. 1,234,930 811,272
Property and equipment, net........................... 148,150 123,150
Deferred income taxes................................. 39,568 36,271
---------- --------
Total assets...................................... $1,422,648 $970,693
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 114,237 $240,222
Accounts payable and payroll-related expenses....... 440,479 416,852
Taxes payable....................................... 100,431 97,134
Long-term debt, current portion..................... 5,356 5,546
Stockholder note payable............................ 33,000 33,000
Deferred revenue.................................... 501,778 --
---------- --------
Total current liabilities......................... 1,195,281 792,754
Long-term debt, less current portion.................. 4,375 3,753
---------- --------
Total liabilities................................. 1,199,656 796,507
---------- --------
Commitments and contingencies.........................
Stockholders' equity:
Common stock, no par value, 200,000 shares
authorized; 106,800 shares issued and outstanding.. 3,500 3,500
Retained earnings................................... 219,492 170,686
---------- --------
Total stockholders' equity........................ 222,992 174,186
---------- --------
Total liabilities and stockholders' equity........ $1,422,648 $970,693
========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE>
LEGACY TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE THREE
DECEMBER 31, MONTHS ENDED
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
Net revenues........................................ $5,197,329 $1,332,263
Costs and expenses:
Project personnel and expenses.................... 2,686,646 699,033
Selling, general and administrative............... 2,567,597 680,016
---------- ----------
Total costs and operating expenses................ 5,254,243 1,379,049
---------- ----------
Loss from operations................................ (56,914) (46,786)
Other income (expense):
Interest and other income......................... 6,404 1,800
Interest expense.................................. (12,698) (3,820)
---------- ----------
Loss before income taxes............................ (63,208) (48,806)
Income tax benefit.................................. 6,081 --
---------- ----------
Net loss............................................ $ (57,127) $ (48,806)
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE>
LEGACY TECHNOLOGY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
STOCK COMMON RETAINED
SHARES STOCK EARNINGS TOTAL
------- ------ -------- --------
<S> <C> <C> <C> <C>
Balance as of December 31, 1996............. 106,800 $3,500 $276,619 $280,119
Net loss.................................... -- -- (57,127) (57,127)
------- ------ -------- --------
Balance as of December 31, 1997............. 106,800 $3,500 $219,492 $222,992
Net loss (unaudited)........................ -- -- (48,806) (48,806)
------- ------ -------- --------
Balance as of March 31, 1998 (unaudited).... 106,800 $3,500 $170,686 $174,186
======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE>
LEGACY TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (57,127) $ (48,806)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 151,462 25,000
Deferred income taxes............................. (106,512) 3,297
Changes in assets and liabilities:
Decrease in accounts receivable and unbilled
revenue.......................................... 195,446 341,076
Increase in prepaid expenses and other current
assets........................................... (28,630) (24,023)
Increase in accounts payable...................... 55,173 125,985
Increase (decrease) in accrued payroll and
payroll-related expenses......................... 215,722 (23,627)
Increase (decrease) in taxes payable.............. 100,431 (3,297)
Decrease in deferred revenue...................... (234,722) (501,778)
--------- ---------
Net cash provided by (used in) operating
activities..................................... 291,243 (106,173)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment................. (134,905) --
--------- ---------
Net cash used in investing activities........... (134,905) --
--------- ---------
Cash flows from financing activities:
Stockholder advances............................... 33,000 --
Repayment of long-term debt........................ (90,123) (432)
--------- ---------
Net cash used in financing activities........... (57,123) (432)
--------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ 99,215 (106,605)
Cash and cash equivalents at beginning of period.... 52,077 151,292
--------- ---------
Cash and cash equivalents at end of period.......... $ 151,292 $ 44,687
========= =========
Supplemental disclosure of cash flows information:
Cash paid for interest............................. $ 12,698 $ 3,820
========= =========
</TABLE>
The accompanying notes are integral part of the financial statements.
F-45
<PAGE>
LEGACY TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
Legacy Technology, Inc. (the "Company") is engaged in all facets of computer
consulting, primarily in the development of data warehouses and decision
support systems.
Management's 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.
Interim Financial Statements
The consolidated financial statements for the three-month period ended March
31, 1998, and all related footnote information for the quarter, are unaudited,
and reflect all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position,
operating results and cash flows for the interim period. The results of
operation for the three-month period ended March 31, 1998 are not necessarily
indicative of the results to be achieved for the 1998 fiscal year.
Revenue Recognition
The Company derives substantially all of its revenues from information
technology and management consulting, software development and implementation,
and package software evaluation and implementation services. Revenues from
management consulting and package software evaluation and implementation
services are recognized as the service is provided, principally on a time and
material basis. Losses on projects in progress are recognized when known. Net
revenues exclude reimbursable expenses charged to clients. Deferred revenue
arises whenever clients pay the Company in advance of services provided.
Cash and Cash Equivalents
The Company considers all short-term investments with maturities of three
months or less when purchased to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions. At
times, such investments may be in excess of the F.D.I.C. insurance limits. The
Company has not experienced any loss to date on these investments.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets ranging from 3 to 7 years. During 1997, the Company
evaluated the estimated useful life used for its computer equipment and
adjusted depreciation expense accordingly by approximately $100,000.
Expenditures for repairs and maintenance are charged to expense as incurred.
Expenditures for betterments and major improvements are capitalized. The
carrying amounts of assets sold or retired and related accumulated
depreciation are removed from the accounts in the year of disposal and any
resulting gains or losses are included in the statement of operations.
Income Taxes
The Company records income taxes using the liability method. Under this
method, the Company records deferred taxes based on temporary taxable and
deductible differences between the tax bases of the Company's assets and
liabilities and their financial reporting bases. A valuation allowance is
established when it is more likely than not that some or all of the deferred
tax assets will not be realized.
F-46
<PAGE>
LEGACY TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk
The Company provides its services primarily to Fortune 1000 companies and
other sophisticated buyers of IT consulting services. The Company performs
ongoing credit evaluations of its major customers and maintains reserves for
potential credit losses to the extent they are identified. Such losses have
been insignificant and are within management's expectations. During the year
ended December 31, 1997, five customers accounted for approximately 70% of net
revenues.
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement is effective for fiscal
years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No. 130 and No.
131 and their applicability to the Company.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of December 31, 1997 and
March 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Equipment........................................... $ 408,484 $408,484
Furniture and fixtures.............................. 25,972 25,972
--------- --------
Total cost........................................ 434,456 434,456
Less accumulated depreciation....................... (286,306) (311,306)
--------- --------
$ 148,150 $123,150
========= ========
</TABLE>
3. DEBT:
Debt is comprised of the following as of December 31, 1997 and March 31,
1998:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Note payable to a bank, monthly installments of
$513 of principal and interest at 9.9%, due August
1999, collateralized by Company assets............ $ 9,731 $ 9,299
Less current portion............................ (5,356) (5,546)
------- -------
Long-term portion............................... $ 4,375 $ 3,753
======= =======
</TABLE>
F-47
<PAGE>
LEGACY TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES:
The tax effects of significant items comprising the Company's net deferred
tax asset as of December 31, 1997 and March 31, 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets
Credits........................................... $27,379 $ --
Unearned revenue.................................. 188,819 --
Section 481 adjustment............................ -- 36,271
------- -------
216,198 36,271
Less: Valuation allowance....................... -- --
------- -------
Total deferred tax asset........................ 216,198 36,271
------- -------
Deferred tax liabilities
Accrual to cash adjustment........................ 176,630 --
------- -------
Total deferred tax liability.................... 176,630 --
------- -------
Total, net...................................... $39,568 $36,271
======= =======
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current
Federal........................................... $ 85,752 $(2,815)
State............................................. 14,679 (482)
--------- -------
100,431 (3,297)
--------- -------
Deferred
Federal........................................... (90,944) 2,815
State............................................. (15,568) 482
--------- -------
(106,512) 3,297
--------- -------
$ (6,081) $ --
========= =======
</TABLE>
5. LEASE COMMITMENTS:
The Company has two operating lease agreements for its premises that expire
March 30, 2000 and May 30, 2000, respectively. The operating lease agreements
are subject to escalation. Rent expense for the year ended December 31, 1997
and the three-month period ended March 31, 1998 was approximately $157,000 and
$67,000, respectively.
F-48
<PAGE>
LEGACY TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Minimum future lease commitments under the operating leases in effect at
December 31, 1997, is presented as follows:
<TABLE>
<S> <C>
1998................................................................ $177,325
1999................................................................ 180,056
2000................................................................ 49,819
--------
Total minimum lease payments...................................... $407,200
========
</TABLE>
F-49
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet of the Company at
April 3, 1998 has been prepared to give effect to the acquisition of Legacy
Technology, Inc. (the "Legacy Acquisition") that is expected to close during
the second quarter as if it had occurred on April 3, 1998. The Unaudited Pro
Forma Combined Balance Sheet is also adjusted to reflect the Offering and the
application of the net proceeds therefrom, including the repayment of
indebtedness as if the Offering had occurred on April 3, 1998.
The following Unaudited Pro Forma Consolidated Statement of Operations of the
Company for the period April 23, 1997 (date of inception) through January 2,
1998 have been prepared to give effect to (i) the acquisitions of Relational
Technologies, Inc., The Hackett Group, Inc. and Delphi Partners, Inc. on
August 1, 1997, October 13, 1997 and November 12, 1997, respectively (the
"1997 Acquisitions") (ii) the Legacy Acquisition, and (iii) the Conversion
(the "Conversion") into a total of 7,160,104 shares of Common Stock of all of
the Company's outstanding shares of Class A Convertible Preferred Stock and
Class B Convertible Preferred Stock concurrent with the Offering, (iv) the
sale of 2,850,000 Shares of Common Stock by the Company and the application of
the net proceeds therefrom, as if such transactions had occurred as of April
23, 1997. The following Unaudited Pro Forma Consolidated Statement of
Operations of the Company for the quarter ended April 3, 1998, give effect to
(i) the Legacy Acquisition, (ii) the Conversion and (iii) the sale of
2,850,000 shares of Common Stock by the Company and the application of the net
proceeds therefrom, as if such transactions had occurred as of April 23, 1997.
Under the terms of certain earn-out provisions contained in their respective
purchase agreements, the sellers of The Hackett Group, Inc. and Delphi
Partners, Inc. may be entitled to additional consideration. In March 1998, the
Company waived the earnout provisions in The Hackett Group, Inc. purchase
agreement and recorded additional goodwill of $3,100,000. The maximum amount
that can be earned by the sellers of Delphi Partners, Inc., which has not
already been recorded in the Company's financial statements, is $2,500,000.
The additional goodwill recorded by the Company in connection with the
acquisition of The Hackett Group, Inc., combined with the maximum amount of
additional goodwill which could be recorded by the Company in connection with
the acquisition of Delphi Partners, Inc., would increase the Company's annual
amortization expense by approximately $375,000.
The Unaudited Pro Forma Consolidated Financial Information is not indicative
of the results that would have occurred if the transactions had occurred on
the dates indicated or which may be realized in the future. The Unaudited Pro
Forma Consolidated Financial Information should be read in conjunction with
the historical financial statements of the companies acquired in connection
with the 1997 Acquisitions and the Legacy Acquisition and the Company's
Consolidated Financial Statements and the notes thereto included elsewhere in
this Prospectus.
PF-1
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 3, 1998
<TABLE>
<CAPTION>
LEGACY PRO FORMA
HISTORICAL ACQUISITION ADJUSTMENTS PRO FORMA OFFERING PRO FORMA
(A) (B) (C) COMBINED ADJUSTMENTS REFERENCE AS ADJUSTED
------------ ----------- ----------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 3,944,221 $ 44,687 $ -- $ 3,988,908 $19,536,500 (D)(E)(F) $ 23,525,408
Accounts receivable and
unbilled revenue, net.. 14,010,003 683,027 -- 14,693,030 -- 14,693,030
Prepaid expenses and
other current assets... 631,898 83,558 -- 715,456 -- 715,456
------------ -------- ----------- ------------ ----------- ------------
Total current assets... 18,586,122 811,272 -- 19,397,394 19,536,500 38,933,894
Property and equipment,
net.................... 2,382,023 123,150 -- 2,505,173 -- 2,505,173
Other assets............ 1,979,198 36,271 -- 2,015,469 -- 2,015,469
Goodwill, net........... 14,893,924 -- 5,825,814 20,719,738 -- 20,719,738
------------ -------- ----------- ------------ ----------- ------------
Total assets........... $ 37,841,267 $970,693 $ 5,825,814 $ 44,637,774 $19,536,500 $ 64,174,274
============ ======== =========== ============ =========== ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable........ $ 1,823,813 $337,356 $ -- $ 2,161,169 $ -- $ 2,161,169
Accrued expenses and
other liabilities...... 6,562,561 416,852 -- 6,979,413 -- 6,979,413
Notes payable to
shareholders, current
portion................ 5,950,000 33,000 2,770,000 8,753,000 (6,520,000) (F) 2,233,000
------------ -------- ----------- ------------ ----------- ------------
Total current
liabilities........... 14,336,374 787,208 2,770,000 17,893,582 (6,520,000) 11,373,582
------------ -------- ----------- ------------ ----------- ------------
Obligations under
capital leases......... 324,048 -- -- 324,048 -- 324,048
Borrowings under
revolving credit
facility............... 7,500,000 9,299 -- 7,509,299 (7,500,000) (E) 9,299
Notes payable to
shareholders........... 1,896,000 -- -- 1,896,000 -- 1,896,000
------------ -------- ----------- ------------ ----------- ------------
Total long-term
liabilities........... 9,720,048 9,299 -- 9,729,347 (7,500,000) 2,229,347
------------ -------- ----------- ------------ ----------- ------------
Convertible preferred
stock.................. 11,140,191 -- (11,140,191) -- -- --
------------ -------- ----------- ------------ ----------- ------------
Common stock............ 23,200 3,500 3,929 30,629 2,850 (D) 33,479
Additional paid-in
capital................ 55,779,486 -- 14,362,762 70,142,248 33,553,650 (D) 103,695,898
Unearned compensation--
restricted stock....... (1,614,407) -- -- (1,614,407) -- (1,614,407)
Accumulated deficit..... (51,543,625) 170,686 (170,686) (51,543,625) -- (51,543,625)
------------ -------- ----------- ------------ ----------- ------------
Total shareholders'
equity................ 2,644,654 174,186 14,196,005 17,014,845 33,556,500 50,571,345
------------ -------- ----------- ------------ ----------- ------------
Total liabilities and
shareholders' equity.. $ 37,841,267 $970,693 $ 5,825,814 $ 44,637,774 $19,536,500 $ 64,174,274
============ ======== =========== ============ =========== ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet
PF-2
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
A. Represents the historical consolidated balance sheet of the Company as of
April 3, 1998.
B. Represents the Legacy Acquisition for which a definitive agreement was
executed in April, 1998 and which is expected to close during the second
quarter.
C. Represents the adjustment to record the purchase price of the Legacy
Acquisition. The purchase price consists of a $2.8 million promissory note
and 269,166 shares of Common Stock at an assumed value of $3,230,000. Also
represents the Conversion of all convertible preferred stock into common
stock at a four-to-one conversion rate.
D. Assumes receipt of net proceeds of $33,556,500 ($37,050,000 less $3,493,500
in issuance and Offering costs) from the Offering and assumes the
Underwriters' over-allotment option is not exercised.
E. Assumes repayment of all outstanding bank debt with the Offering proceeds.
The debt is scheduled for repayment with a balloon payment due on November
7, 2000. The interest rate on the debt is at varying rates, principally
LIBOR plus 2.25-3.25%.
F. Assumes repayment of short-term debt owed to the sole stockholder in
connection with the Company's purchase of The Hackett Group, Inc. As of
January 2, 1998, $3,750,000 is payable on the earlier of March 31, 1999 or
the date the Company completes an initial public offering of its stock. The
note bears interest at 12%. The remaining Hackett Group stockholder notes
are scheduled to be paid on March 31, 1999. Also assumes repayment of debt
amounting to $2,770,000 owed to the Legacy stockholders in connection with
the Legacy Acquisition. The short-term note is payable upon the earlier of
the completion of an initial public offering of the Company's Common Stock
or over a 12-month period commencing on October 1, 1998 and bears interest
at a rate of 6%.
PF-3
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 23, 1997 (DATE OF INCEPTION) THROUGH JANUARY 2, 1998
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------------- --------------------------
LEGACY LEGACY
THE COMPANY ACQUISITIONS ACQUISITION ACQUISITION ACQUISITION OFFERING
(A) (B) (C) ADJUSTMENTS ADJUSTMENTS PRO FORMA ADJUSTMENTS
------------ ------------ ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues..... $ 14,848,172 $13,968,338 $5,197,329 $ -- $ -- $ 34,013,839 $ --
Costs and
expenses:
Project
personnel and
expenses....... 13,333,921 6,668,208 2,686,646 -- -- 22,688,775 --
Selling, general
and
administrative.. 8,084,558 5,558,301 2,567,597 362,390(D) 285,000(D) 16,857,846 --
Settlement
costs.......... 1,902,608 -- -- -- -- 1,902,608(E) --
In-process
research and
development
technology..... 4,000,000 -- -- -- -- 4,000,000(F) --
------------ ----------- ---------- --------- --------- ------------ --------
Total costs and
operating
expenses....... 27,321,087 12,226,509 5,254,243 362,390 285,000 45,449,229 --
------------ ----------- ---------- --------- --------- ------------ --------
Income (loss)
from
operations...... (12,472,915) 1,741,829 (56,914) (362,390) (285,000) (11,435,390)
Other income
(expense):
Interest income
(expense),
net............ 382,463 28,437 (6,294) (419,664)(G) (176,588)(G) (191,646) 711,807(H)
Income tax
benefit........ -- -- 6,081 -- -- 6,081 --
------------ ----------- ---------- --------- --------- ------------ --------
Net income (loss)
(I)............. $(12,090,452) $ 1,770,266 $ (57,127) $(782,054) $(461,588) $(11,620,955) $711,807
============ =========== ========== ========= ========= ============ ========
Net loss per
common share--
basic and
diluted......... $ (1.91) $ (0.80)
============ ============
Weighted average
common shares
outstanding..... 6,342,319 14,596,917
<CAPTION>
PRO FORMA AS
ADJUSTED
---------------
<S> <C>
Net revenues..... $ 34,013,839
Costs and
expenses:
Project
personnel and
expenses....... 22,688,775
Selling, general
and
administrative.. 16,857,846
Settlement
costs.......... 1,902,608
In-process
research and
development
technology..... 4,000,000
---------------
Total costs and
operating
expenses....... 45,449,229
---------------
Income (loss)
from
operations...... (11,435,390)
Other income
(expense):
Interest income
(expense),
net............ 520,161
Income tax
benefit........ 6,081
---------------
Net income (loss)
(I)............. $(10,909,148)
===============
Net loss per
common share--
basic and
diluted......... $ (0.70)
===============
Weighted average
common shares
outstanding..... 15,675,379(J)
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations.
PF-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
A. Represents the historical consolidated statement of operations of the
Company for the period April 23, 1997 (date of inception) through January
2, 1998.
B. Represents the historical consolidated statement of operations of the 1997
Acquisitions from April 23, 1997 (date of inception) until such 1997
Acquisitions were completed by the Company.
C. Represents the historical statement of operations of Legacy Technology,
Inc. from April 23, 1997 through January 2, 1998.
D. Adjusts goodwill amortization expense to reflect the allocation of the
purchase price for each of the 1997 Acquisitions and the Legacy Acquisition
beginning on April 23, 1997 using a 15-year life. On August 1, 1997, the
Company acquired Relational Technologies, Inc. in exchange for 1,220,700
restricted shares of Common Stock valued at approximately $610,000. On
October 13, 1997, the Company acquired The Hackett Group, Inc., for
$6,500,000 in cash, 444,000 restricted shares of Common Stock valued at
approximately $355,000 and a $5,143,000 promissory note which is subject to
certain earn-out provisions. As of January 2, 1998, the Company had
recorded $3,750,000 of the note as additional purchase consideration. Also,
on November 12, 1997, the Company acquired Delphi Partners, Inc. for
$7,400,000 in cash, 560,000 restricted shares of Common Stock valued at
approximately $840,000 and contingent consideration up to a maximum of
$2,500,000 based on the achievement of certain pre-tax profit targets. As
of January 2, 1998, the Company had not recorded any additional
consideration under this earn-out. In April, 1998, the Company executed a
definitive agreement to acquire Legacy Technology, Inc. for a $2,770,000
promissory note, payable on the date the Company completes a public
offering of its Common Stock, or, over a 12-month period commencing October
1, 1998, 269,166 restricted shares of common stock valued at approximately
$3,230,000 and contingent consideration up to a maximum of $1,300,000 based
on achievement of certain revenue and pre-tax profit targets.
E. Settlement costs consist primarily of payments to certain key executives
and certain other management employees of the Company relating to the
obligations assumed by the Company for compensation earned by such
employees during the Dispute Period and legal fees incurred in connection
with the ensuing litigation. Management believes that the majority of these
costs are non-recurring.
F. Represents an unusual charge for in-process research and development
relating to the acquisition of The Hackett Group, Inc.
G. Adjustment to interest as if debt incurred in connection with the 1997
Acquisitions and the Legacy Acquisition was outstanding for the period
April 23, 1997 (date of inception) through January 2, 1998. Approximately
$750,000 of debt was incurred in connection with the purchase of The
Hackett Group, Inc., an additional $7.4 million of debt was incurred in
connection with the purchase of Delphi Partners, Inc. and $2.77 million of
debt expected to be incurred in connection with the Legacy Acquisition. The
interest rate on the debt is variable but was assumed to be approximately
8.5% for purposes of the pro forma adjustment which represents the weighted
average interest rate on the debt as of April 3, 1998.
H. Upon the closing of the Offering, the Company will repay all outstanding
debt except certain notes payable to shareholders in the amount of $300,000
which are payable on March 31, 1999 and which were assumed as part of the
Delphi Partners, Inc. acquisition. Interest expense has been adjusted to
reflect the use of a portion of the Offering proceeds to repay the
outstanding debt. The debt that will be repaid is comprised of $8.2 million
outstanding under the Company's revolving credit facility with BankBoston,
N.A., a $3.75 million promissory note payable to the sole stockholder of
The Hackett Group, Inc. based on the achievement of earnings targets for
1997, and a $2.77 million promissory note payable to the stockholders of
Legacy Technology, Inc.
I. No income tax provision is required due to the Company's current tax loss
and the inability of the Company to currently use the benefits of its loss
carryforward.
J. Pro forma loss per share has been calculated based upon 15,675,379 shares
outstanding. This represents the sum of the total shares outstanding on a
pro forma basis prior to the Offering (14,596,917 shares) and the number of
shares required to be sold in the Offering (1,078,462 shares) to repay debt
and amounts due to shareholders ($14,020,000).
PF-5
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED APRIL 3, 1998
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA
LEGACY LEGACY PRO FORMA
THE COMPANY ACQUISITION ACQUISITION OFFERING AS
(A) (B) ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $ 18,531,770 $1,332,263 $ -- $ 19,864,033 $ -- $ 19,864,033
Costs and expenses:
Project personnel and
expenses.............. 11,193,806 699,033 -- 11,892,839 -- 11,892,839
Selling, general and
administrative........ 5,654,019 680,016 95,000(C) 6,429,035 -- 6,429,035
Compensation related to
vesting of restricted
shares................ 40,843,400 -- -- 40,843,400 -- 40,843,400
------------ ---------- --------- ------------ -------- ------------
Total costs and operat-
ing expenses.......... 57,691,225 1,379,049 95,000 59,165,274 -- 59,165,274
------------ ---------- --------- ------------ -------- ------------
Income (loss) from oper-
ations................. (39,159,455) (46,786) (95,000) (39,301,241) (39,301,241)
Other income (expense):
Interest income (ex-
pense), net........... (293,718) (2,020) (58,863)(D) (354,601) 380,628(E) 26,027
------------ ---------- --------- ------------ -------- ------------
Net loss (F)............ $(39,453,173) $ (48,806) $(153,863) $(39,655,842) $380,628 $(39,275,214)
============ ========== ========= ============ ======== ============
Net loss per common
share--basic and dilut-
ed..................... $ (3.86) $ (2.28 ) $ (2.13)
============ ============ ============
Weighted average common
shares outstanding..... 10,226,330 17,377,239 18,455,701(G)
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement of
Operations
PF-6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
A. Represents the historical consolidated statement of operations of the
Company for the first quarter of fiscal year 1998.
B. Represents the historical consolidated statement of operations of Legacy
Technology, Inc. for the first quarter of fiscal 1998.
C. Adjusts goodwill amortization expense to reflect the allocation of the
purchase price for the Legacy Acquisition for the first quarter using a 15-
year life.
D. Adjustment to interest expense as if debt incurred in connection with the
Legacy Acquisition was outstanding for the first quarter. The interest rate
on the debt was assumed to be 8.5% for purposes of the pro forma adjustment
which represents the interest rate on the debt for the first quarter.
E. Upon the closing of the Offering, the Company will retire all outstanding
debt except certain notes payable to shareholders totaling $4,096,000.
Notes in the amount of $303,000 were assumed as part of the Delphi
Partners, Inc. acquisition and are payable on March 31, 1999. The remaining
$3,793,000 relates to payments due to the stockholder and employees of the
Hackett Group in connection with the subsequent amendments to the purchase
and employment agreements. Of the $3,793,000 in notes, $1,897,000 is
payable on March 31, 1999 and $1,896,000 is payable on March 31, 2000. The
Company will also assume $33,000 of notes payable as part of the Legacy
Acquisition. Interest expense has been adjusted to reflect the use of a
portion of the Offering proceeds to retire the debt.
F. No income tax provision is required due to the Company's current tax loss
and the inability of the Company to currently use the benefits of its loss
carryforward.
G. Pro forma loss per share has been calculated based upon 18,455,701 shares
outstanding. This represents the sum of the total shares outstanding on a
pro forma basis prior to the Offering (17,377,239 shares) and the number of
shares required to be sold in the Offering (1,078,462 shares) to repay debt
and amounts due to shareholders ($14,020,000).
PF-7
<PAGE>
[BACK COVER OF PROSPECTUS]
[LOGO OF ACG APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the Common Stock being registered. All amounts
shown are estimates except for the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Securities and Exchange Commission registration fee................ $ 20,650
NASD filing fee.................................................... 7,500
Nasdaq National Market fee......................................... 90,000
Blue sky qualification fees and expenses........................... 5,000
Accounting fees and expenses....................................... 325,000
Legal fees and expenses............................................ 375,000
Transfer agent and registrar fees.................................. 10,000
Miscellaneous expenses............................................. 66,850
--------
Total............................................................ $900,000
========
</TABLE>
--------
* To be provided supplementally.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and Bylaws of the Registrant provide for the
indemnification of the Registrant's directors and officers to the fullest
extent authorized by, and subject to the conditions set forth in the Florida
Business Corporation Act (the "Florida Act") against all expenses, liabilities
and losses (including attorneys' fees, judgments, fines, ERISA taxes or
penalties and amounts paid or to be paid in settlement), except that the
Registrant will indemnify a director or officer in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Registrant's Board of Directors. The
indemnification provided under the Bylaws includes the right to be paid by the
Registrant the expenses (including attorneys' fees) in advance of any
proceeding for which indemnification may be had in advance of its final
disposition, provided that the payment of such expenses (including attorneys'
fees) incurred by a director or officer in advance of the final disposition of
a proceeding may be made only upon delivery to the Registrant of an
undertaking by or on behalf of such director or officer to repay all amounts
so paid in advance if it is ultimately determined that such director or
officer is not entitled to be indemnified. Pursuant to the Bylaws, if a claim
for indemnification is not paid by the Registrant within 60 days after a
written claim has been received by the Registrant, the claimant may at any
time thereafter bring an action against the Registrant to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant will
be entitled to be paid also the expense of prosecuting such action.
Generally, the Florida Act permits indemnification of a director or officer
upon a determination that he or she 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, with respect to any criminal action or proceeding, had no
reasonable cause to belive his or her conduct was unlawful.
Under the Articles of Incorporation, the Registrant has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Registrant, or is or was serving
at the request of the Registrant as a director, officer, employee, or agent of
another corporation or of a partnership, joint venture, trust, employee
benefit plan or other enterprise, against any liability asserted against such
person or incurred by such person in any such capacity, or arising out of such
person's status as such,
II-1
<PAGE>
whether or not the Registrant would have the power to indemnify such person
against such liability under the provisions of the Florida Act. The Registrant
maintains director and officer liability insurance on behalf of its directors
and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The share numbers below do not reflect the Reverse Stock Split described in
the Prospectus:
(a) On April 23, 1997, in connection with the formation of the Registrant,
the Registrant issued 2,400,000 common shares, par value $.01 per share
("Common Stock") to Ted A. Fernandez, the Registrant's President, Chief
Executive Officer and Chairman, Allan R. Frank, the Registrant's Chief
Technology Officer and a director, Ulysses S. Knotts, III, the Registrant's
Executive Vice President, Sales and Marketing and a director, and Edmund R.
Miller, a director of the Company, as the initial shareholders of the
Registrant pursuant to an agreement (each, a "Senior Executive Agreement")
entered into with each of such persons. Such shares were sold at par ($.01 per
share) for an aggregate consideration of $2,400. These shares were issued
without registration under the Securities Act of 1993, as amended (the
"Securities Act") in reliance upon an exemption from registration under
Section 4(2) thereof ("Section 4(2)").
(b) The Registrant sold to Golder, Thoma, Cressey, Rauner Fund V, L.P.
("GTCR V"), MG Capital Partners II, L.P. ("MG"), Gator Associates, Ltd.
("Gator"), Tara Ventures, Ltd. ("Tara," and together with Gator, the "Miller
Group") (GTCR V, MG and the Miller Group are sometimes referred to herein
collectively as the "Initial Investors"), pursuant to a purchase agreement,
dated as of April 23, 1997, a total of 6,800,000 shares of Class A Convertible
Preferred Stock of the Registrant, par value $.01 per share (the "Class A
Preferred Stock"), at a purchase price of $3.00 per share for an aggregate
consideration of $20,400,000. At the time of issuance, each share of Class A
Preferred Stock was convertible into one share of Common Stock. These shares
were issued without registration under the Securities Act in reliance upon an
exemption from registration under Section 4(2).
(c) On July 10, 1997, Messrs. Fernandez, Frank and Knotts and three other
employees of the Registrant exercised options to acquire to total of 200,000
shares of Class A Preferred Stock at an exercise of $3.00 per share for an
aggregate consideration of $600,000. These shares of Class A Preferred Stock
were issued without registration under the Securities Act in reliance on an
exemption contained in Section 4(2). Messrs. Fernandez, Frank and Knotts and
those three other employees immediately converted these 200,000 shares of
Class A Preferred Stock and received in exchange therefor a total of 200,000
shares of Common Stock. These shares of Common Stock were issued without
registration under the Securities Act in reliance on an exemption contained in
Section 3(a)(9) thereof ("Section 3(a)(9)").
(d) Also on July 10, 1997, the Initial Investors converted a portion of the
Class A Preferred Stock owned by them and received in exchange therefor a
total of 3,453,268 shares of Common Stock. These shares were issued without
registration under the Securities Act in reliance on an exemption contained in
Section 3(a)(9).
(e) On July 11, 1997 pursuant to employment-related agreements entered into
with three employees of the Registrant, the Registrant issued to such
employees a total of 1,900,000 shares of Common Stock at a purchase price of
$.01 per share for an aggregate consideration of $1,900. These shares were
issued without registration under the Securities Act in reliance on an
exemption from registration under Section 4(2).
(f) Effective as of July 17, 1997, the Registrant amended its Articles of
Incorporation to increase the number of authorized shares of Common Stock to
100,000,000 and to change the par value of the Common Stock and the Class A
Preferred Stock to $.001 per share. As a result of the split of the Common
Stock, each share of Class A Preferred Stock was convertible into four shares
of Common Stock as of July 17, 1997. Also on July 17, 1997, the Registrant
declared a four-for-one stock split of Common Stock and issued 23,859,804
shares of Common Stock to the holders of Common Stock as of such date. These
shares were issued without registration under the Securities Act in reliance
on an exemption contained in Section 3(a)(9).
II-2
<PAGE>
(g) On July 31, 1997 pursuant to an employment-related agreement entered
into with John F. Brennan, the Registrant's Executive Vice President,
Acquisitions and Strategic Planning, the Registrant issued 280,000 shares to
Mr. Brennan at a purchase price of $.0025 per share for an aggregate
consideration of $700. These shares were issued without registration under the
Securities Act in reliance upon an exemption from registration under Section
4(2).
(h) On August 1, 1997, in connection with the merger Relational
Technologies, Inc. ("RTI") into the Registrant, the Registrant issued
2,441,400 shares of Common Stock to the eight former shareholders of RTI in
exchange for (i) all of the issued and outstanding capital stock of RTI and
(ii) with respect to 996,500 of such shares, for additional consideration in
the amount of $.0025 per share for an aggregate consideration of $2,491.25.
These shares were issued without registration under the Securities Act in
reliance upon an exemption from registration under Section 4(2).
(i) In October 1997, the Registrant issued 888,000 shares of Common Stock to
the sole former shareholder of The Hackett Group, Inc. (the "Hackett Group")
at a purchase price of $.0025 per share for an aggregate consideration of
$2,220 in connection with the acquisition by the Registrant of Hackett Group.
These shares were issued without registration under the Securities Act in
reliance upon an exemption from registration under Section 4(2).
(j) Also in October 1997, the Registrant issued a total of 484,000 shares of
Common Stock to six employees of the Hackett Group at a purchase price of
$.0025 per share for an aggregate consideration of $1,210 pursuant to
employment agreements entered into with each of such persons in connection
with the acquisition by the Registrant of Hackett Group. These shares were
issued without registration under the Securities Act in reliance upon an
exemption from registration under Section 4(2).
(k) Also in October 1997, the Registrant issued 80,000 shares of Common
Stock to two individuals pursuant to a financial services agreement among the
Registrant and such persons in exchange for (i) financial advisory services
rendered to the Registrant by such persons in connection with the acquisition
of the Hackett Group and (ii) payment of a purchase price of $.0025 per share
for an aggregate consideration of $200. These shares were issued without
registration under the Securities Act in reliance upon an exception from
registration under Section 4(2).
(l) On November 12, 1997, the Registrant issued a total of 1,120,000 shares
of Common Stock to eight former shareholders of Delphi Partners, Inc.
("Delphi") at a purchase price of $.0025 per share for an aggregate
consideration of $2,800 in connection with the acquisition by the Registrant
of Delphi which became a wholly owned subsidiary of the Registrant as of such
date. These shares were issued without registration under the Securities Act
in reliance upon an exemption from registration under Section 4(2).
(m) Also on November 12, 1997, the Registrant issued 7,500 shares of Common
Stock to a financial advisory firm in exchange for (i) financial advisory
services rendered to the Registrant by such firm in connection with the
acquisition of Delphi and (ii) payment of a purchase price of $.0025 per share
for an aggregate consideration of $18.75. These shares were issued without
registration under the Securities Act in reliance upon an exemption from
registration under Section 4(2).
(n) On February 24, 1998, the Registrant issued to GTCR V, MG, GTCR
Associates V, ("GTCR Associates") and Miller Capital Management, Inc.,
("Miller Capital"), a total of 200,000 shares of Class A Preferred Stock at a
purchase price of $3.00 per share for an aggregate consideration of $600,000
pursuant to a purchase agreement among the Registrant and such persons. These
shares were issued without registration under the Securities Act in reliance
upon an exemption from registration under Section 4(2).
II-3
<PAGE>
(o) On March 5, 1998, the Registrant issued 33,333 shares of Class B
Convertible Preferred Stock, par value $.001 per share (the "Class B Preferred
Stock" and, together with the Class A Preferred Stock, the "Convertible
Preferred Stock"), to FSC Corp., a Massachusetts corporation and an affiliate
of BankBoston, N.A. ("FSC"), at a purchase price of $15.00 per share for an
aggregate consideration of $499,995. Each share of Class B Preferred Stock is
convertible into four shares of Common Stock. These shares were issued without
registration under the Securities Act in reliance upon an exemption from
registration under Section 4(2) of the Securities Act.
(p) On March 27, 1998, the Registrant issued 6,640,000 shares of fully
vested Common Stock in exchange for 6,640,000 shares of Common Stock which
previously had been issued to certain of the Registrant's directors and
employees (including Messrs. Fernandez, Frank, Knotts, Brennan and Miller) and
which were subject to certain vesting requirements. These shares were issued
without registration under the Securities Act in reliance on an exception
confirmed in Section 3(a)(9). Also on March 27, 1998, the Registrant canceled
400,000 shares of Common Stock which had previously been issued to certain
employees of the Registrant.
(q) Between July 22, 1997 and April 3, 1998, pursuant to employment
agreements and restricted stock agreements, the Registrant issued a total of
9,732,412 shares of Common Stock at a purchase price of $.0025 per share to
certain of its employees for an aggregate consideration of $24,331.03. The
Registrant subsequently repurchased 46,300 of these shares at a purchase price
of $.0025 per share for a total purchase price of $115.75. These shares were
issued without registration under the Securities Act in reliance upon an
exemption from registration under Section 3(b) thereof and Rule 504 of
Regulation D promulgated thereunder.
Each of the foregoing transactions was, or will be, effected without an
underwriter.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Second Amended and Restated Articles of Incorporation of the Registrant
3.2 Proposed Bylaws of the Registrant
5.1* Form of Opinion of Hogan & Hartson L.L.P.
9.1+ Shareholders Agreement dated April 23, 1997 among the Registrant, GTCR
V, MG, the Miller Group, Messrs. Fernandez, Frank, Knotts and Miller
and certain other shareholders of the Registrant parties thereto
9.2+ Amendment No. 1 to Shareholders Agreement dated February 24, 1998
9.3 Letter Agreement dated as of March 15, 1998 to amend Shareholders
Agreement
9.4+ Form of Restricted Securities Agreement dated April 23, 1997 among the
Initial Investors and each of Messrs. Fernandez, Frank, Knotts and
Miller
10.1 Purchase Agreement dated April 23, 1997 among the Registrant, GTCR V,
MG, Gator and Tara
10.2 Series A Preferred Stock Purchase Agreement dated February 24, 1998
among the Registrant, GTCR V, GTCR Associates and Miller Capital
10.3 Stock Purchase Agreement dated March 5, 1998 between the Registrant and
FSC
10.4* Second Amended and Restated Registration Rights Agreement dated as of
May 5, 1998 among the Registrant, GTCR V, MG, GTCR Associates, Miller
Capital, FSC, Messrs. Fernandez, Frank, Knotts and Miller and certain
other shareholders of the Registrant named therein
10.5* Second Amended and Restated Registration Rights Agreement dated as of
May 5, 1998 among the Registrant and the eight former shareholders of
RTI
10.6 Revolving Credit Agreement dated as of November 7, 1997 among the
Registrant, BankBoston, N.A. and certain other lenders party thereto
and BankBoston, N.A. as agent
10.7 Agreement and Plan of Merger dated as of August 1, 1997 among the
Registrant, RTI and all of the shareholders of RTI
10.8 Stock Purchase Agreement dated as of October 13, 1997 by and between
the Registrant and Gregory P. Hackett relating to the acquisition of
Hackett Group
10.9 Amendment No. 1 dated March 12, 1998 to Stock Purchase Agreement dated
as of October 13, 1997 by and between the Registrant and Gregory P.
Hackett relating to the acquisition of Hackett Group
10.10 Stock Purchase Agreement dated as of November 12, 1997 by and between
the Registrant and the shareholders of Delphi relating to the
acquisition of Delphi
10.11 Registrant's 1998 Stock Option and Incentive Plan
10.12+ Form of Senior Management Agreement dated April 23, 1997 between the
Registrant and each of Messrs. Fernandez, Frank and Knotts
10.13+ Senior Management Agreement dated April 23, 1997 between the Registrant
and Mr. Miller
10.14* Form of Employment Agreement to be entered into between the Registrant
and each of Messrs. Fernandez, Frank and Knotts
10.15+ Employment Agreement dated July 22, 1997 between the Registrant and Mr.
San Miguel
10.16+ Restricted Stock Agreement dated July 22, 1997 between the Registrant
and Mr. San Miguel
10.17* Form of Employment Agreement to be entered into between the Registrant
and Mr. San Miguel
10.18 Confidential Settlement Agreement dated as of May 21, 1998 between KPMG
Peat Marwick LLP, on the one hand, and the Registrant, certain officers
and employees of ACG-Florida, Mr. Miller and Miller Capital, on the
other.
10.19* Amendment No. 2 dated as of May 5, 1998 to Purchase Agreement dated
April 23, 1997 among the Registrant, GTCR V, MG, Gator and Tara
10.20 Amendment No. 2 dated as of May 5, 1998 to Stock Purchase Agreement
dated March 5, 1998 between the Registrant and FSC.
10.21* Amendment No. 2 dated as of May 5, 1998 to Agreement and Plan of Merger
dated as of August 1, 1997 among the Registrant, RTI and all of the
shareholders of RTI
10.22 Amendment to certain Senior Management Agreements dated March 27, 1998,
among the Company, the Board of Directors and each of Messrs.
Fernandez, Frank, Knotts and Miller
10.23* Agreement and Plan of Merger among the Registrant, the Registrant
Acquisition Sub, Legacy and the shareholders of Legacy
10.24 First Amendment to Revolving Credit Agreement dated as of April 3,
1998, by and among the Registrant, Bank Boston, N.A. and certain other
lenders party thereto and Bank Boston, N.A. as agent.
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand L.L.P. (Registrant's financial statements)
23.2 Consent of Coopers & Lybrand L.L.P. (financial statements of Delphi,
Hackett Group, RTI and Legacy)
23.3 Form of Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-8)
27.1 Financial Data Schedule (period April 23, 1997 to January 2, 1998)
27.2 Financial Data Schedule (period January 2, 1998 to April 3, 1998)
</TABLE>
- - --------
+ Previously filed.
* To be filed by amendment.
II-5
<PAGE>
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth
therein is not applicable or is included elsewhere in the Financial Statements
or the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as may be required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 of this
Registration Statement, 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 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 and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
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 Miami, State of Florida,
on the 7th day of May, 1998.
ANSWERTHINK CONSULTING GROUP, INC.
/s/ Ted A. Fernandez
By: _________________________________
Ted A. Fernandez
President, Chief Executive Officer
and Chairman
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ted A. Fernandez and Luis E. San Miguel, and
each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, from such person and in each
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement or any Registration Statement relating to this Registration
Statement under Rule 462 and to file the same, with all exhibits thereto and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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 date indicated.
NAME TITLE DATE
/s/ Ted A. Fernandez President, Chief
- - ------------------------------------- Executive Officer and May 7, 1998
TED A. FERNANDEZ Chairman (Principal
Executive Officer)
/s/ Luis E. San Miguel Executive Vice
- - ------------------------------------- President, Finance May 7, 1998
LUIS E. SAN MIGUEL and Chief Financial
Officer (Principal
Financial and
Accounting Officer)
/s/ Allan R. Frank Executive Vice
- - ------------------------------------- President, Chief May 7, 1998
ALLAN R. FRANK Technology Officer
and Director
/s/ Ulysses S. Knotts, III Executive Vice
- - ------------------------------------- President, Sales and May 7, 1998
ULYSSES S. KNOTTS, III Marketing and
Director
/s/ Fernando Montero Director May 7, 1998
- - -------------------------------------
FERNANDO MONTERO
/s/ Edmund R. Miller Director
- - ------------------------------------- May 7, 1998
EDMUND R. MILLER
/s/ Bruce Rauner Director
- - ------------------------------------- May 7, 1998
BRUCE RAUNER
/s/ William C. Kessinger Director
- - ------------------------------------- May 7, 1998
WILLIAM C. KESSINGER
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Second Amended and Restated Articles of Incorporation of the Registrant
3.2 Proposed Bylaws of the Registrant
5.1* Form of Opinion of Hogan & Hartson L.L.P.
9.1+ Shareholders Agreement dated April 23, 1997 among the Registrant, GTCR
V, MG, the Miller Group, Messrs. Fernandez, Frank, Knotts and Miller
and certain other shareholders of the Registrant parties thereto
9.2+ Amendment No. 1 to Shareholders Agreement dated February 24, 1998
9.3 Letter Agreement dated as of March 15, 1998 to amend Shareholders
Agreement
9.4+ Form of Restricted Securities Agreement dated April 23, 1997 among the
Initial Investors and each of Messrs. Fernandez, Frank, Knotts and
Miller
10.1 Purchase Agreement dated April 23, 1997 among the Registrant, GTCR V,
MG, Gator and Tara
10.2 Series A Preferred Stock Purchase Agreement dated February 24, 1998
among the Registrant, GTCR V, GTCR Associates and Miller Capital
10.3 Stock Purchase Agreement dated March 5, 1998 between the Registrant and
FSC
10.4* Second Amended and Restated Registration Rights Agreement dated as of
May 5, 1998 among the Registrant, GTCR V, MG, GTCR Associates, Miller
Capital, FSC, Messrs. Fernandez, Frank, Knotts and Miller and certain
other shareholders of the Registrant named therein
10.5* Second Amended and Restated Registration Rights Agreement dated as of
May 5, 1998 among the Registrant and the eight former shareholders of
RTI
10.6 Revolving Credit Agreement dated as of November 7, 1997 among the
Registrant, BankBoston, N.A. and certain other lenders party thereto
and BankBoston, N.A. as agent
10.7 Agreement and Plan of Merger dated as of August 1, 1997 among the
Registrant, RTI and all of the shareholders of RTI
10.8 Stock Purchase Agreement dated as of October 13, 1997 by and between
the Registrant and Gregory P. Hackett relating to the acquisition of
Hackett Group
10.9 Amendment No. 1 dated March 12, 1998 to Stock Purchase Agreement dated
as of October 13, 1997 by and between the Registrant and Gregory P.
Hackett relating to the acquisition of Hackett Group
10.10 Stock Purchase Agreement dated as of November 12, 1997 by and between
the Registrant and the shareholders of Delphi relating to the
acquisition of Delphi
10.11 Registrant's 1998 Stock Option and Incentive Plan
10.12+ Form of Senior Management Agreement dated April 23, 1997 between the
Registrant and each of Messrs. Fernandez, Frank and Knotts
10.13+ Senior Management Agreement dated April 23, 1997 between the Registrant
and Mr. Miller
10.14* Form of Employment Agreement to be entered into between the Registrant
and each of Messrs. Fernandez, Frank and Knotts
10.15+ Employment Agreement dated July 22, 1997 between the Registrant and Mr.
San Miguel
10.16+ Restricted Stock Agreement dated July 22, 1997 between the Registrant
and Mr. San Miguel
10.17* Form of Employment Agreement to be entered into between the Registrant
and Mr. San Miguel
10.18 Confidential Settlement Agreement dated as of May 21, 1998 between KPMG
Peat Marwick LLP, on the one hand, and the Registrant, certain officers
and employees of ACG-Florida, Mr. Miller and Miller Capital, on the
other.
10.19* Amendment No. 2 dated as of May 5, 1998 to Purchase Agreement dated
April 23, 1997 among the Registrant, GTCR V, MG, Gator and Tara
10.20 Amendment No. 2 dated as of May 5, 1998 to Stock Purchase Agreement
dated March 5, 1998 between the Registrant and FSC.
10.21* Amendment No. 2 dated as of May 5, 1998 to Agreement and Plan of Merger
dated as of August 1, 1997 among the Registrant, RTI and all of the
shareholders of RTI
10.22 Amendment to certain Senior Management Agreements dated March 27, 1998,
among the Company, the Board of Directors and each of Messrs.
Fernandez, Frank, Knotts and Miller
10.23* Agreement and Plan of Merger among the Registrant, ACG-Florida
Acquisition Sub, Legacy and the shareholders of Legacy
10.24 First Amendment to Revolving Credit Agreement dated as of April 3,
1998, by and among the Registrant, Bank Boston, N.A. and certain other
lenders party thereto and Bank Boston, N.A. as agent.
21.1 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand L.L.P. (Registrant's financial statements)
23.2 Consent of Coopers & Lybrand L.L.P. (financial statements of Delphi,
Hackett Group, RTI and Legacy)
23.3 Form of Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-8)
27.1 Financial Data Schedule (period April 23, 1997 to January 2, 1998)
27.2 Financial Data Schedule (period January 2, 1998 to April 3, 1998)
</TABLE>
- - --------
+ Previously filed.
* To be filed by amendment.
<PAGE>
Exhibit 1.1
3,850,000 Shares
ANSWERTHINK CONSULTING GROUP, INC.
COMMON STOCK, PAR VALUE $.001 PER SHARE
FORM OF UNDERWRITING AGREEMENT
May ___, 1998
<PAGE>
May ___, 1998
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
The Robinson-Humphrey Company LLC
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
AnswerThink Consulting Group, Inc., a Florida corporation (the
"Company"), proposes to issue and sell to the several Underwriters named in
Schedule II hereto (the "Underwriters"), and certain shareholders of the Company
(the "Selling Shareholders") named in Schedule I hereto severally propose to
sell to the several Underwriters, an aggregate of 3,850,000 shares of the
Common Stock, par value $.001 per share of the Company (the "Firm Shares"), of
which 2,850,000 shares are to be issued and sold by the Company and
1,000,000 shares are to be sold by the Selling Shareholders, each Selling
Shareholder selling the amount set forth opposite such Selling Shareholder's
name in Schedule I hereto.
The Company also proposes to issue, and certain of the Selling
Shareholders propose to sell, to the several Underwriters not more than an
additional aggregate of 577,500 shares of its Common Stock, par value $.001
per share of the Company (the "Additional Shares") if and to the extent that
you, as Managers of the offering, shall have determined to exercise, on behalf
of the Underwriters, the right to purchase such shares of common stock granted
to the Underwriters in Section 3 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares". The shares of
Common Stock, par value $.001 per share of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock". The Company and the Selling Shareholders are hereinafter
sometimes collectively referred to as the "Sellers".
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if
-1-
<PAGE>
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "Securities Act"), is hereinafter referred to as the "Registration
Statement"; the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "Prospectus". If the Company has filed an
abbreviated registration statement to register additional shares of Common Stock
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement.
As part of the offering contemplated by this Agreement, Morgan Stanley &
Co. Incorporated ("Morgan Stanley") has agreed to reserve out of the Shares set
forth opposite its name on Schedule II to this Agreement, up to 231,000 shares,
for sale to the Company's employees, officers, and directors and other parties
associated with the Company (collectively, "Participants"), as set forth in the
Prospectus under the heading "Underwriting" (the "Directed Share Program"). The
Shares to be sold by Morgan Stanley pursuant to the Directed Share Program (the
"Directed Shares") will be sold by Morgan Stanley pursuant to this Agreement at
the public offering price. Any Directed Shares not orally confirmed for purchase
by any Participants by the end of the business day on which this Agreement is
executed will be offered to the public by Morgan Stanley as set forth in the
Prospectus.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, will not
contain 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, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
-2-
<PAGE>
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; all of the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly by the Company, free and clear of
all liens, encumbrances, equities or claims, except for the pledge of all
of the shares of capital stock of the Company's subidiaries to BankBoston,
N.A.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) Other than as described in the Prospectus, the shares of Common
Stock (including the Shares to be sold by the Selling Shareholders)
outstanding prior to the issuance of the Shares to be sold by the Company
have been duly authorized and are validly issued, fully paid and non-
assessable.
(h) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or by-
laws of the Company or any
-3-
<PAGE>
agreement or other instrument binding upon the Company or any of its
subsidiaries, including the Settlement Agreement dated as of May 21, 1997
among the Company, KPMG Peat Marwick and the other parties thereto (the
"Settlement Agreement"), that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares .
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (1) the Company and
its subsidiaries have not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, except in each case as described in the
Prospectus.
(n) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned
-4-
<PAGE>
by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as
described in the Prospectus.
(o) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a material adverse
affect on the Company and its subsidiaries, taken as a whole.
(p) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in the Prospectus, or,
to the knowledge of the Company, is imminent; and the Company is not aware
of any existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that could
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(q) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any of its subsidiaries has been
refused any insurance coverage sought or applied for; and neither the
Company nor any of its subsidiaries has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in the Prospectus.
(r) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or
-5-
<PAGE>
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described the Prospectus
(s) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (3)
access to assets is permitted only in accordance with management's general
or specific authorization; and (4) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(t) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(u) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(v) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(w) Other than as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the
-6-
<PAGE>
Securities Act with respect to any securities of the Company or the right
to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement, and all such rights
described in the Prospectus have been waived.
(x) The Company has not offered, or caused the Underwriters to offer,
Shares to any person pursuant to the Directed Share Program with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the Company,
or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
Furthermore, the Company represents and warrants to Morgan Stanley
that (i) the Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or
supplemented, if applicable, are distributed in connection with the
Directed Share Program, and that (ii) no authorization, approval, consent,
license, order, registration or qualification of or with any government,
governmental instrumentality or court, other than such as have been
obtained, is necessary under the securities laws and regulations of foreign
jurisdictions in which the Directed Shares are offered outside the United
States.
2. Representations and Warranties of the Selling Shareholders. Each
of the Selling Shareholders represents and warrants to and agrees with each of
the Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Shareholder and
Boston EquiServ, as Custodian, relating to the deposit of the Shares to be
sold by such Selling Shareholder (the "Custody Agreement") and the Power of
Attorney appointing certain individuals as such Selling Shareholder's
attorneys-in-fact to the extent set forth therein, relating to the
transactions contemplated hereby and by the Registration Statement (the
"Power of Attorney") will not contravene any provision of applicable law,
or the certificate of incorporation or by-laws of such Selling Shareholder
(if such Selling Shareholder is a corporation), or any agreement or other
instrument binding upon such Selling Shareholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for
the performance by such Selling Shareholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such Selling
-7-
<PAGE>
Shareholder, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares.
(c) Such Selling Shareholder has, and on the Closing Date will have,
valid title to the Shares to be sold by such Selling Shareholder and the
legal right and power, and all authorization and approval required by law,
to enter into this Agreement, the Custody Agreement and the Power of
Attorney and to sell, transfer and deliver the Shares to be sold by such
Selling Shareholder.
(d) The Custody Agreement and the Power of Attorney have been duly
authorized, executed and delivered by such Selling Shareholder and are
valid and binding agreements of such Selling Shareholder.
(e) Delivery of the Shares to be sold by such Selling Shareholder
pursuant to this Agreement will pass title to such Shares free and clear of
any security interests, claims, liens, equities and other encumbrances.
(f) With respect to information furnished to you in writing by or on
behalf of such Selling Shareholder expressly for use therein, (i) the
Registration Statement, when it became effective, did not contain and, as
amended or supplemented, if applicable, will not contain 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, and (ii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3. Agreements to Sell and Purchase. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at $______ a share (the "Purchase
Price") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Seller as the number of Firm Shares set
forth in Schedule II hereto opposite the name of such Underwriter bears to the
total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the
-8-
<PAGE>
Additional Shares, and the Underwriters shall have a one-time right to purchase,
severally and not jointly, up to 557,500 Additional Shares at the Purchase
Price. If you, on behalf of the Underwriters, elect to exercise such option, you
shall so notify the Company in writing not later than 30 days after the date of
this Agreement, which notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date (as defined below) but
not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in Section 5
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Additional Shares (subject to such adjustments to eliminate fractional
shares as you may determine) that bears the same proportion to the total number
of Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule II hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
Each Seller hereby agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
ending 180 days after the date of the Prospectus, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to
be sold hereunder, (B) the issuance by the Company of 269,166 shares of Common
Stock to the stockholders of Legacy Technology, Inc. ("Legacy") in connection
with the acquisition of Legacy, (C) the issuance by the Company of shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing, (D) the grant by the Company of (x) options to purchase
shares of Common Stock in connection with the acquisition of Legacy and (y)
options to employees in the ordinary course of business consistent with past
practice, provided that no such option shall become exercisable during the 180-
day period, or (E) transactions by any person other than the Company relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the offering of the Shares. In addition, the Company
agrees that, without the prior written consent of Morgan Stanley on behalf of
the Underwriters, it will not, during the period ending 180 days after the date
of the Prospectus, accelerate the vesting of any shares of restricted Common
Stock, accelerate the exercisability of any stock option or amend, modify or
remove any of the transfer restrictions relating to any stock held by, or
contained in any agreements with, its existing stockholders. In addition, each
Selling Shareholder, agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period ending 180
days after the date of the Prospectus, make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock.
4. Terms of Public Offering. The Sellers are advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers are further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "Public Offering Price") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may
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reallow, a concession, not in excess of $_____ a share, to any Underwriter or to
certain other dealers.
5. Payment and Delivery. Payment for the Firm Shares to be sold by
each Seller shall be made to such Seller in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on ____________, 1998, or at such other time on the same or such other
date, not later than ___________, 1998, as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to as the
"Closing Date".
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 3 or at such other time on the same or on such other
date, in any event not later than _______, 1998, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to
as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The obligations of
the Sellers to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than __________ (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
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[(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and]
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 6(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
(c) The Underwriters shall have received on the Closing Date an
opinion of Hogan & Hartson L.L.P., outside counsel for the Company, dated
the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to
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transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock (including the Shares to be sold
by the Selling Shareholders) outstanding prior to the issuance of the
Shares to be sold by the Company have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company,
free and clear of all liens, encumbrances, equities or claims;
(vi) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-
assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights;
(vii) other than as described in the Prospectus, no person has
any right, which has not been waived, to require the Company to
include any securities of the Company with the Shares to be registered
pursuant to the Registration Statement;
(viii) this Agreement has been duly authorized, executed and
delivered by the Company;
(ix) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries, including the Settlement
Agreement, that is material to the Company and its subsidiaries, taken
as a whole, or, to the best of such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or
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order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under
this Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and
sale of the Shares;
(x) the statements (A) in the Prospectus under the captions
"Certain Transactions," "Shares Eligible for Future Sale,"
"Description of Capital Stock," "Underwriters" and "[others]" and (B)
in the Registration Statement in Items 14 and 15, in each case insofar
as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein;
(xi) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required;
(xii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xiii) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (B) has no reason
to believe that (except for financial statements and schedules and
other financial and statistical data as to which such counsel need not
express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief) the Prospectus contains any untrue statement of a
material fact or omits to state a
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<PAGE>
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of Hogart & Hartson L.L.P., counsel for the Selling Shareholders,
dated the Closing Date, to the effect that :
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders;
(ii) the execution and delivery by each Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations
under, this Agreement and the Custody Agreement and Powers of Attorney
of such Selling Shareholder will not contravene any provision of
applicable law, or the certificate of incorporation or by-laws of such
Selling Shareholder (if such Selling Shareholder is a corporation),
or, to the best of such counsel's knowledge, any agreement or other
instrument binding upon such Selling Shareholder or, to the best of
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required
for the performance by such Selling Shareholder of its obligations
under this Agreement or the Custody Agreement or Power of Attorney of
such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states in connection with
offer and sale of the Shares;
(iii) each of the Selling Shareholders has valid title to the
Shares to be sold by such Selling Shareholder and the legal right and
power, and all authorization and approval required by law, to enter
into this Agreement and the Custody Agreement and Power of Attorney of
such Selling Shareholder and to sell, transfer and deliver the Shares
to be sold by such Selling Shareholder;
(iv) the Custody Agreement and the Power of Attorney of each
Selling Shareholder have been duly authorized, executed and delivered
by such Selling Shareholder and are valid and binding agreements of
such Selling Shareholder; and
(v) delivery of the Shares to be sold by each Selling
Shareholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances.
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<PAGE>
(e) The Underwriters shall have received on the Closing Date an
opinion of Ropes & Gray, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 6(c)(vi), 6(c)(viii),
6(c)(x) (but only as to the statements in the Prospectus under "Description
of Capital Stock" and "Underwriters") and 6(c)(xiii) above.
With respect to Section 6(c)(xiii) above, Hogan & Hartson L.L.P. and
Ropes & Gray may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to Section 6(d) above,
Hogan and Hartson, L.L.P. may rely upon an opinion or opinions of counsel
for any Selling Shareholders and, with respect to factual matters and to
the extent such counsel deems appropriate, upon the representations of each
Selling Shareholder contained herein and in the Custody Agreement and Power
of Attorney of such Selling Shareholder and in other documents and
instruments; provided that (A) each such counsel for the Selling
Shareholders is satisfactory to your counsel, (B) a copy of each opinion so
relied upon is delivered to you and is in form and substance satisfactory
to your counsel, (C) copies of such Custody Agreements and Powers of
Attorney and of any such other documents and instruments shall be delivered
to you and shall be in form and substance satisfactory to your counsel and
(D) Hogart & Hartson L.L.P. shall state in their opinion that they are
justified in relying on each such other opinion.
The opinions of Hogan & Hartson L.L.P. described in Sections 6(c) and
6(d) above shall be rendered to the Underwriters at the request of the
Company or one or more of the Selling Shareholders, as the case may be, and
shall so state therein.
(f) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from Coopers & Lybrand, independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company
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<PAGE>
relating to sales and certain other dispositions of shares of Common
Stock or certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
(h) The Shares shall have been approved for quotation on the Nasdaq
National Market.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
7. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 7(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and
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<PAGE>
addresses you will furnish to the Company) to which Shares may have been
sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
be misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending June 30, 1999 that satisfies the provisions of Section
11(a) of the Securities Act and the rules and regulations of the Commission
thereunder.
(f) that in connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. Morgan Stanley will notify the
Company as to which Participants will need to be so restricted. The Company
will direct the transfer agent to place stop transfer restrictions upon
such securities for such period of time.
(g) to pay all fees and disbursements of counsel (up to maximum of
$5,000) incurred by the Underwriters in connection with the Directed
Share Program and stamp duties, similar taxes or duties or other taxes,
if any, incurred by the Underwriters in connection with the Directed
Share Program.
Furthermore, the Company covenants with Morgan Stanley that the
Company will comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program.
8. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Sellers agree to
pay or cause to be paid all expenses incident to the performance of their
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel, the Company's accountants and counsel for the
Selling Shareholders in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in connection
with the preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing
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<PAGE>
costs associated therewith, and the mailing and delivering of copies thereof to
the Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 7(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the NASD,
which together with the fees and disbursement of counsel referred to in (iii)
above may not exceed $10,000, (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to listing the Shares on the
Nasdaq National Market, (vi) the cost of printing certificates representing the
Shares, (vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the offering of the Shares, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, and (ix) all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section. It
is understood, however, that except as provided in this Section, Section 9
entitled "Indemnity and Contribution", and the last paragraph of Section 11
below, the Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on resale of
any of the Shares by them and any advertising expenses connected with any offers
they may make.
The provisions of this Section shall not supersede or otherwise affect
any agreement that the Sellers may otherwise have for the allocation of such
expenses among themselves.
9. Indemnity and Contribution. (a) Each Seller agrees severally
and not jointly, to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
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material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein, and provided that the liability of each Selling Shareholder
--------
under this section 9(a) shall not exceed the product of the number of shares
sold by such Selling Shareholder and the initial public offering price as set
forth in the Prospectus.
(b) The Company agrees to indemnify and hold harmless Morgan Stanley
and each person, if any, who controls Morgan Stanley within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
("Morgan Stanley Entities"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in the prospectus wrapper material
prepared by or with the consent of the Company for distribution in foreign
jurisdictions in connection with the Directed Share Program attached to the
Prospectus or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein, when considered in conjunction with the
Prospectus or any applicable preliminary prospectus, not misleading; (ii) caused
by the failure of any Participant to pay for and accept delivery of the shares
which, immediately following the effectiveness of the Registration Statement,
were subject to a properly confirmed agreement to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program, provided that,
the Company shall not be responsible under this subparagraph (iii) for any
losses, claim, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of Morgan Stanley Entities.
(c) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Selling Shareholder
furnished in writing by or on behalf of such Selling Shareholder expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.
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(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Shareholders, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(e) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 9(a), 9(b), 9(c) or 9(d), such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, (ii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement and each person,
if any, who controls the Company within the meaning of either such Section and
(iii) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Selling Shareholders and all persons, if any, who control
any Selling Shareholder within the meaning of either such Section, and that all
such fees and expenses shall be reimbursed as they are incurred.
Notwithstanding anything contained herein to the contrary, if indemnity may be
-20-
<PAGE>
sought pursuant to Section 9(b) hereof in respect of such action or proceeding,
then in addition to such separate firm for the indemnified parties, the
indemnifying party shall be liable for the reasonable fees and expenses of not
more than one separate firm (in addition to any local counsel) for Morgan
Stanley for the defense of any losses, claims, damages and liabilities arising
out of the Directed Share Program, and all persons, if any, who control Morgan
Stanley within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act. In the case of any such separate firm for the Underwriters and
such control persons of any Underwriters, such firm shall be designated in
writing by Morgan Stanley. In the case of any such separate firm for the
Company, and such directors, officers and control persons of the Company, such
firm shall be designated in writing by the Company. In the case of any such
separate firm for the Selling Shareholders and such control persons of any
Selling Shareholders, such firm shall be designated in writing by the persons
named as attorneys-in-fact for the Selling Shareholders under the Powers of
Attorney. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(f) To the extent the indemnification provided for in Section 9(a),
9(b), 9(c) or 9(d) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 9(f)(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 9(f)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative
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<PAGE>
benefits received by the Sellers on the one hand and the Underwriters on the
other hand in connection with the offering of the Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by each Seller and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the Sellers
on the one hand and the Underwriters on the other hand 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 Sellers or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective number of Shares they have purchased hereunder, and not joint.
(g) The Sellers and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 9(f). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that 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 Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 9 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(h) The indemnity and contribution provisions contained in this
Section 9 and the representations, warranties and other statements of the
Company and the Selling Shareholders contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or any
person controlling any Underwriter, any Selling Shareholder or any person
controlling any Selling Shareholder, or the Company, its officers or directors
or any person controlling the Company and (iii) acceptance of and payment for
any of the Shares.
10. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and
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<PAGE>
prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the NASD, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 10(a)(i) through 10(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule II bears to
the aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares to be purchased, and arrangements satisfactory
to you, the Company and the Selling Shareholders for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Shareholders. In any such case either you or the
relevant Sellers shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
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<PAGE>
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
12. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
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<PAGE>
Very truly yours,
ANSWERTHINK CONSULTING GROUP, INC.
By:
----------------------------
Name:
Title:
The Selling Shareholders
named in Schedule I hereto,
acting severally
By:
----------------------------
Attorney-in-Fact
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
The Robinson-Humphrey Company LLC
NationsBanc Montgomery Securities LLC
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule II hereto.
By: Morgan Stanley & Co. Incorporated
By:
---------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
Number of
Firm Shares
Selling Shareholder To Be Sold
Golder, Thoma, Cressey, Rauner Fund V,L.P. 686,700
AB Hannells Industrier 34,000
BFC Holdings, Inc. 66,864
Leonardo E. Brito 3,172
Marcel Dreier 13,600
Steven L. Eber 20,000
Pippa J. Ellis 8,664
RBC Inc. 133,000
Joseph M Salvani 34,000
Total ............................................... 1,000,000
=========
<PAGE>
SCHEDULE II
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin &
Jenrette Securities Corporation
The Robinson-Humphrey Company LLC
NationsBanc Montgomery Securities LLC
---------
Total ........ =========
<PAGE>
EXHIBIT A
[FORM OF LOCK-UP LETTER]
____________, 1998
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin &
Jenrette Securities Corporation
The Robinson-Humphrey Company LLC
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley") proposes to enter into an Underwriting Agreement (the
"Underwriting Agreement") with AnswerThink Consulting Group, Inc., a Delaware
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several Underwriters, including Morgan Stanley (the
"Underwriters"), of 3,850,000 shares (the "Shares") of the Common Stock, par
value $.01 per share of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
<PAGE>
Common Stock, or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) the sale of
any Shares to the Underwriters pursuant to the Underwriting Agreement, (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering, or (c) any
sale or transfer of shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock by the undersigned during the
period commencing on the date hereof and ending on the date of the Prospectus,
provided that the transferee or purchaser agrees in writing to be bound by the
terms of this letter agreement. In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
-------------------------
(Name)
-------------------------
(Address)
<PAGE>
Exhibit 3.1
SECOND AMENDED AND RESTATED
---------------------------
ARTICLES OF INCORPORATION
-------------------------
OF
--
ANSWERTHINK CONSULTING GROUP, INC.
----------------------------------
Pursuant to Section 607.1007 of the Florida Statutes, ANSWERTHINK
CONSULTING GROUP, INC., a Florida corporation (the "Corporation"), certifies
-----------
that:
ARTICLE FIRST: The original Articles of Incorporation of the
Corporation were filed by the Department of State on April 23, 1997, as amended
by the Articles of Amendment on July 17, 1997, the Articles of Correction to the
Articles of Amendment filed July 31, 1997, the Articles of Merger filed August
5, 1997, the Amended and Restated Articles of Incorporation on March 3, 1998,
the Articles of Correction to the Amended and Restated Articles of Incorporation
on March 13, 1998 and the Articles of Amendment on May 1, 1998 (collectively,
the "Articles of Incorporation");
ARTICLE SECOND: The Amended and Restated Articles of Incorporation
were duly adopted by the Corporation's Board of Directors and submitted to
shareholders of the Corporation on May 5, 1997;
ARTICLE THIRD: The Articles of Incorporation of the Corporation are
amended as follows:
(a) Article Four of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(b) Article Seven of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(c) Article Eight of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(d) Article Nine of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
<PAGE>
(e) Article Ten of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(f) Article Eleven of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(g) Article Twelve of the Articles of Incorporation is replaced in its
entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(h) Article Thirteen of the Articles of Incorporation is replaced in
its entirety so that, as amended, said Article Four shall read as set forth in
Article SEVENTH of these Amended and Restated Articles of Incorporation.
(i) Article Fourteen is hereby inserted into the Articles of
Incorporation as set forth in Article SEVENTH of these Amended and Restated
Articles of Incorporation.
ARTICLE FOURTH: These amendments were duly adopted by the
shareholders of the Corporation on May 5, 1998 by written consent without a
meeting in accordance with Section 607.0704 of the Florida Business Corporation
Act and the number of votes cast for these amendments by the shareholders was
sufficient for approval of these amendments;
ARTICLE FIFTH: These amendments were duly adopted by each voting
group of shareholders of the Corporation entitled to vote on these amendments on
May 5, 1998 by written consent without a meeting in accordance with Section
607.0704 of the Florida Business Corporation Act and the number of votes cast
for these amendments by each such voting group of shareholders was sufficient
for approval of these amendments;
ARTICLE SIXTH: There are no discrepancies between the provisions of
the Articles of Incorporation, and the provisions of these Amended and Restated
Articles of Incorporation other the inclusion of the foregoing amendments, which
were adopted pursuant to Section 607.1003, Florida Statutes, and the omission of
matters of historical interest.
ARTICLE SEVENTH: The text of the Articles of Incorporation of the
Corporation is restated with the amendments described above, effective as of the
date of filing with the Department of State, to read as follows:
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<PAGE>
ARTICLE ONE
-----------
The name of the corporation is AnswerThink Consulting Group, Inc. (the
"Corporation").
-----------
ARTICLE TWO
-----------
The address of the Corporation's registered office in the State of
Florida is 1200 South Pine Island Road, Plantation, Florida, County of Broward,
33324. The name of its registered agent at such address is CT Corporation
System.
ARTICLE THREE
-------------
The nature of the business or the purpose to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the Florida Business Corporation Act.
ARTICLE FOUR
------------
A. AUTHORIZED SHARES
-----------------
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 129,900,000, of which (i)
125,000,000 of such shares shall be Common Stock, having a par value of $.001
per share ("COMMON STOCK"), (ii) 1,250,000 of such shares shall be Preferred
Stock, having a par value of $.001 per share ("PREFERRED STOCK"), and (iii)
3,650,000 of such shares shall be Convertible Preferred Stock, having a par
value of $.001 per share ("CONVERTIBLE PREFERRED STOCK"), subject to
cancellation as provided in Article 4D Section 1N below.
B. COMMON STOCK
------------
Section 1. Relative Rights.
---------------
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of (i) the Preferred Stock as set forth in the
certificate of designations filed to establish each series of Preferred Stock
and (ii) the Convertible Preferred Stock as set forth in this Amended and
Restated Certificate of Incorporation. Each share of Common Stock shall have
the same relative rights as and be identical in all respects to all the other
shares of Common Stock.
-3-
<PAGE>
Section 2. Voting.
-------
Each holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the shareholders of the Corporation and, share
for share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
and acted upon by the shareholders.
Section 3. Dividends.
---------
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Stock as to the payment of dividends, the full amount of dividends
and of sinking fund or retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then dividends may be
paid on the Common Stock and on any class or series of stock entitled to
participate therewith as to dividends, out of any assets legally available for
the payment of dividends thereon, but only when and as declared by the Board.
Section 4. Liquidation
-----------
In the event of any dissolution, liquidation, or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Stock,
and holders of any class or series of stock entitled to participate therewith,
in whole or in part, as to the distribution of assets in such event, shall
become entitled to participate in the distribution of any assets of the
Corporation remaining after the Corporation shall have paid, or provided for
payment of, all debts and liabilities of the Corporation and after the
Corporation shall have paid, or set aside for payment, to the holders of any
class of stock having preference over the Common Stock in the event of
dissolution, liquidation or winding up the full preferential amounts (if any) to
which they are entitled.
Section 5. Registration of Transfer.
------------------------
The Corporation shall keep at its principal office a register for the
registration of Common Stock. Upon the surrender of any certificate
representing Common Stock at such place, the Corporation shall, at the request
of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of Common Stock represented
by the surrendered certificate, the
-4-
<PAGE>
Corporation forthwith shall cancel such surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
shares of Common Stock as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate.
Section 6. Replacement.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of any class of Common Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
C. PREFERRED STOCK
---------------
The Board of Directors is authorized, subject to limitations
prescribed by the Florida Business Corporation Act and the provisions of these
Amended and Restated Articles of Incorporation, to provide, by resolution or
resolutions from time to time and by filing a certificate of designations
pursuant to the Florida Business Corporation Act, for the issuance of the shares
of Preferred Stock in series, to establish from time to time the number of
shares to be included in each such series, to fix the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series and to fix the qualifications, limitations or
restrictions thereof.
D. CONVERTIBLE REFERRED STOCK
---------------------------
Section 1. Convertible Preferred Stock.
---------------------------
1A. Designation and Amount
The Convertible Preferred Stock shall be issued in two series
consisting of (i) 3,600,000 shares of Series A Convertible Preferred Stock (the
"SERIES A CONVERTIBLE PREFERRED STOCK") and (ii) 50,000 shares of Series B
Convertible Preferred Stock (the "SERIES B CONVERTIBLE PREFERRED STOCK").
-5-
<PAGE>
1B. Participating Dividends.
-----------------------
In the event that the Corporation declares or pays any dividends upon
the Common Equity (whether payable in cash, securities or other property) other
than dividends payable solely in shares of Common Equity, the Corporation shall
also declare and pay to the holders of the Convertible Preferred Stock at the
same time that it declares and pays such dividends to the holders of the Common
Equity, the dividends which would have been declared and paid with respect to
the Common Equity issuable upon conversion of the Convertible Preferred Stock
had all of the outstanding Convertible Preferred Stock been converted
immediately prior to the record date for such dividend, or if no record date is
fixed, the date as of which the record holders of Common Equity entitled to such
dividends are to be determined.
1C. Liquidation.
-----------
Upon any liquidation, dissolution or winding up of the Corporation
(whether voluntary or involuntary), each holder of Convertible Preferred Stock
shall be entitled to be paid, before any distribution or payment is made upon
any Junior Securities, an amount in cash equal to (i) in respect of the Series A
Convertible Preferred Stock, the aggregate Liquidation Value of all shares of
Series A Convertible Preferred Stock (each such share of Series A Convertible
Preferred Stock is sometimes referred to herein as a "SERIES A SHARE" and all
such shares of Series A Convertible Preferred Stock are sometimes referred to
herein collectively as the "SERIES A SHARES") held by such holder (plus all
accrued and unpaid dividends thereon) and (ii) in respect of the Series B
Convertible Preferred Stock, the aggregate Liquidation Value of all shares of
Series B Convertible Preferred Stock (each such share of Series B Convertible
Preferred Stock is sometimes referred to herein as a "SERIES B SHARE" and all
such shares of Series B Convertible Preferred Stock are sometimes referred to
herein collectively as the "SERIES B SHARES") held by such holder (plus all
accrued and unpaid dividends thereon), and the holders of Convertible Preferred
Stock shall not be entitled to any further payment. (Shares of the Convertible
Preferred Stock are sometimes referred to herein individually as a "SHARE" and
collectively as the "SHARES.") If upon any such liquidation, dissolution or
winding up of the Corporation, the Corporation's assets to be distributed among
the holders of the Convertible Preferred Stock are insufficient to permit
payment to such holders of the aggregate amount which they are entitled to be
paid under this Article 4D Section 1C, then the entire assets available to be
distributed to the Corporation's shareholders shall be distributed pro rata
among such holders based upon the aggregate Liquidation Value (plus all accrued
and unpaid dividends thereon) of the Convertible Preferred Stock held by each
such holder. Not less than 30 days prior to the payment date
-6-
<PAGE>
stated therein, the Corporation shall mail written notice of any such
liquidation, dissolution, or winding up to each record holder of Convertible
Preferred Stock, setting forth in reasonable detail the amount of proceeds to be
paid with respect to each Share and each share of Common Equity in connection
with such liquidation, dissolution or winding up.
1D. Priority of the Convertible Preferred Stock Redemptions.
-------------------------------------------------------
As long as any Convertible Preferred Stock remains outstanding,
without the prior written consent of the holders of a majority of the
outstanding Shares, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities; provided that the Corporation may repurchase shares of Common
Equity from present or former employees of the Corporation and its Subsidiaries
as approved by the Board.
1E. Redemptions.
-----------
(i) Scheduled Redemption. The Corporation shall redeem all of the
--------------------
outstanding Shares of Convertible Preferred Stock on April 22, 2004 (the
"SCHEDULED REDEMPTION DATE"), at a price per Share equal to the Liquidation
Value thereof.
(ii) Redemption Payments. For each Share which is to be redeemed
-------------------
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in immediately
available funds equal to the Liquidation Value of such Share. If the funds of
the Corporation legally available for redemption of Shares on any Redemption
Date are insufficient to redeem the total number of Shares to be redeemed on
such date, those funds which are legally available shall be used to redeem the
maximum possible number of Shares pro rata among the holders of the Shares to be
redeemed based upon the aggregate Liquidation Value of such Shares held by each
such holder. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Shares, such funds shall immediately
be used to redeem the balance of the Shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed.
(iii) Notice of Redemption. Except as otherwise provided herein, the
--------------------
Corporation shall mail written notice of each redemption of any Convertible
Preferred Stock to each record holder thereof not more than 30 nor less than 15
days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Series A Shares or
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Series B Shares, as applicable, shall be issued to the holder thereof without
cost to such holder within 20 business days after surrender of the certificate
representing such redeemed Shares.
(iv) Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. For each series of Convertible Preferred Stock, the number of Shares
- - --------
to be redeemed from each holder thereof in redemptions hereunder shall be the
number of Shares determined by multiplying the total number of Shares of such
series to be redeemed times a fraction, the numerator of which shall be the
total number of Shares of such series then held by such holder and the
denominator of which shall be the total number of Shares of such series then
outstanding.
(v) Redeemed or Otherwise Acquired Shares. Any Shares which are
-------------------------------------
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not be reissued, sold or
transferred.
1F. Voting Rights
-------------
Except as otherwise provided herein and as otherwise required by
applicable law, the holders of Convertible Preferred Stock shall be entitled to
notice of all shareholders meetings at the same time and in the same manner as
notice is given to all shareholders entitled to vote at such meetings, and the
holders of Convertible Preferred Stock shall be entitled to vote on all matters
to be voted on by shareholders of the Corporation together with the holders of
the Common Equity voting together as a single class with each Share of
Convertible Preferred Stock entitled to one vote for each share of Common Stock
issuable upon conversion of the Convertible Preferred Stock as of the record
date for such vote, or if no record date is specified, as of the date of such
vote.
1G. Conversion
----------
(i) Conversion Procedure.
--------------------
(a) At any time, any holder of Convertible Preferred Stock may convert
all or any portion of the Convertible Preferred Stock held by such holder into a
number of shares of Conversion Stock computed by multiplying the number of
Shares to be converted by the Liquidation Value of such Shares, and dividing the
result by the Conversion Price applicable to such Share (as defined in Section
1G(ii) below) then in effect.
(b) Except as otherwise provided herein, each conversion of
Convertible Preferred Stock shall be deemed to have been effected as of the
close of business on the date on which the certificate or certificates
representing the
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<PAGE>
Convertible Preferred Stock to be converted have been surrendered for conversion
at the principal office of the Corporation. At the time any such conversion has
been effected, the rights of the holder of the Shares converted as a holder of
Convertible Preferred Stock shall cease and the Person or Persons in whose name
or names any certificate or certificates for shares of Conversion Stock are to
be issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Conversion Stock represented thereby.
(c) The conversion rights of any Share subject to redemption hereunder
shall terminate on the Redemption Date for such Share unless the Corporation has
failed to pay to the holder thereof the Liquidation Value in respect of such
Share.
(d) Notwithstanding any other provision hereof, if a conversion of
Convertible Preferred Stock is to be made in connection with a Public Offering
(other than the automatic conversion of Convertible Preferred Stock in
connection with the Corporation's initial public offering as provided in Section
1G(ii) below), a Fundamental Change, Organic Change or other transaction
affecting the Corporation, the conversion of any Shares may, at the election of
the holder thereof, be conditioned upon the consummation of such transaction, in
which case such conversion shall not be deemed to be effective until such
transaction has been consummated.
(e) As soon as possible after a conversion has been effected (but in
any event within 20 business days), the Corporation shall deliver to the
converting holder:
(1) a certificate or certificates representing the number of
shares of Conversion Stock issuable by reason of such conversion in such name or
names and such denomination or denominations as the converting holder has
specified; and
(2) the amount payable under Section 1G(i)(i) below with respect
to such conversion.
(f) The issuance of certificates for shares of Conversion Stock upon
conversion of Convertible Preferred Stock shall be made without charge to the
holders of such Convertible Preferred Stock for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Conversion Stock. Upon
conversion of each Share of Convertible Preferred Stock, the Corporation shall
take all such actions as are necessary in order to insure that the Conversion
Stock issuable with respect to such
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<PAGE>
conversion shall be validly issued, fully paid and nonassessable, free and clear
of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
(g) The Corporation shall not close its books against the transfer of
Convertible Preferred Stock or of Conversion Stock issued or issuable upon
conversion of Convertible Preferred Stock in any manner which interferes with
the timely conversion of Convertible Preferred Stock. The Corporation shall
assist and cooperate with any holder of Shares required to make any governmental
filings or obtain any governmental approval prior to or in connection with any
conversion of Shares hereunder (including, without limitation, making any
filings required to be made by the Corporation).
(h) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Convertible Preferred Stock, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Convertible Preferred Stock. All shares of Conversion Stock which
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof. The Corporation shall take all such actions as may be
necessary to assure that all such shares of Conversion Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Conversion
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of the
Convertible Preferred Stock.
(i) If any fractional interest in a share of Conversion Stock would,
except for the provisions of this Section 1G(i) be delivered upon any conversion
of the Convertible Preferred Stock, the Corporation, in lieu of delivering the
fractional share therefore, shall pay an amount to the holder thereof equal to
the Market Price of such fractional interest as of the date of conversion.
(ii) Conversion Price.
----------------
(a) The conversion price of Series A Convertible Preferred Stock
shall be $1.50 (as adjusted pursuant to this Section 1G, the "CONVERSION PRICE"
for the Series A Convertible Preferred Stock) and the Conversion Price of Series
B Convertible Preferred Stock shall be $7.50 (as adjusted pursuant to this
Section 1G, the "CONVERSION PRICE" for the Series B Convertible Preferred
Stock). In order to prevent dilution of the conversion rights granted under this
Section 1G,
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<PAGE>
the Conversion Price shall be subject to adjustment from time to time pursuant
to this Section 1G(ii).
(b) If and whenever on or after the original dates of issuance
of the Series A Convertible Preferred Stock or the Series B Convertible
Preferred Stock, respectively, the Corporation issues or sells, or in accordance
with Section 1G(iii) is deemed to have issued or sold, any shares of its Common
Equity for a consideration per share less than the applicable Conversion Price
in respect of such Shares in effect immediately prior to the time of such issue
or sale, then immediately upon such issue or sale or deemed issue or sale the
Conversion Price of the affected series of Convertible Preferred Stock shall be
reduced to the Conversion Price determined by dividing (i) the sum of (A) the
product derived by multiplying the Conversion Price for such Shares in effect
immediately prior to such issue or sale by the number of shares of Common Equity
Deemed Outstanding immediately prior to such issue or sale, plus (B) the
consideration, if any, received by the Corporation upon such issuance or sale,
by (ii) the number of shares of Common Equity Deemed Outstanding immediately
after such issue or sale.
(c) Notwithstanding the foregoing, there shall be no adjustment
in the Conversion Price as a result of any issuance to employees, directors, or
consultants of the Corporation and its Subsidiaries pursuant to stock option
plans, stock ownership plans and other employment arrangements approved by the
Board (as such number of shares is proportionately adjusted for subsequent stock
splits, combinations and dividends affecting the Common Equity).
(iii) Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under Section 1G(ii), the following
shall be applicable:
(a) Issuance of Rights or Options. If the Corporation in any
-----------------------------
manner grants or sells any right or option to subscribe for or to purchase
Common Equity or any stock or other securities convertible into or exchangeable
for Common Equity (such rights or options being herein called "Options") and the
price per share for which Common Equity is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible Securities issuable
upon exercise of such Options, is less than the applicable Conversion Price in
respect of either series of Convertible Preferred Stock in effect immediately
prior to the time of the granting or sale of such Options, then the total
maximum number of shares of Common Equity issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the granting or sale of such Options for such price per share. For
purposes of this paragraph, the "price per share for which
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<PAGE>
Common Equity is issuable" shall be determined by dividing (i) the total amount,
if any, received or receivable by the Corporation as consideration for the
granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Equity issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
shall be made when Convertible Securities are actually issued upon the exercise
of such Options or when Common Equity is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. If the Corporation in
----------------------------------
any manner issues or sells any Convertible Securities and the price per share
for which Common Equity is issuable upon conversion or exchange thereof is less
than the applicable Conversion Price for either series of Convertible Preferred
Stock in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Equity issuable upon conversion or exchange
of such Convertible Securities shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Equity is issuable" shall be
determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Equity issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price shall be made when Common Equity is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 1G, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the purchase
-----------------------------------------
price provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities or the rate at
which any Convertible Securities are convertible into or exchangeable for
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<PAGE>
Common Stock changes at any time (other than by reason of the antidilution
provisions contained therein), the applicable Conversion Price for either series
of Convertible Preferred Stock in effect at the time of such change shall be
immediately adjusted to the Conversion Price for the affected series of
Convertible Preferred Stock which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold; provided that if such
adjustment would result in an increase of the Conversion Price then in effect
for the affected series of Convertible Preferred Stock, such adjustment shall
not be effective until 30 days after written notice thereof has been given by
the Corporation to all holders of the affected series of Convertible Preferred
Stock. For purposes of Section 1G(iii), if the terms of any Option or
Convertible Security which was outstanding as of the dates of issuance of the
Series A Convertible Preferred Stock or the Series B Convertible Preferred Stock
are changed in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Equity deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change.
(d) Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any right
- - ----------
to convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder for the affected
series of Convertible Preferred Stock shall be adjusted immediately to the
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued, provided that if such expiration or termination would result in an
increase in the Conversion Price then in effect for such series of Convertible
Preferred Stock, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of such series of
Convertible Preferred Stock. For purposes of Section 1G(iii) the expiration or
termination of any Option or Convertible Security which was outstanding as of
the date of issuance of the affected series of Convertible Preferred Stock shall
not cause the Conversion Price hereunder for such series of Convertible
Preferred Stock to be adjusted unless, and only to the extent that, a change in
the terms of such Option or Convertible Security caused it to be deemed to have
been issued after the date of issuance of such series of Convertible Preferred
Stock.
(e) Calculation of Consideration Received. If any Common
-------------------------------------
Equity, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the
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<PAGE>
amount received by the Corporation therefor (net of discounts, commissions and
related expenses). If any Common Equity, Option or Convertible Security is
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Equity, Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Equity, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities shall be determined by the Board.
(f) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $0.001.
(g) Treasury Shares. The number of shares of Common Equity
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Equity.
(h) Record Date. If the Corporation takes a record of the
-----------
holders of Common Equity for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Equity, Options or in
Convertible Securities or (ii) to subscribe for or purchase Common Equity,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Equity deemed to have been
issued or sold upon the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(iv) Subdivision or Combination of Common Equity. If the Corporation
-------------------------------------------
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Equity into a
greater number of shares, the Conversion Price of each
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<PAGE>
series of Convertible Preferred Stock in effect immediately prior to such
subdivision shall be proportionately reduced, and if the Corporation at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Equity into a smaller number of shares, the
Conversion Price of each series of Convertible Preferred Stock in effect
immediately prior to such combination shall be proportionately increased.
(v) Certain Events. If any event occurs of the type contemplated by
--------------
the provisions of this Section 1G but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features or the
payment, issuance or distribution by the Corporation to the holders of Common
Equity of any debt securities of the Corporation), then the Board shall make an
appropriate adjustment in the Conversion Price of each series of Convertible
Preferred Stock so as to protect the rights of the holders of such series of
Convertible Preferred Stock; provided that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this Section 1G or decrease
the number of shares of Conversion Stock issuable upon conversion of each Share
of Convertible Preferred Stock.
(vi) Notices.
-------
(a) Immediately upon any adjustment of the Conversion Price of
any series of Convertible Preferred Stock, the Corporation shall give written
notice thereof to all holders of such series of Convertible Preferred Stock,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(b) The Corporation shall give written notice to all holders of
Convertible Preferred Stock at least 20 days prior to the date on which the
Corporation closes its books or takes a record (i) with respect to any dividend
or distribution upon Common Equity, (ii) with respect to any pro rata
subscription offer to holders of Common Equity or (iii) for determining rights
to vote with respect to any Organic Change, dissolution or liquidation.
(c) The Corporation shall also give written notice to the
holders of Convertible Preferred Stock at least 20 days prior to the date on
which any Organic Change shall take place.
(vii) Automatic Conversion. Notwithstanding anything herein to the
--------------------
contrary, immediately prior to the time at which the Corporation executes an
underwriting agreement relating to its initial public offering (the "EFFECTIVE
TIME"), each Share of Convertible Preferred Stock then outstanding shall
automatically be converted into a number of shares of Conversion Stock computed
by dividing the Liquidation Value for such Share by the Conversion Price then in
effect for such Share. The automatic conversion of Shares pursuant to this
Section 1G(vii) shall occur at the Effective Time without any further action by
the Corporation or the holders of Shares. As soon as possible after a
conversion has
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<PAGE>
been effected (but in any event within 20 business days), the Corporation shall
deliver to the converting holder: (a) a certificate or certificates representing
the number of shares of Conversion Stock issuable by reason of such conversion
in such name or names and such denomination or denominations as the converting
holder has specified; and (b) the amounts payable under Section 1G(i)(i) above
with respect to such conversion.
1H. Events of Noncompliance
(i) Definition. An Event of Noncompliance shall have occurred if:
----------
(a) the Corporation fails to make any payment with respect to
Convertible Preferred Stock which it is required to make hereunder, whether or
not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject; or
(b) the Corporation or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the federal Bankruptcy Code; or the Corporation or any Subsidiary
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or any Subsidiary or of any
substantial part of the assets of the Corporation or any Subsidiary, or
commences any proceeding (other than a proceeding for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Corporation or any Subsidiary
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, or any such petition
or application is filed, or any such proceeding is commenced, against the
Corporation or any Subsidiary and either (a) the Corporation or any such
Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or proceeding is not
dismissed within 60 days.
(ii) Consequences of Events of Noncompliance.
---------------------------------------
(a) For each series of Convertible Preferred Stock, if an Event
of Noncompliance, other than an Event of Noncompliance of the type described in
Section 1H(i)(b), has occurred and is continuing, the holder or holders of a
majority of any series of Convertible Preferred Stock then outstanding may
demand (by written notice delivered to the Corporation) immediate redemption of
all or any portion of such series of Convertible Preferred Stock owned by such
holder or holders at a price per Share equal to the Liquidation Value thereof.
The
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<PAGE>
Corporation shall give prompt written notice of such election to the other
holders of such series of Convertible Preferred Stock (but in any event within
20 days after receipt of the initial demand for redemption), and each such other
holder may demand immediate redemption of all or any portion of such holder's
Convertible Preferred Stock by giving written notice thereof to the Corporation
within seven days after receipt of the Corporation's notice. The Corporation
shall redeem all Preferred Stock as to which rights under this paragraph have
been exercised within 15 days after receipt of the initial demand for
redemption.
(b) If an Event of Noncompliance of the type described in
Section 1H(i)(b) has occurred, all of the Convertible Preferred Stock then
outstanding shall be subject to immediate redemption by the Corporation (without
any action on the part of the holders of Convertible Preferred Stock) at a price
per Share equal to the Liquidation Value thereof. The Corporation shall
immediately redeem all of the Convertible Preferred Stock upon the occurrence of
such Event of Noncompliance.
(c) If any Event of Noncompliance exists, each holder of
Convertible Preferred Stock shall also have any rights which such holder is
entitled to under any contract or agreement at any time and any other rights
which such holder may have pursuant to applicable law.
1I. Registration of Transfer
The Corporation shall keep at its principal office a register for the
registration of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock. Upon the surrender of any certificate representing Convertible
Preferred Stock at such place, the Corporation shall, at the request of the
record holder of such certificate, execute and deliver (at the Corporation's
expense) a new certificate or certificates in exchange therefor representing in
the aggregate the number of Shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent
such number of Shares as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate.
1J. Replacement
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
Shares, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the
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<PAGE>
case of any such mutilation upon surrender of such certificate, the Corporation
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares represented by such
lost, stolen, destroyed or mutilated certificate.
1K. Definitions
"COMMON EQUITY" means, collectively, the Common Stock and any capital
stock of any class of the Corporation hereafter authorized which is not limited
to a fixed sum or percentage of par or stated value in respect to the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon any liquidation, dissolution or winding up of the Corporation.
"COMMON EQUITY DEEMED OUTSTANDING" means, at any given time, the
number of shares of Common Equity actually outstanding at such time, plus the
number of shares of Common Equity deemed to be outstanding pursuant to Section
1G(iii)(a) or (b) hereof whether or not the Options or Convertible Securities
are actually exercisable at such time, but excluding any shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock.
"CONVERSION STOCK" means shares of Common Stock; provided, that if
--------
there is a change such that the securities issuable upon conversion of the
Convertible Preferred Stock are issued by an entity other than the Corporation
or there is a change in the type or class of securities so issuable, then the
term "Conversion Stock" shall mean one share of the security issuable upon
conversion of the Convertible Preferred Stock if such security is issuable in
shares, or shall mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Equity.
"FUNDAMENTAL CHANGE" means (a) any sale or transfer of more than 50%
of the assets of the Corporation and its Subsidiaries on a consolidated basis
(measured either by book value in accordance with generally accepted accounting
principles consistently applied or by fair market value determined in the
reasonable good faith judgment of the Board) in any transaction or series of
transactions (other than sales in the ordinary course of business) and (b) any
merger or consolidation to which the Corporation is a party, except for a merger
in which the Corporation is the surviving corporation, the terms of the
Convertible Preferred Stock are not changed and the Convertible Preferred Stock
is not exchanged for cash, securities or other property, and after giving effect
to such merger, the holders of the Corporation's outstanding capital stock
possessing a majority of the voting power
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<PAGE>
(under ordinary circumstances) to elect a majority of the Board immediately
prior to the merger shall continue to own the Corporation's outstanding capital
stock possessing the voting power (under ordinary circumstances) to elect a
majority of the Board.
"JUNIOR SECURITIES" means any capital stock or other equity securities
of the Corporation, except for the Convertible Preferred Stock.
"LIQUIDATION VALUE" of (i) each Share of Series A Convertible
Preferred Stock as of any particular date shall be equal to $6.00 (as
proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting such Share) and (ii) each Share of Series B
Convertible Preferred Stock as of any particular date shall be equal to $30.00
(as proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting such Share).
"MARKET PRICE" of any security means the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined by the Board.
"ORGANIC CHANGE" means any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Corporation's assets or other transaction, in each case which is effected in
such a manner that the holders of Common Equity are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Equity.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
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<PAGE>
"PUBLIC OFFERING" means any offering by the Corporation of its capital
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as amended (except pursuant to
registrations on Form S-4 or Form S-8 or any successor to either such form), as
then in effect, or any comparable statement under any similar federal statute
then in force.
"REDEMPTION DATE" as to any Share means the date specified in the
notice of any redemption at the Corporation's option or at the holder's option
or the applicable date specified herein in the case of any other redemption;
provided that no such date shall be a Redemption Date unless the Liquidation
Value of such Share is actually paid in full on such date, and if not so paid in
full, the Redemption Date shall be the date on which such amount is fully paid.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
1L. Amendment and Waiver
No amendment, modification or waiver shall be binding or effective
with respect to any provision of this Article 4D Section 1 without the prior
written consent of the holders of at least 70% of the Convertible Preferred
Stock outstanding at the time such action is taken.
1M. Notices
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier
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<PAGE>
service, charges prepaid, and shall be deemed to have been given when so mailed
or sent (i) to the Corporation, at its principal executive offices and (ii) to
any shareholder, at such holder's address as it appears in the stock records of
the Corporation (unless otherwise indicated by any such holder).
1N. Cancellation of Convertible Preferred Stock;
Restatement of Articles of Incorporation
Upon the occurrence of the Effective Time and the automatic conversion
of all outstanding Shares at such time as provided in Section 1G(ii), the class
of Convertible Preferred Stock shall be canceled and the Corporation shall no
longer have the authority to issue Shares of any series of Convertible Preferred
Stock. After the Effective Time, the Board, on behalf of the Corporation, shall
file a restatement of these Amended and Restated Articles of of Incorporation
reflecting the cancellation of the class of Convertible Preferred Stock and the
deletion of this Article 4D Section 1.
E. PREEMPTIVE RIGHTS
-----------------
Except as set forth in the remaining sentence of this subsection E of
this Article Four, no shareholder of this Corporation shall have, by reason of
its holding shares of any class or series of stock of this Corporation, any
preemptive or preferential rights to purchase or subscribe for any other shares
of any class or series of this Corporation now or hereafter to be authorized,
and any other equity securities, or any notes, debentures, warrants, bonds, or
other securities convertible into or carrying options or warrants to purchase
shares of any class, now or hereafter to be authorized, whether or not the
issuance of any such shares, or such notes, debentures, bonds or other
securities, would adversely affect the dividend or voting rights of such
shareholder.
Notwithstanding the foregoing, the Corporation may contract with a
shareholder to grant such preemptive or preferential rights pursuant to
agreements to which the Corporation is a party as in effect from time to time.
ARTICLE FIVE
------------
The name and mailing address of the sole incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Connie Bryan 660 E. Jefferson Street
Tallahassee, Florida 32301
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<PAGE>
ARTICLE SIX
-----------
The Corporation is to have perpetual existence.
ARTICLE SEVEN
-------------
In furtherance and not in limitation of the powers conferred by the
Florida Business Corporation Act, the Board is expressly authorized and
empowered to adopt, amend and repeal the bylaws of the Corporation. The bylaws
of the Corporation may be adopted, amended or repealed by the shareholders of
the Corporation only upon the affirmative vote of at least two-thirds of the
entire voting power of all the then-outstanding shares of stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
ARTICLE EIGHT
-------------
Meetings of shareholders may be held within or without the State of
Florida, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Florida at such place or places as
may be designated from time to time by the Corporation's Board of Directors or
in the by-laws of the Corporation. Election of directors need not be by written
ballot unless the by-laws of the Corporation so provide. The Corporation shall
hold a special meeting of shareholders only: (i) on call of the Board of
Directors or persons authorized to do so by the Corporation's by-laws; or (ii)
if the holders of not less than fifty percent of the shares of capital stock
entitled to vote on any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the Corporation's secretary one or more
written demands for the meeting describing the purpose or purposes for which it
is to be held.
ARTICLE NINE
------------
Any action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting, without prior notice and without a vote,
if the action is taken by persons who would be entitled to vote at a meeting and
who hold shares having voting power equal to not less than the greater of (a)
80% of the voting power of all shares of each class or series entitled to vote
on such action or (b) the minimum number of votes of each class or series that
would be necessary to authorize or take the action at a meeting at which all
shares of each class or series entitled to vote were present and voted. The
action must be evidenced by one or more written consents describing the action
taken, signed by the shareholders entitled to take action without a meeting, and
delivered to the Corporation in the
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<PAGE>
manner prescribed by the Florida Business Corporation Act for inclusion in the
minute book. No consent shall be effective to take the corporate action
specified unless the number of consents required to take such action are
delivered to the Corporation within 60 days of the delivery of the earliest-
dated consent. Written notice of the action taken shall be given in accordance
with the Florida Business Corporation Act to all shareholders who do not
participate in taking the action who would have been entitled to notice if such
action had been taken at a meeting having a record date on the date that written
consents signed by a sufficient number of holders to take the action were
delivered to the Corporation.
ARTICLE TEN
-----------
To the fullest extent permitted by the Florida Business Corporation
Act as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the Corporation or its shareholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
------------
protection of a director of the Corporation existing at the time of such repeal
or modification.
The Corporation shall indemnify to the fullest extent authorized or
permitted by law (as now or hereafter in effect) any person who is or was made,
or threatened to be made, a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of
the Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative, is or
was a director or officer of the Corporation, or is or was serving in any
capacity at the request of the Corporation for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise (an
"Other Entity"), against judgments, fines, penalties, excise taxes, amounts paid
in settlement and costs, charges and expenses (including attorneys' fees and
disbursements). Persons who are not directors or officers of the Corporation may
be similarly indemnified in respect of service to the Corporation to the extent
the Board of Directors at any time specifies that such persons are entitled to
the benefits of this Article.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of an Other Entity, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to
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<PAGE>
indemnify such person against such liability under the provisions of this
Article, the Bylaws or under Section 607.0850 of the Florida Act or any other
provision of law.
Subject to Article V, Section 9 of the bylaws of the Corporation, the
Corporation shall indemnify and advance expenses on behalf of its officers and
directors to the fullest extent not prohibited by law in existence either now or
hereafter.
ARTICLE ELEVEN
--------------
The Corporation expressly elects not to be governed by Section
607.0902 of the Florida Business Corporation Act.
ARTICLE TWELVE
--------------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein, by the consent of the Corporation's Board of
Directors and by the laws of the State of Florida, and all rights conferred upon
shareholders herein are granted subject to this reservation.
ARTICLE THIRTEEN
----------------
The business and affairs of the Corporation shall be managed by or
under the direction of the Board. Except as otherwise provided in these Amended
and Restated Articles of Incorporation, each director of the Corporation shall
be entitled to one vote per director on all matters voted or acted upon by the
Board.
ARTICLE FOURTEEN
----------------
The number of directors of the Corporation shall be such number as
from time to time shall be fixed by, or in the manner provided in, the bylaws of
the Corporation; provided, however, that the number of directors which shall
-----------------
constitute the whole board shall not be fewer than five nor more than 15. The
directorships (i.e., the particular seats on the Board) shall be classified into
----
three classes as nearly equal in number as possible.
The following persons comprise all of the members of the Board as of
the date hereof, each holding office until the annual meeting indicated opposite
his respective name and until his respective successor is appointed and
qualified or until his earlier resignation or removal:
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<PAGE>
<TABLE>
<CAPTION>
Term as Director
Name Expires
- - --------------------------------------------------------- -------------------------
<S> <C>
Ted A. Fernandez 2001
c/o AnswerThink Consulting Group, Inc.
1401 Brickell Avenue
Suite 350
Miami, Florida 33131
Bruce V. Rauner 2001
c/o GTCR
6100 Sears Tower
Chicago, Illinois 60606-6402
Fernando Montero 2001
c/o AnswerThink Consulting Group, Inc.
1401 Brickell Avenue
Suite 350
Miami, Florida 33131
Allan R. Frank 2000
c/o AnswerThink Consulting Group, Inc.
1401 Brickell Avenue
Suite 350
Miami, Florida 33131
William C. Kessinger 2000
c/o GTCR
6100 Sears Tower
Chicago, Illinois 60606-6402
Edmund R. Miller 1999
c/o AnswerThink Consulting Group, Inc.
1401 Brickell Avenue,
Suite 350
Miami, Florida 33131
Ulysses S. Knotts, III 1999
c/o AnswerThink Consulting Group, Inc.
1401 Brickell Avenue,
Suite 350
Miami, Florida 33131
</TABLE>
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<PAGE>
With respect to newly created or eliminated directorships resulting
from an increase or decrease, respectively, in the number of directors, the
Board shall determine and designate to which class of directorships each
director belongs. The term of any director elected at an annual meeting of
shareholders shall expire at the annual meeting of shareholders held in the
third year following the year of the director's election. Unless and except to
the extent that the bylaws of the Corporation shall otherwise require, the
election of directors of the Corporation need not be by written ballot.
Vacancies and newly created directorships resulting from any increase
in the number of directors of the Board may be filled only by the affirmative
vote of a majority of the directors then in office, although fewer than a
quorum, or by a sole remaining director. Whenever the holders of any class or
classes of stock or series thereof are entitled to elect one or more directors
by the provisions of these Amended and Restated Articles of Incorporation,
vacancies and newly created directorships of such class or classes or series may
be filled by the affirmative vote of a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected. Each director so chosen shall hold office until the next
election of directors of the class to which such director was appointed, and
until such director's successor is elected and qualified, or until the
director's earlier death, resignation or removal.
A director may resign at any time upon written notice to the
Corporation, and the resignation shall take effect at the time it specifies,
without any need for acceptance by the Board. In the event that one or more
directors resigns from the Board, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, with the vote thereon to take effect when
such resignation or resignations becomes effective. Directors may only be
removed for cause upon the affirmative vote of at least two-thirds of the entire
voting power of all the then-outstanding shares of stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class.
ARTICLE FIFTEEN
---------------
The principal place of business and mailing address of the Corporation
is 1401 Brickell Avenue, Suite 350, Miami, Florida 33131.
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<PAGE>
I, THE UNDERSIGNED, being the President of the Corporation, for the
purpose of amending and restating the Articles of Incorporation of the
Corporation pursuant to the Florida Business Corporation Act, do make this
certificate, hereby declaring and certifying that this is my act and deed and
the facts stated herein are true, and accordingly have hereunto set my hand on
the 5th day of May, 1998.
/s/ Ted A. Fernandez
----------------------
Ted A. Fernandez
President
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<PAGE>
Exhibit 3.2
BYLAWS
OF
ANSWERTHINK CONSULTING GROUP, INC.
1. OFFICES
1.1. REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be as designated from
time to time by the appropriate filing by the Corporation in the office of the
Secretary of State of the State of Florida.
1.2. OTHER OFFICES
The Corporation may also have offices at such other places, both
within and without the State of Florida, as the Board of Directors of the
Corporation (the "BOARD") may from time to time determine or as the business of
the Corporation may require.
2. MEETINGS OF SHAREHOLDERS
2.1. PLACE OF MEETINGS
All meetings of the shareholders shall be held at such place as may be
fixed from time to time by the Board, the Chairman or the President.
2.2. ANNUAL MEETINGS
(a) The Corporation shall hold annual meetings of shareholders,
commencing with the year 1999, on such date and at such time as shall be
designated from time to time by the Board, the Chairman or the President. At
each annual meeting, the shareholders shall elect by a plurality vote (as
provided in SECTION 2.9 hereof) directors to succeed those whose terms expire at
the time of the annual meeting. The nomination of persons for election to the
Board and the proposal of any other business to be transacted at an annual
meeting may be made only (i) by or at the direction of the Board or (ii) by any
shareholder of record who
<PAGE>
gives notice in accordance with the procedures set forth in paragraph (b) of
this SECTION 2.2 and who is a shareholder of record both on the date of giving
such notice and on the record date for the determination of shareholders
entitled to vote at such annual meeting; only persons thereby nominated shall be
eligible to serve as directors and only business thereby proposed shall be
transacted at an annual meeting. The presiding officer of the annual meeting
shall determine whether a nomination or any proposal of business complies or
complied with this SECTION 2.2.
(b) For nominations and other business to be brought properly before
an annual meeting by a shareholder pursuant to clause (ii) of paragraph (a) of
this SECTION 2.2, the shareholder must deliver notice to the Secretary of the
Corporation at the principal executive offices of the Corporation in accordance
with this SECTION 2.2(B). The notice must be received by the Secretary not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
-------- -------
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date, the shareholder must so deliver the
notice not earlier than the 90th day prior to such annual meeting and not later
than the close of business on the later of the 60th day prior to such annual
meeting or the tenth day following the day on which public announcement of the
date of such meeting is first made; provided further, however, that in the event
-------- ------- -------
that the number of directors to be elected to the Board is increased and there
is no public announcement naming all of the nominees for director or specifying
the size of the increased Board made by the Corporation at least 70 days prior
to the first anniversary of the preceding annual meeting, with respect to
nominees for any new position created by the increase, the shareholder must so
deliver the notice not later than the close of business on the tenth day
following the day on which such public announcement is first made. The
shareholder's notice must set forth: (i) as to each person whom the shareholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and
regulations thereunder (together with such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected), whether or not the Corporation is then subject to Section 14(a) and
such rules and regulations; (ii) as to any other business that the shareholder
proposes to transact at the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting the business at the
meeting and any material interest in the business of the shareholder and of the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, the name and address of the
shareholder, as they appear on the Corporation's books, and of such beneficial
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<PAGE>
owner, the class and number of shares of the Corporation that are owned
beneficially and of record by such shareholder and such beneficial owner and a
representation that the shareholder intends to appear in person or by proxy at
the annual meeting to bring such business before the meeting. For purposes of
this SECTION 2.2 and SECTION 2.3 hereof, a "public announcement" means
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service, in a document publicly filed with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act (or their successor provisions), or in a notice of meeting or proxy
statement mailed generally to the Corporation's shareholders. In giving notice
under this SECTION 2.2, a shareholder must also comply with state law and the
Exchange Act (and the rules and regulations thereunder). Nothing in this
SECTION 2.2 shall be deemed to affect the rights of a shareholder to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 (or its successor provision) under the Exchange Act.
2.3. SPECIAL MEETINGS
Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called only by the Board, the
Chairman or the President or by the shareholders as set forth in the
Corporation's Articles of Incorporation (as amended and amended and restated
from time to time, the "ARTICLES OF INCORPORATION"). Business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice relating to such meeting (or to the purposes for which the meeting is
called if such notice is waived or is not required as provided in the Florida
Business Corporation Act (the "FLORIDA BUSINESS CORPORATION ACT") or these
Bylaws). In the case of a special meeting of shareholders called for the
purpose of electing directors, nominations may be made only (i) by or at the
direction of the Board or (ii) by any shareholder of record who delivers to the
Secretary, no later than the tenth day following the day on which public
announcement of the special meeting is made, a notice that complies with and is
delivered in accordance with SECTION 2.2(B) above.
2.4. NOTICE OF MEETINGS
Written notice of any meeting of shareholders, stating the place, date
and hour of the meeting, and (if it is a special meeting) the purpose or
purposes for which the meeting is called, shall be given to each shareholder
entitled to vote at such meeting not less than ten nor more than 60 days before
the date of the meeting (except to the extent that such notice is waived or is
not required as provided in the Florida Business Corporation Act or these
Bylaws). Such notice shall be given in
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<PAGE>
accordance with, and shall be deemed effective as set forth in, Section 687.084
(or any successor section) of the Florida Business Corporation Act.
2.5. WAIVERS OF NOTICE
Whenever the giving of any notice is required by statute, the Articles
of Incorporation or these Bylaws, a waiver thereof, in writing and delivered to
the Corporation, signed by the person or persons entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance of a shareholder at a meeting shall
constitute a waiver of notice (1) of such meeting, except when the shareholder
at the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (2) (if it is a special meeting) of consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter at the beginning of the meeting.
2.6. LIST OF SHAREHOLDERS
After the record date for a meeting of shareholders has been fixed, at
least ten days before such meeting, the officer or other agent of the
Corporation who has charge of the stock ledger of the Corporation shall make a
list of all shareholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each shareholder and the number of
shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place in the city where the meeting is to be held, which
place is to be specified in the notice of the meeting, or at the place where the
meeting is to be held. Such list shall also, for the duration of the meeting,
be produced and kept open to the examination of any shareholder who is present
at the time and place of the meeting.
2.7. QUORUM AT MEETINGS
Shareholders may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Except as otherwise provided by statute or
by the Articles of Incorporation, a quorum shall exist if there are present in
person or represented by proxy the holders of a majority of the shares entitled
to vote at the meeting. Where a separate vote by a class or classes is
required, a majority of the outstanding shares of such class or classes, present
in person or represented by proxy, shall constitute a quorum entitled to take
action with respect to that vote on that matter. Once a share is represented
for any purpose at a meeting (other than solely to object (1) to holding the
meeting or transacting
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<PAGE>
business at the meeting or (2) (if it is a special meeting) to consideration of
a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice), it is deemed present for quorum purposes for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or must be set for the adjourned meeting. The holders of a
majority of the voting shares represented at a meeting, whether or not a quorum
is present, may adjourn such meeting from time to time.
2.8. VOTING AND PROXIES
Unless otherwise provided in the Florida Business Corporation Act or
in the Articles of Incorporation, and subject to the other provisions of these
Bylaws, each shareholder shall be entitled to one vote on each matter, in person
or by proxy, for each share of the Corporation's capital stock that has voting
power and that is held by such shareholder. No proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A duly executed appointment of proxy shall be irrevocable if the
appointment form states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
2.9. REQUIRED VOTE
When a quorum is present at any meeting of shareholders, all matters
shall be determined, adopted and approved by the affirmative vote (which need
not be by ballot) of the holders of a majority of the shares present in person
or represented by proxy at the meeting and entitled to vote with respect to the
matter, unless the proposed action is one upon which, by express provision of
statutes or of the Articles of Incorporation, a different vote is specified and
required, in which case such express provision shall govern and control with
respect to that vote on that matter. Where a separate vote by a class or
classes is required, the affirmative vote of the holders of a majority of the
shares of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class. Notwithstanding the foregoing,
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.
2.10. INSPECTORS
Prior to any meeting of shareholders, the Board or the President shall
appoint one or more inspectors to act at such meeting and make a written report
thereof and may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
the
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<PAGE>
meeting of shareholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall ascertain the number of shares
outstanding and the voting power of each, determine the shares represented at
the meeting and the validity of proxies and ballots, count all votes and
ballots, determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors and
certify their determination of the number of shares represented at the meeting
and their count of all votes and ballots. The inspectors may appoint or retain
other persons to assist them in the performance of their duties. The date and
time of the opening and closing of the polls for each matter upon which the
shareholders will vote at a meeting shall be announced at the meeting. No
ballot, proxy or vote, nor any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls. In determining the
validity and counting of proxies and ballots, the inspectors shall be limited to
an examination of the proxies, any envelopes submitted therewith, any
information provided by a shareholder who submits a proxy by telegram, cablegram
or other electronic transmission from which it can be determined that the proxy
was authorized by the shareholder, ballots and the regular books and records of
the Corporation, and they may also consider other reliable information for the
limited purposes of reconciling proxies and ballots submitted by or on behalf of
banks, brokers, their nominees or similar persons that represent more votes than
the holder of a proxy is authorized by the record owner to cast or more votes
than the shareholder holds of record. If the inspectors consider other reliable
information for such purpose, they shall, at the time they make their
certification, specify the precise information considered by them, including the
person or persons from whom they obtained the information, when the information
was obtained, the means by which the information was obtained and the basis for
the inspectors' belief that such information is accurate and reliable.
3. DIRECTORS
3.1. POWERS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board, which may exercise all such powers of the
Corporation and do all such lawful acts and things, subject to any limitation
set forth in the Articles of Incorporation or as otherwise may be provided in
the Florida Business Corporation Act.
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<PAGE>
3.2. NUMBER AND ELECTION
Within the limits set forth in the Articles of Incorporation, the
number of directors shall be determined by resolution of the Board. The
directors shall be elected at the annual meeting of the shareholders in
accordance with the Articles of Incorporation. Vacancies on the Board shall be
filled in accordance with the Articles of Incorporation. Once elected or chosen
pursuant to the Articles of Incorporation, a director shall hold office until
the director's successor is elected and qualified or until the director dies,
resigns or is removed; provided, however, that if the Board decreases the number
-----------------
of directors constituting the Board and designates a particular directorship to
be eliminated due to the decrease, a director in the eliminated directorship
shall cease to hold office after the next election of such directorship, unless
the director is nominated and elected to another directorship on the Board.
3.3. MEETINGS
3.3.1. REGULAR MEETINGS
Regular meetings of the Board may be held without notice at such time
and at such place as shall from time to time be determined by the Board.
3.3.2. SPECIAL MEETINGS
Special meetings of the Board may be called by the Chairman or
President on one day's notice to each director, either personally or by
telephone, express delivery service (so that the scheduled delivery date of the
notice is at least one day in advance of the meeting), telegram or facsimile
transmission, and on five days' notice by mail (effective upon deposit of such
notice in the mail). The notice need not describe the purpose of a special
meeting.
3.3.3. TELEPHONE MEETINGS
Members of the Board may participate in a meeting of the Board by any
communication by means of which all participating directors can simultaneously
hear each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
3.3.4. ACTION WITHOUT MEETING
Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting if the action is taken by all members of
the Board. The action must be evidenced by one or more written consents
describing
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<PAGE>
the action taken, signed by each director, and delivered to the Corporation for
inclusion in the minute book.
3.3.5. WAIVER OF NOTICE OF MEETING
A director may waive any notice required by statute, the Articles of
Incorporation or these Bylaws before or after the date and time stated in the
notice. Except as set forth below, the waiver must be in writing, signed by the
director entitled to the notice, and delivered to the Corporation for inclusion
in the minute book. Notwithstanding the foregoing, a director's attendance at
or participation in a meeting waives any required notice to the director of the
meeting unless the director at the beginning of the meeting objects to holding
the meeting or transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
3.4. QUORUM AND VOTE AT MEETINGS
At all meetings of the Board, a quorum of the Board consists of a
majority of the total number of directors comprising the full Board as
established pursuant to SECTION 3.2 of these Bylaws. The vote of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board, except as may be otherwise specifically provided by statute or by
the Articles of Incorporation or by these Bylaws.
3.5. COMMITTEES OF DIRECTORS
The Board may designate one or more committees, each committee to
consist of two or more directors who serve at the pleasure of the Board. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. If a member of a committee is absent from any meeting, or
disqualified from voting thereat, the remaining member or members present and
not disqualified from voting, whether or not such member or members constitute a
quorum, may, by unanimous vote, appoint another member of the Board to act at
the meeting in the place of such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, and to the
extent permitted by law and the Articles of Incorporation, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers that may require that such seal be
affixed. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board. Each committee
shall keep regular minutes of its meetings and report
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<PAGE>
the same to the Board, when required. Unless otherwise specified in the Board
resolution appointing the Committee, all provisions of the Florida Business
Corporation Act and these Bylaws relating to meetings, action without meetings,
notice (and waiver thereof) and quorum and voting requirements of the Board
apply, as well, to such committees and their members.
3.6. COMPENSATION OF DIRECTORS
The Board shall have the authority to fix the compensation of
directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
4. OFFICERS
4.1. POSITIONS
The officers of the Corporation shall be a Chairman, a President and a
Secretary, and such other officers as the Board (or an officer authorized by the
Board) from time to time may appoint, including a Treasurer, one or more Vice
Presidents (any of whom may be designated Senior Vice President or Executive
Vice President), Assistant Secretaries and Assistant Treasurers. Each such
officer shall exercise such powers and perform such duties as shall be set forth
below and such other powers and duties as from time to time may be specified by
the Board or by any officer(s) authorized by the Board to prescribe the duties
of such other officers. Any number of offices may be held by the same person,
except that in no event shall the President and the Secretary be the same
person. Each of the Chairman, President and/or any Vice President may execute
bonds, mortgages, contracts and other instruments and documents under the seal
of the Corporation, if required, except where required or permitted by law to be
otherwise executed and except where the execution thereof shall be expressly
delegated by the Board to some other officer or agent of the Corporation.
4.2. CHAIRMAN
The Chairman shall (when present and unless otherwise provided by
resolution of the Board or delegated by the Chairman) preside at all meetings of
the Board and shareholders, and shall ensure that all orders and resolutions of
the Board and shareholders are carried into effect.
- 9 -
<PAGE>
4.3. PRESIDENT
The President shall be the Chief Executive Officer of the Corporation
and shall have full responsibility and authority for management of the
operations of the Corporation and shall have and perform such other duties as
may be prescribed by the shareholders, the Board or the Executive Committee (if
any).
4.4. VICE PRESIDENT
In the absence of the President or in the event of the President's
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President. Unless the order is
otherwise designated, an Executive Vice President shall come in order before any
Senior Vice President and any Vice President, and a Senior Vice President shall
come in order before any Vice President.
4.5. SECRETARY
The Secretary shall have responsibility for preparation of minutes of
meetings of the Board and of the shareholders and for authenticating records of
the Corporation. The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the Board. The Secretary
or an Assistant Secretary may also attest all instruments signed by any other
officer of the Corporation.
4.6. ASSISTANT SECRETARY
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board (or if there shall have been no
such determination, then in the order of their election), shall, in the absence
of the Secretary or in the event of the Secretary's inability or refusal to act,
perform the duties and exercise the powers of the Secretary.
4.7. TREASURER
The Treasurer, if one is appointed, shall have responsibility for the
custody of the corporate funds and securities and shall see to it that full and
accurate accounts of receipts and disbursements are kept in books belonging to
the Corporation. The Treasurer, if one is appointed, shall render to the
Chairman, the
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<PAGE>
President and the Board, upon request, an account of all financial transactions
and of the financial condition of the Corporation.
4.8. ASSISTANT TREASURER
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board (or if there shall
have been no such determination, then in the order of their election), shall, in
the absence of the Treasurer or in the event of the Treasurer's inability or
refusal to act, perform the duties and exercise the powers of the Treasurer.
4.9. TERM OF OFFICE
The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board may be removed at any time, with or
without cause, by the affirmative vote of a majority of the Board.
4.10. COMPENSATION
The compensation of officers of the Corporation shall be fixed by the
Board or by any officer(s) authorized by the Board to prescribe the compensation
of such other officers.
4.11. FIDELITY BONDS
The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.
5. CAPITAL STOCK
5.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES
The shares of the Corporation shall be represented by certificates,
provided that the Board may provide by resolution that some or all of any or all
classes or series of the Corporation's stock be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until the
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board, every holder of stock represented by
certificates, and upon request every holder of uncertificated shares, shall be
entitled to have a certificate
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<PAGE>
(representing the number of shares registered in certificate form) signed in the
name of the Corporation by the Chairman, President or any Vice President, and by
the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary of
the Corporation. Any or all the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar whose signature or facsimile
signature appears on a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
5.2. LOST CERTIFICATES
The Board, Chairman, President or Secretary may direct a new
certificate of stock to be issued in place of any certificate theretofore issued
by the Corporation and alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming that the certificate
of stock has been lost, stolen or destroyed. When authorizing such issuance of
a new certificate, the Board or any such officer may, as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or such owner's legal representative, to advertise
the same in such manner as the Board or such officer shall require and/or to
give the Corporation a bond or indemnity, in such sum or on such terms and
conditions as the Board or such officer may direct, as indemnity against any
claim that may be made against the Corporation on account of the certificate
alleged to have been lost, stolen or destroyed or on account of the issuance of
such new certificate or uncertificated shares.
5.3. RECORD DATE
5.3.1. ACTIONS BY SHAREHOLDERS
In order that the Corporation may determine the shareholders entitled
to notice of or to vote at any meeting of shareholders, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than 60 days nor less than ten days before the date of such
meeting. If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting, unless the Board
fixes a new record date for the adjourned meeting.
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<PAGE>
5.3.2. PAYMENTS
In order that the Corporation may determine the shareholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the shareholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than 60 days prior to such action. If no record
date is fixed, the record date for determining shareholders for any such purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
5.4. SHAREHOLDERS OF RECORD
The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends, to
receive notifications, to vote as such owner and to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise may be provided by the Florida Business Corporation Act.
6. INDEMNIFICATION; INSURANCE
6.1. AUTHORIZATION OF INDEMNIFICATION
Each person who was or is a party or is threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
by or in the right of the Corporation or otherwise (a "PROCEEDING"), by reason
of the fact that he or she is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee, partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan, shall be
(and shall be deemed to have a contractual right to be) indemnified and held
harmless by the Corporation (and any successor to the Corporation by merger or
otherwise) to the fullest extent authorized by, and subject to the conditions
and (except as provided herein) procedures set forth in the Florida Business
Corporation Act, as the same exists or may hereafter be amended (but any such
amendment shall not be deemed to limit or prohibit the rights of indemnification
hereunder for past acts or omissions of any such person insofar as
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<PAGE>
such amendment limits or prohibits the indemnification rights that said law
permitted the Corporation to provide prior to such amendment), against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
ERISA taxes or penalties and amounts paid or to be paid in settlement) actually
and reasonably incurred or suffered by such person in connection therewith if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal proceeding, had no reasonable cause to believe such
person's conduct was unlawful; provided, however, that the Corporation shall
-------- -------
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person (except for a suit or
action pursuant to SECTION 6.2 hereof) only if such proceeding (or part thereof)
was authorized by the Board. Persons who are not directors or officers of the
Corporation and are not so serving at the request of the Corporation may be
similarly indemnified in respect of such service to the extent authorized at any
time by the Board. The indemnification conferred in this SECTION 6.1 also shall
include the right to be paid by the Corporation (and such successor) the
expenses (including attorneys' fees) incurred in the defense of or other
involvement in any such proceeding in advance of its final disposition;
provided, however, that, if and to the extent the Florida Business
- - -------- -------
Corporation Act requires, the payment of such expenses (including attorneys'
fees) incurred by a director or officer in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an undertaking
by or on behalf of such director or officer to repay all amounts so paid in
advance if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this SECTION 6.1 or otherwise; and provided
--------
further, that such expenses incurred by other employees and agents may be so
- - -------
paid in advance upon such terms and conditions, if any, as the Board deems
appropriate.
6.2. RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION
If a claim under SECTION 6.1 is not paid in full by the Corporation
within 60 days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring an action against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
action. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in connection with any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standards of conduct that make it permissible under the Florida Business
Corporation Act for the Corporation to indemnify the claimant for the amount
claimed or is otherwise not entitled to indemnification under SECTION 6.1, but
the burden of proving such
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<PAGE>
defense shall be on the Corporation. The failure of the Corporation to have made
a determination (in the manner provided under the Florida Business Corporation
Act) prior to or after the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Florida Business Corporation Act
shall not be a defense to the action or create a presumption that the claimant
has not met the applicable standard of conduct. Unless otherwise specified in an
agreement with the claimant, an actual determination by the Corporation (in the
manner provided under the Florida Business Corporation Act) after the
commencement of such action that the claimant has not met such applicable
standard of conduct shall not be a defense to the action, but shall create a
presumption that the claimant has not met the applicable standard of conduct.
6.3. NON-EXCLUSIVITY
The rights to indemnification and advance payment of expenses provided
by SECTION 6.1 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification and advance payment of expenses may be entitled
under any Bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
6.4. SURVIVAL OF INDEMNIFICATION
The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, SECTION 6.1 hereof shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, partner or agent and shall inure to the
benefit of the personal representatives, heirs, executors and administrators of
such person.
6.5. INSURANCE
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company, trust
or other enterprise, against any liability asserted against such person or
incurred by such person in any such capacity, or arising out of such person's
status as such, and related expenses, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of the Florida Business Corporation Act.
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<PAGE>
7. GENERAL PROVISIONS
7.1. INSPECTION OF BOOKS AND RECORDS
Any shareholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Corporation's
stock ledger, a list of its shareholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a shareholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the shareholder. The demand under oath shall be directed to the
Corporation at its registered office or at its principal place of business.
7.2. DIVIDENDS
The Board may declare dividends upon the capital stock of the
Corporation, subject to the provisions of the Articles of Incorporation and the
laws of the State of Florida.
7.3. RESERVES
The directors of the Corporation may set apart, out of the funds of
the Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
7.4. EXECUTION OF INSTRUMENTS
All checks, drafts or other orders for the payment of money and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board may from time to time designate.
7.5. FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board.
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<PAGE>
7.6. SEAL
The corporate seal shall be in such form as the Board shall approve.
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or otherwise reproduced.
* * * *
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<PAGE>
Exhibit 9.3
AnswerThink Consulting Group
1401 Brickell Avenue
Suite 350
Miami, Florida 33131
March 15, 1998
To: The Undersigned Parties
Gentlemen:
Each of the undersigned are signatories, and reference is hereby made,
to that certain Shareholders Agreement dated April 23, 1997 (the "SHAREHOLDERS
AGREEMENT") governing, among other matters, certain voting arrangements
pertaining to the composition of the Board of Directors of AnswerThink
Consulting Group, Inc., a Florida corporation (the "COMPANY" or "ANSWERTHINK"),
and certain rights of first offer on behalf of management of the Company.
Capitalized terms not otherwise defined herein have the meanings set forth in
the Shareholders Agreement. In connection with the proposed reincorporation of
the Company in Delaware by means of a merger into a newly formed, wholly owned
Delaware corporation subsidiary of the Company and the potential initial public
offering ("IPO") of AnswerThink following such reincorporation, the Company's
underwriters have suggested that the Shareholders Agreement be modified in
certain respects, and the undersigned desire, by execution of this Letter
Agreement, to agree to such modifications as follows:
1. It is understood that the Board of Directors of the Company
intends unanimously to adopt a resolution appointing a three-member special
committee (the "COMMITTEE") of the Board to designate, on or before December 31,
1998, three (3) outside Board members who shall be unaffiliated with the Company
or any of the undersigned (the "3 OUTSIDE DIRECTORS"). The three members of the
Committee shall be (1) Ted Fernandez, (2) Ed Miller, and (3) either Bruce Rauner
or Will Kessinger (as GTCR V may elect). Designations of each of the 3 Outside
Directors shall only be by unanimous vote of the three members of the Committee.
The Board of Directors, pursuant to resolutions to be adopted prior to the
consummation of the IPO, will provide that Will Kessinger will be placed in the
class of directors whose terms expire at the annual meeting of shareholders in
2000, and that Bruce Rauner will be placed in the class of Directors whose terms
expire at the annual meeting of shareholders in 2001. Such resolutions also will
provide that
<PAGE>
upon designation of the 3 Outside Directors by the Committee, the Board will
expand by adding three members, and one of the 3 Outside Directors will be
placed in each of the three classes of directors. No shareholder approval should
be required to effect any of the foregoing.
2. Conditioned upon the Board's adoption of the above-described
resolutions regarding the Committee and the designation and placement of the 3
Outside Directors into the three classes of directors and the placement of
Messrs. Kessinger and Rauner into the appropriate classes of directors, all as
set forth in paragraph 1, the undersigned agree that the force and effect of the
-----------
Shareholders Agreement shall be suspended in all respects, effective upon
consummation of the IPO. Such suspension shall be superseded by an outright
termination of the Shareholders Agreement (without further action by the
undersigned) if, and as soon as, the 3 Outside Directors have taken their seats
on the Board of Directors of the Company as provided in paragraph 1 on or before
-----------
December 31, 1998.
3. If, on the other hand, the IPO has been consummated but the 3
Outside Directors are not in place on AnswerThink's Board as of December 31,
1998, the suspension with respect to the voting arrangements in Section 1 of the
Shareholders Agreement effected by the preceding paragraph shall terminate and
be of no further force and effect, and the voting arrangements in Section 1 of
the Shareholders Agreement shall again be in full force and effect, effective as
of January 1, 1999. The suspension with respect to all other provisions of the
Shareholders Agreement shall, nonetheless, be superseded by an outright
termination of such provisions, effective as of January 1, 1999.
4. Since the Shareholders Agreement was executed, Gator and Tara
(whose owners comprised the "MILLER GROUP" of AnswerThink's shareholders, as
such term is defined under the Shareholders Agreement) have dissolved and the
AnswerThink shares which had been owned by Gator and Tara prior to such
dissolutions were distributed to Edmund R. Miller ("MILLER") and the other prior
owners of interests in Gator and Tara. Miller currently holds valid proxies
from such persons to vote their shares. Miller's execution of this Letter
Agreement is therefore intended to be binding on the entire "Miller Group" of
AnswerThink shareholders, as such term is defined in the Shareholders Agreement.
5. Accordingly, in consideration of the foregoing premises, the
parties by their execution of this Letter Agreement agree and accept the
foregoing terms by which the Shareholders Agreement is now modified.
[THIS SPACE LEFT INTENTIONALLY BLANK]
2
<PAGE>
6. This Letter Agreement may be executed in counterparts and by fax.
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
----------------------------
Ted A. Fernandez
President
EXECUTIVES:
----------
/s/ Ted A. Fernandez
---------------------------------
Ted A. Fernandez
/s/ Allen R. Frank
---------------------------------
Allen R. Frank
/s/ Ulysses S. Knotts, III
---------------------------------
Ulysses S. Knotts, III
MILLER GROUP:
------------
/s/ Edmund R. Miller
---------------------------------
Edmund R. Miller, on behalf of himself and,
pursuant to valid proxies, those certain
other AnswerThink shareholders who
owned interests in either Gator
Associates, Ltd. or Tara Ventures, Ltd.
3
<PAGE>
MG CAPITAL PARTNERS II, L.P.
By:
--------------------------------------
Its: ______________________________________
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P
By: GTCR V, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By: /s/ William C. Kessinger
--------------------------------------
William C. Kessinger
Principal
4
<PAGE>
Exhibit 10.1
PURCHASE AGREEMENT
------------------
THIS AGREEMENT is made as of April 23, 1997, among AnswerThink
Consulting Group, Inc., a Florida corporation (the "Company"), Golder, Thoma,
Cressey, Rauner Fund V, L.P., a Delaware limited partnership ("GTCR V"), MG
Capital Partners II, L.P., a Delaware limited partnership ("MG"), Gator
Associates, Ltd., a Florida limited partnership ("Gator"), Tara Ventures, Ltd.,
a British Virgin Islands corporation ("Tara" and together with Gator, the
"Miller Group"). GTCR V, MG and the Miller Group are individually referred to
herein as a "Purchaser", and collectively, the "Purchasers." Except as
otherwise indicated herein, capitalized terms used herein are defined in Section
6 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
-------------------------
1A. Authorization of the Stock. The Company shall authorize the
--------------------------
issuance and sale to the Purchasers of up to 6,800,000 shares of its Class A
Convertible Preferred Stock, par value $.01 per share (the "Convertible
Preferred") having the rights and preferences set forth in Exhibit A-1 attached
-----------
hereto.
1B. Purchase and Sale of the Convertible Preferred.
----------------------------------------------
(a) At the Closing (as defined in subparagraph 1C below), the Company
shall sell to each Purchaser (other than MG) and, subject to the terms and
conditions set forth herein, each Purchaser (other than MG) shall purchase from
the Company, up to 100,000 shares of the Convertible Preferred at a price of
$3.00 per share; provided that the Miller Group shall receive a credit towards
its purchase of Convertible Preferred in an amount equal to $292,176.30 for
preincorporation expenses of the Company incurred by the Miller Group on or
prior to the Closing.
(b) The Company has been organized for the purpose of owning and
operating an information technology consulting business. Each of (i) the Miller
Group and (ii) GTCR V (together with MG) is willing to provide up to
$10,200,000 (including the Initial Funding, as defined below) in equity
financing to the Company as a portion of the financing necessary to the Company.
The consideration obtained by the Company from each Purchaser (other than MG) at
the Closing (the "Initial Funding") shall help support the Company's initial
financing needs. From time to time after the Closing, upon the written request
of the Company's board of directors (the "Board"), each of the Miller Group and
GTCR V (together with MG) shall, within 10 business days, subject to the terms
and conditions contained herein, purchase such number of shares of Convertible
Preferred at a price of $3.00 per share (as adjusted from time to time as a
result of stock dividends, stock splits, recapitalization and similar events) as
shall equal $10,200,000 less the sum of the Initial Funding by the Miller Group
or GTCR V (together with
<PAGE>
MG) as the case may be, all subsequent payments pursuant to this Section 1B(b)
and any credit pursuant to Section 1B(a).
1C. The Closing. In connection with the Initial Funding, the closing
-----------
of the purchase and sale of the Convertible Preferred to be purchased pursuant
to paragraphs 1B(a) and 1B(b) (the "Closing") shall take place at the offices of
Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m.
on April 23, 1997, or at such other place or on such other date as may be
mutually agreeable to the Company and each Purchaser. At the Closing, the
Company shall deliver to each Purchaser stock certificates evidencing the
Convertible Preferred to be purchased by such Purchaser, registered in such
Purchaser's name, upon payment of the purchase price thereof by a cashier's or
certified check, or by wire transfer of immediately available funds to such
account as designated by the Company in the amount required to be paid pursuant
to paragraph 1B.
Section 2. Conditions of each Purchaser's Obligation at the Closing.
--------------------------------------------------------
The obligation of each Purchaser to purchase and pay for the Convertible
Preferred at the Closing and at each subsequent closing is subject to the
satisfaction as of the Closing or subsequent closing of the following
conditions:
2A. Representations and Warranties; Covenants. The representations
-----------------------------------------
and warranties contained in Section 5 hereof shall be true and correct at and as
of the Closing or subsequent closing as though then made, except to the extent
of changes caused by the transactions expressly contemplated herein, and the
Company shall have performed in all material respects all of the covenants
required to be performed by it hereunder prior to the Closing or subsequent
closing, as the case may be.
2B. Articles of Incorporation. The Company's articles of
-------------------------
incorporation (the "Articles of Incorporation") shall be in form and substance
substantially similar to Exhibit A-1 hereto, shall not have been amended or
-----------
modified and shall be in full force and effect under the laws of Florida as of
the Closing. The Company's by-laws (the "By-laws") shall be in form and
substance substantially similar to Exhibit A-2 hereto, shall not have been
-----------
amended or modified and shall be in full force and effect under the laws of
Florida as of the Closing.
2C. Management Agreements. Simultaneously with the Closing, the
---------------------
Company shall have entered into (i) a senior management agreement, in form and
substance substantially similar to Exhibit B-1 attached hereto (the "Executive
-----------
Management Agreements"), with each of Ted A. Fernandez, Allan R. Frank and
Ulysses S. Knotts, III (collectively, with Edmund R. Miller, the "Executives")
and (ii) a management agreement, in form and substance substantially similar to
Exhibit B-2 attached hereto (the "Miller Management Agreement" and collectively
- - -----------
with the Executive Management Agreements, the "Management Agreements"), the
Management Agreements shall not have been amended or modified and shall be in
full force and effect as of the Closing or the subsequent closing, as the case
may be, and each Executive shall have purchased the Stock proposed to be
purchased by him thereunder.
2
<PAGE>
2D. Shareholders Agreement. The Company, the Purchasers, the
----------------------
Executives and certain other investors shall have entered into a shareholders
agreement in form and substance substantially similar to Exhibit C attached
---------
hereto (the "Shareholders Agreement"), and the Shareholders Agreement shall be
in full force and effect as of the Closing or the subsequent closing, as the
case may be.
2E. Registration Agreement. The Company, the Purchasers, the
----------------------
Executives and certain other investors shall have entered into a registration
agreement in form and substance substantially similar to Exhibit D attached
---------
hereto (the "Registration Agreement"), and the Registration Agreement shall be
in full force and effect as of the Closing or the subsequent closing, as the
case may be.
2F. Restricted Securities Agreement. Simultaneously with the Closing,
-------------------------------
the Purchasers shall have entered into a restricted securities agreement, in
form and substance substantially similar to Exhibit E attached hereto (the
---------
"Restricted Securities Agreements"), with each of the Executives and the
Restricted Securities Agreements shall not have been amended or modified and
shall be in full force and effect as of the Closing or the subsequent closing,
as the case may be.
2G. Closing Documents. The Company shall have delivered to each
-----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing or
the subsequent closing, as the case may be, stating that the conditions
specified in Section 1 and paragraphs 2A through 2F, inclusive, have been
fully satisfied;
(ii) (a) certified copies of the resolutions duly adopted by the
Board authorizing the execution, delivery and performance of this
Agreement, the Management Agreements, the Shareholders Agreement, the
Registration Agreement and each of the other agreements contemplated
hereby, the filing of the Articles of Incorporation referred to in
paragraph 2B, the issuance and sale of the Convertible Preferred and the
consummation of all other transactions contemplated by this Agreement, and
(b) the resolutions duly adopted by the Company's shareholders adopting the
Articles of Incorporation and By-laws referred to in paragraph 2B;
(iii) certified copies of the Articles of Incorporation and the
By-laws, each as in effect at the Closing or the subsequent closing, as the
case may be; and
(iv) such other documents relating to the transactions
contemplated by this Agreement as each Purchaser or its counsel may
reasonably request.
2H. Fees and Expenses. The Company shall have reimbursed each
-----------------
Purchaser for the fees and expenses as provided in paragraph 7A hereof.
3
<PAGE>
2I. Compliance with Applicable Laws. The purchase of Convertible
-------------------------------
Preferred by each Purchaser hereunder shall not be prohibited by any applicable
law or governmental regulation, shall not subject such Purchaser to any penalty,
liability or, in such Purchaser's sole judgment, other onerous conditions under
or pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which such Purchaser
is subject.
2J. Sale of Convertible Preferred to Each Purchaser. The Company
-----------------------------------------------
shall have simultaneously sold to each Purchaser the Convertible Preferred to be
purchased by such Purchaser hereunder at the Closing or the subsequent closing,
as the case may be, and shall have received payment therefor in full.
2K. South American Investment. Satisfactory arrangements shall have
-------------------------
been made with respect to Netsol.
2L. Waiver. Any condition specified in this Section 2 may be waived
------
with respect to any Purchaser only if such waiver is set forth in a writing
executed by such Purchaser.
Section 3. Covenants.
---------
3A. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to each Purchaser (so long as such Purchaser holds any Stock) and to
each holder of at least 15% of the Investor Preferred and each holder of at
least 15% of the Investor Common:
(i) as soon as available but in any event within 30 days after
the end of each quarterly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarter, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarterly period, all prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal year-
end adjustments;
(ii) accompanying the financial statements referred to in
subparagraph (i), an Officer's Certificate stating that neither the Company
nor any of its Subsidiaries is in default under any of its other material
agreements or, if any such default exists, specifying the nature and period
of existence thereof and what actions the Company and its Subsidiaries have
taken and propose to take with respect thereto;
(iii) within 120 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
annual budget and to the preceding fiscal year, all prepared in
4
<PAGE>
accordance with generally accepted accounting principles, consistently
applied, and accompanied by (a) with respect to the consolidated portions
of such statements (except with respect to budget data), an opinion
containing no exceptions or qualifications (except for qualifications
regarding specified contingent liabilities) of an independent accounting
firm acceptable to the holders of a majority of each of the Investor
Preferred and the Investor Common, and (b) a copy of such firm's annual
management letter to the Board;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the
Company by its independent accountants (and not otherwise contained in
other materials provided hereunder);
(v) at least 30 days prior to the beginning of each fiscal
year, an annual budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of
income and cash flows), and promptly upon preparation thereof any other
significant budgets prepared by the Company and any revisions of such
annual or other budgets, and within 30 days after any monthly period in
which there is a material adverse deviation from the annual budget, an
Officer's Certificate explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto;
(vi) promptly (but in any event within five business days) after
the discovery or receipt of notice of any default under any material
agreement to which it or any of its Subsidiaries is a party or any other
event or circumstance affecting the Company or any Subsidiary which is
reasonably likely to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of
the Company or any Subsidiary (including the filing of any material
litigation against the Company or any Subsidiary or the existence of any
material dispute with any Person which involves a reasonable likelihood of
such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto; and
(vii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this paragraph 3A may reasonably
request.
Each of the financial statements referred to in subparagraph (i) and (iii) shall
fairly present the consolidated financial position of the Company and its
Subsidiaries in all material respects as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end audit adjustments (none of which would, alone or
in the aggregate, be materially adverse to the financial condition, operating
results, assets, operations or business prospects of the Company and its
Subsidiaries taken as a whole).
5
<PAGE>
3B. Inspection of Property. The Company shall permit any
----------------------
representatives designated by any holder of at least 15% of the outstanding
Investor Preferred or at least 15% of the outstanding Investor Common, upon
reasonable notice and during normal business hours and such other times as any
such holder may reasonably request, to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the corporate and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries; provided that the Company shall
have the right to have its chief financial officer present at any meetings with
the Company's independent accountants; and provided further that, if requested
by the Company, such representatives shall first enter into a confidentiality
and non-disclosure agreement with the Company, in form and substance reasonably
satisfactory to the Company. Notwithstanding the foregoing, the Company may
exclude such representatives from receiving access to any information to the
extent that the Company has been advised by its independent legal counsel that
the disclosure to such representatives of such information would cause the
Company or any Subsidiary to waive its attorney-client privilege with respect to
any such information which is material to the Company or any of its
Subsidiaries.
3C. Affirmative Covenants. So long as any Purchaser holds any Stock,
---------------------
the Company shall, and shall cause each Subsidiary to:
(i) comply with all applicable laws, rules and regulations of
all governmental authorities, the violation of which would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company
and its Subsidiaries taken as a whole, and pay and discharge when payable
all taxes, assessments and governmental charges (except to the extent the
same are being contested in good faith and adequate reserves therefor have
been established);
(ii) enter into and maintain appropriate nondisclosure and
noncompete agreements with its key employees; and
(iii) take, or omit to take, all such actions as are necessary so
that the representation and warranty contained in Section 5D shall continue to
remain true and correct at all times as if such representation and warranty were
remade every day.
3D. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and, so
long such action is not unduly burdensome on the employees of the Company, shall
take such further action as any holder or holders of Restricted Securities may
reasonably request to comply with the provisions of (i) Rule 144 adopted by the
Securities and Exchange Commission under
6
<PAGE>
the Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the Securities and Exchange
Commission or (ii) General Instruction I of Form S-2 or S-3 or any similar
registration form hereafter adopted by the Securities and Exchange Commission.
Upon request, the Company shall deliver to any holder of Restricted Securities a
written statement as to whether it has complied with such requirements.
3E. Limited Preemptive Rights.
-------------------------
(i) Except for the issuance of Stock (a) to the Executives
pursuant to the Management Agreements, (b) in connection with acquisitions
exempted herefrom by the Board, (c) to employees pursuant to stock option
plans, stock ownership plans and other employment arrangements approved by
the Board or (d) pursuant to a public offering registered under the
Securities Act, if the Company at any time after the Closing authorizes the
issuance or sale of any shares of Stock or any securities containing
options or rights to acquire any shares of Stock (other than as a dividend
on the outstanding Stock), the Company shall first offer to sell to each
holder of Investor Stock a portion of such stock or securities equal to the
quotient determined by dividing (1) the number of shares of Underlying
Common Stock held by such holder by (2) the total number of shares of
Underlying Common Stock immediately prior to such issuance. Each holder of
Investor Stock shall be entitled to purchase all or any portion of such
stock or securities at the most favorable price and on the most favorable
terms as such stock or securities are to be offered to any other Persons.
(ii) In order to exercise its purchase rights hereunder, a
holder of Investor Stock must within 15 days after receipt of written
notice from the Company describing in reasonable detail the stock or
securities being offered, the purchase price thereof, the payment terms and
such holder's percentage allotment deliver a written notice to the Company
describing its election hereunder. If all of the stock and securities
offered to the holders of Investor Stock is not fully subscribed by such
holders, the remaining stock and securities shall be reoffered by the
Company to the holders purchasing their full allotment upon the terms set
forth in this paragraph, except that such holders must exercise their
purchase rights within five days after receipt of such reoffer.
(iii) Upon the expiration of the offering periods described
above, the Company shall be entitled to sell such stock or securities which
the holders of Investor Stock have not elected to purchase during the 90
days following such expiration on terms and conditions no more favorable to
the purchasers thereof than those offered to such holders. Any stock or
securities offered or sold by the Company after such 90-day period must be
reoffered to the holders of Investor Stock pursuant to the terms of this
paragraph.
(iv) Nothing contained in this paragraph 3E shall be deemed to
amend, modify or limit in any way the restrictions on the issuance of
shares of stock set forth in this Agreement, in the Shareholders Agreement
or in any other agreement to which the Company is bound.
7
<PAGE>
3F. Public Disclosures. The Company shall not, nor shall it permit
------------------
any Subsidiary to, disclose any Purchaser's name or identity as an investor in
the Company in any press release or other public announcement or in any document
or material filed with any governmental entity, without the prior written
consent of such Purchaser, unless such disclosure is required by applicable law
or governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure the Company shall give written notice
to each Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit such Purchaser to review and comment upon the form
and substance of such disclosure.
3G. Unrelated Business Taxable Income. The Company shall not engage
---------------------------------
in any transaction which is reasonably likely to cause any Purchaser or any of
its limited partners which are exempt from income taxation under Section 501(a)
of the IRC and, if applicable, any pension plan that any such trust may be a
part of, to recognize unrelated business taxable income as defined in Section
512 and Section 514 of the IRC.
3H. Hart-Scott-Rodino Compliance. In connection with any transaction
----------------------------
in which the Company is involved which is required to be reported under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to
time (the "HSR Act"), the Company shall prepare and file all documents with the
Federal Trade Commission and the United States Department of Justice which may
be required to comply with the HSR Act, and shall promptly furnish all materials
thereafter requested by any of the regulatory agencies having jurisdiction over
such filings, in connection with the transactions contemplated thereby. The
Company shall take all reasonable actions and shall file and use reasonable best
efforts to have declared effective or approved all documents and notifications
with any governmental or regulatory bodies, as may be necessary or may
reasonably be requested under federal antitrust laws for the consummation of the
subject transaction.
Section 4. Transfer of Restricted Securities.
----------------------------------
(i) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule or rules then in
force) if such rule or rules are available and (c) subject to the conditions
specified in subparagraph (ii) below, any other legally available means of
transfer.
(ii) In connection with the transfer of any Restricted
Securities (other than a transfer described in subparagraph 4(i)(a) or (b)
above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of Kirkland & Ellis or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the Company
8
<PAGE>
an opinion of Kirkland & Ellis or such other counsel that no subsequent transfer
of such Restricted Securities shall require registration under the Securities
Act, the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in paragraph 7C. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7C.
(iii) Upon the request of any Purchaser, the Company shall
promptly supply to each Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission.
(iv) Notwithstanding anything contained herein to the contrary,
except for any transfer pursuant to Section 4(i)(a) or (b) permitted by the last
sentence of Paragraph 7F, if any holder of Investor Stock (the "Transferring
Purchaser") desires to transfer all or a portion of its Restricted Securities,
the Transferring Purchaser shall deliver a written notice (the "Offer Notice")
to the Company, the Executives (other than Edmund R. Miller) and all of the
other holders of Investor Stock (the "Other Holders"). The Offer Notice shall
disclose in reasonable detail the proposed number of Restricted Securities to be
transferred and the proposed sale price, terms and conditions of the transfer.
Each Other Holder may elect to purchase all or any portion of the Restricted
Securities specified in the Offer Notice at the price and on the terms specified
therein by delivering written notice (the "Reply Notice") of such election to
the Company and each Other Holder as soon as practical but in any event within
20 days after the delivery of the Offer Notice. If the Other Holders elect to
purchase an aggregate number of any type of Restricted Securities greater than
the number of such type of Restricted Securities specified in the Offer Notice,
such type of Restricted Securities shall be allocated among the Other Holders
pro rata based upon the number of shares of Underlying Common Stock owned by
each Other Holder desiring to acquire such type of Restricted Securities
pursuant to this Section 4(iv) (but in no event shall the pro rata share of any
such Other Holder result in such Other Holder acquiring a number of any type of
Restricted Securities in excess of the number of such Restricted Securities
requested by such Other Holder). If the Other Holders have elected to purchase
all or any portion of the Restricted Securities from the Transferring Purchaser,
the transfer of such shares shall be consummated as soon as practical after the
delivery of the last Reply Notice, but in any event within 40 days after the
delivery of either such notice. To the extent that the Other Holders have not
elected to purchase all of the Restricted Securities being offered, the
Transferring Purchaser may, within 90 days after a delivery of the Offer Notice,
transfer such Restricted Securities to one or more third parties at a price no
less than the price per share specified in the Reply Notice and on other terms
no more favorable to the transferees than offered to the Other Holders. The
purchase price specified in any Offer Notice shall be payable solely in cash at
the closing of the transaction or, if mutually agreed upon by the parties, in
installments over time.
9
<PAGE>
Section 5. Representations and Warranties of the Company. As a
---------------------------------------------
material inducement to each Purchaser to enter into this Agreement and purchase
the Stock, the Company hereby represents and warrants to such Purchaser that:
5A. Organization and Corporate Power. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of Florida,
and is qualified to do business in every jurisdiction in which the failure to so
qualify might reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the Articles
of Incorporation and By-laws being furnished to each Purchaser's counsel on or
prior to the Closing reflect all amendments made thereto at any time on or prior
to the Closing and are correct and complete.
5B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of 22,200,000 shares
of Stock, of which 7,200,000 shares shall be designated as Convertible
Preferred and 15,000,000 shares shall be designated as Common Stock. As of
the Closing, except as contemplated hereby, the Company shall not have
outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock or containing any profit participation
features, nor shall it have outstanding any rights or options to subscribe
for or to purchase its capital stock or any stock or securities convertible
into or exchangeable for its capital stock or any stock appreciation rights
or phantom stock plans other than pursuant to and as contemplated by this
Agreement and the Management Agreements. As of the Closing, the Company
shall not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock
or any warrants, options or other rights to acquire its capital stock,
except pursuant to this Agreement and the Management Agreements. As of the
Closing, all of the outstanding shares of the Company's capital stock shall
be validly issued, fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, contractual shareholders preemptive rights or rights of refusal
with respect to the issuance of the Stock hereunder or the issuance of the
Stock pursuant to paragraph 1B(b) hereof, except as expressly provided
herein. Based in part on the investment representations of each Purchaser
in paragraph 7C hereof and of the Executives in the Management Agreements,
the Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its capital
stock, and the offer, sale and issuance of the Stock hereunder and pursuant
to paragraph 1B(b) hereof do not and will not require registration under
the Securities Act or any applicable state securities laws. To the best of
the Company's knowledge, there are no agreements between the
10
<PAGE>
Company's shareholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the
Company's affairs, except for the Shareholders Agreement, the Restricted
Securities Agreements and the Management Agreements.
5C. Subsidiaries; Investments. The Company does not own or hold any
-------------------------
shares of stock or any other security or interest in any other Person or any
rights to acquire any such security or interest, and the Company has never had
any Subsidiary.
5D. Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement, the Management Agreements, the Shareholders
Agreement, the Registration Agreement and all other agreements contemplated
hereby to which the Company is a party and the filing of the Articles of
Incorporation referred to in paragraph 2B have been duly authorized by the
Company. This Agreement, the Management Agreements, the Shareholders Agreement,
the Registration Agreement, the Articles of Incorporation and all other
agreements contemplated hereby each constitutes a valid and binding obligation
of the Company, enforceable in accordance with its terms. The execution and
delivery by the Company of this Agreement, the Management Agreements, the
Shareholders Agreement, the Registration Agreement and all other agreements
contemplated hereby to which the Company is a party, the offering, sale and
issuance of the Stock hereunder and pursuant to subparagraph 1B(b), the filing
of the Articles of Incorporation referred to in paragraph 2B, and the operation
by the Company of its business and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company do not and will not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body pursuant to, the Articles of
Incorporation or bylaws of the Company, or any law, statute, rule or regulation
to which the Company is subject, or any agreement, instrument, order, judgment
or decree to which the Company is a party or by which it or any of the
Executives is bound, including, without limitation, to the Company's knowledge,
any agreement, document or instrument with KPMG Peat Marwick.
5E. Conduct of Business; Liabilities. Other than the negotiation,
--------------------------------
execution and delivery of this Agreement, the Management Agreements, the
Shareholders Agreement, the Registration Agreement and the other agreements
contemplated hereby and thereby and in connection with the preincorporation of
the Company as previously disclosed to the Purchaser, prior to the Closing, the
Company has not (i) conducted any business, (ii) incurred any expenses,
obligations or liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known to the Company and whether due or to become
due and regardless of when asserted) except to the extent disclosed pursuant to
paragraph 5G, (iii) owned any assets, (iv) entered into any contracts or
agreements, or (v) violated any laws or governmental rules or regulations.
11
<PAGE>
5F. Tax Matters. The Company has filed all tax returns (if any)
-----------
which it is required to file under applicable laws and regulations; all such
returns are complete and correct in all material respects; the Company has paid
all taxes due and owing by it and has withheld and paid over all taxes which it
is obligated to withhold from amounts paid or owing to any employee,
shareholder, creditor or other third party; the Company has not waived any
statute of limitations with respect to taxes or agreed to any extension of time
with respect to a tax assessment or deficiency; the assessment of any additional
taxes for periods for which returns have been filed is not expected; no foreign,
federal, state or local tax audits are pending or being conducted with respect
to the Company, no information related to tax matters has been requested by any
foreign, federal, state or local taxing authority and no notice indicating an
intent to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority; and there are no
unresolved questions or claims concerning the Company's tax liability. The
Company has not made an election under (S)341(f) of the IRC.
5G. Litigation, etc. Except as set forth on Schedule 5G (Litigation)
---------------- ------------------------
attached hereto, there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Company's knowledge,
threatened against or affecting the Company (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company with respect to their businesses or
proposed business activities) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitations, any actions, suit, proceedings or
investigations with respect to the transactions contemplated by this Agreement).
The Company is not subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of the Company's knowledge,
any governmental investigations or inquiries; and, to the best of the Company's
knowledge, there is no basis for any of the foregoing. The Company is not
subject to any judgment, order or decree of any court or other governmental
agency.
5H. Brokerage. There are no claims for brokerage commissions,
---------
finders, fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company. The Company shall pay, and hold each Purchaser harmless
against, any liability, loss or expense (including, without limitation,
attorneys, fees and out-of-pocket expenses) arising in connection with any such
claim.
5I. Governmental Consent, etc. No permit, consent, approval or
--------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby.
5J. ERISA. The Company does not maintain or have any obligation to
-----
contribute to or any other liability with respect to or under (including but not
limited to current or potential withdrawal liability), nor has it ever
maintained or had any obligation to contribute to or any other liability with
respect to or under, (i) any plan or arrangement whether or not terminated,
which provides medical, health, life insurance or other welfare type benefits
for
12
<PAGE>
current or future retired or terminated employees (except for limited continued
medical benefit coverage required to be provided under Section 4980B of the IRC
or as required under applicable state law), (ii) any "multiemployer plan" (as
defined in Section 3(37) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), (iii) any employee plan which is a tax-qualified "defined
benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated,
(iv) any employee plan which is a tax-qualified "defined contribution plan" (as
defined in Section 3(34) of ERISA), whether or not terminated, or (v) any other
plan or arrangement providing benefits to current or former employees, including
any bonus plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated. For purposes of
this subparagraph 5J, the term "Company" includes all organizations under common
control with the Company pursuant to Section 414(b) or (c) of the IRC.
5K. Compliance with Laws. The Company has not violated any law or
--------------------
any governmental regulation or requirement which violation would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company, and
the Company has not received notice of any such violation. The Company is not
subject to any clean up liability, and the Company has no reason to believe it
may become subject to any clean up liability, under any federal, state or local
environmental law, rule or regulation.
5L. Disclosure. Neither this Agreement nor any of the schedules,
----------
attachments, written statements, documents, certificates or other items prepared
or supplied to any Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading. There is no fact which the Company has not disclosed to
any Purchaser in writing and of which any of its officers, directors or
executive employees is aware and which has had or might reasonably be
anticipated to have a material adverse effect upon the existing or expected
financial condition, operating results, assets, customer or supplier relations,
employee relations or business prospects of the Company or any of its
Subsidiaries.
5M. Closing Date. The representations and warranties of the Company
------------
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company to any Purchaser shall be true and
correct in all material respects on the date of the Closing as though then made,
except as affected by the transactions expressly contemplated by this Agreement.
5N. Post-Closing Representations and Warranties. In connection with
-------------------------------------------
any reaffirmation after the Closing of the representations and warranties
contained in this Section 5, the following shall apply:
13
<PAGE>
(i) The representations and warranties contained in Section 5B
shall be deemed to be true and correct on any date after the Closing if
such representations and warranties are true and correct on such date
except for the fact that additional shares of Convertible Preferred may
have been issued to any Purchaser pursuant to subparagraph 1B(b) hereof and
that additional shares of Convertible Preferred may have been issued to the
Executives pursuant to the Management Agreements;
(ii) The representations and warranties contained in Section 5C
shall be deemed to be amended to add the following language at the end
thereof:
"except for shares of stock or other securities or interests
in any Person and Subsidiaries acquired after April 23,
1997, in each case with the approval of the Board."
(iii) In connection with any such reaffirmation after the date
in which the Company and its Subsidiaries have assets (other than cash and
cash equivalents) in excess of $1 million in the aggregate, the
representations and warranties contained in Section 5E shall be deemed to
be amended to substitute the following representation in its place:
"The Company and its Subsidiaries do not have any
material obligation or liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known
to the Company or any Subsidiary, whether due or to become
due and regardless of when asserted) other than: (i)
liabilities set forth on most recent balance sheet
(including any notes thereof) delivered to the Purchasers
pursuant to Section 3A hereof; (ii) liabilities and
obligations which have arisen after the date of such balance
sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit) and (iii)
liabilities and obligations which have been disclosed to and
approved by the Board."
(iv) The representations and warranties contained in Section 5J
shall be deemed to be amended to add the following language at the end of
the first sentence thereof:
", in each case except for such plans or arrangements which
have been approved by the Board."
Section 6. Definitions. For the purposes of this Agreement, the
-----------
following terms have the meanings set forth below:
14
<PAGE>
"Affiliate" of any particular person or entity means any other person
---------
or entity controlling, controlled by or under common control with such
particular person or entity.
"Indebtedness" means all indebtedness for borrowed money (including
------------
purchase money obligations) maturing one year or more from the date of creation
or incurrence thereof or renewable or extendible at the option of the debtor to
a date one year or more from the date of creation or incurrence thereof, all
indebtedness under revolving credit arrangements extending over a year or more,
all capitalized lease obligations and all guarantees of any of the foregoing.
"Investor Common" means (i) the Common Stock issued upon conversion of
---------------
any Investor Preferred and (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular shares of
Investor Common, such shares shall cease to be Investor Common when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (b) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar rule then in force).
"Investor Preferred" means (i) the Convertible Preferred issued
------------------
hereunder or pursuant to subparagraph 1B(b) and (ii) any Convertible Preferred
issued or issuable with respect to the Class A Preferred referred to in clause
(i) above by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares of Investor Preferred, such shares
shall cease to be Investor Preferred when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar rule then in force).
"Investor Stock" means the Investor Preferred and the Investor Common.
--------------
"IRC" means the Internal Revenue Code of 1986, as amended, and any
---
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a limited liability
------
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated
15
<PAGE>
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Restricted Securities" means (i) the Convertible Preferred issued
---------------------
hereunder or pursuant to subparagraph 1B(b), (ii) any Convertible Preferred
issued or issuable with respect to the Class A Preferred referred to in clause
(i) above by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, (iii) the Common Stock issued upon conversion of any Convertible
Preferred referred to in clauses (i) or (ii) above, and (iv) any Common Stock
issued or issuable with respect to the Common Stock referred to in clause (iii)
above by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7C have been delivered by the
Company in accordance with paragraph 4(ii). Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7C.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Stock" means the Convertible Preferred and the Common Stock.
-----
"Subsidiary" means any corporation of which the securities having a
----------
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
"Underlying Common Stock" means, at any time, the sum of (i) the
-----------------------
number of shares Common Stock of the Company outstanding as of such time plus
(ii) the number of shares of Common Stock of the Company issuable upon the
exercise or conversion of the Convertible Preferred at such time.
7. Miscellaneous.
-------------
16
<PAGE>
7A. Expenses. The Company agrees to pay, and hold each Purchaser and
--------
all holders of Investor Stock harmless against liability for the payment of, (i)
the fees and expenses of their counsel arising in connection with their due
diligence investigation of the Company, Interprise Technology Solutions, Inc.
and the Executives, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated by this Agreement (including but
not limited to fees and expenses arising with respect to any subsequent purchase
of Stock pursuant to subparagraph 1B(b) hereof), (ii) the fees and expenses
incurred with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of this Agreement, the Management
Agreements, the Restricted Securities Agreements, the Shareholders Agreement,
the Registration Agreement, the other agreements contemplated hereby and the
Articles of Incorporation, (iii) stamp and other taxes which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition of any shares of Stock purchased hereunder or in
accordance with subparagraph 1B(b) hereof, and (iv) the fees and expenses
incurred with respect to the interpretation or enforcement of the rights granted
under this Agreement, the Management Agreements, the Shareholders Agreement, the
Registration Agreement, the other agreements contemplated hereby and the
Articles of Incorporation and the By-laws.
7B. Remedies. Each holder of Investor Stock shall have all rights
--------
and remedies set forth in this Agreement and the Articles of Incorporation and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
7C. Purchaser's Investment Representations. By its acquisition
--------------------------------------
thereof, each holder of Restricted Securities hereby represents that (i) the
Restricted Securities to be acquired by such holder pursuant to this Agreement
will be acquired for such holder's own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act, or any
applicable state securities laws, and the Restricted Securities will not be
disposed of in contravention of the Securities Act or any applicable state
securities laws; (ii) such holder is an "accredited investor" and a
sophisticated investor for purposes of applicable foreign and U.S. federal and
state securities laws and regulations and is able to evaluate the risks and
benefits of the investment in the Restricted Securities; (iii) such holder is
able to bear the economic risk of his investment in the Restricted Securities
for an indefinite period of time because the Restricted Securities have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (iv) such holder has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of Restricted Securities and has had full access to such other
information concerning the Company as it has requested; and (v) this Agreement
and each of the other agreements contemplated hereby constitutes (or will
constitute) the legal, valid and binding obligation of such holder, enforceable
in accordance with its terms, and the execution, delivery and performance of
this Agreement and such other agreements by
17
<PAGE>
such holder does not and will not conflict with, violate or cause a breach of
any agreement, contract or instrument to which such holder is a party or any
judgment, order or decree to which such holder is subject. Notwithstanding the
foregoing, nothing contained herein shall prevent such holder and subsequent
holders of Restricted Securities from transferring such securities in compliance
with the provisions of Section 4 hereof. Each certificate for Restricted
Securities shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on April 23, 1997, and have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate
is subject to the conditions specified in the Purchase
Agreement, dated as of April 23, 1997, between the issuer
(the "Company") and a certain investor, and the Company
reserves the right to refuse the transfer of such securities
until such conditions have been fulfilled with respect to
such transfer. A copy of such conditions shall be furnished
by the Company to the holder hereof upon written request and
without charge."
7D. Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of 70% of the Investor Stock. No other course of dealing between the
Company and the holder of any Stock or any delay in exercising any rights
hereunder or under the Articles of Incorporation shall operate as a waiver of
any rights of any such holders. For purposes of this Agreement, shares of Stock
held by the Company or any Subsidiaries shall not be deemed to be outstanding.
7E. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
7F. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Stock are also for the benefit of, and enforceable by,
any subsequent holder of such Stock. The rights and obligations of GTCR V under
this Agreement and the agreements contemplated hereby may be assigned by GTCR V
at any time, in whole or in part, to any investment fund managed by Golder,
Thoma, Cressey, Rauner, Inc., or any successor thereto or to any co-investment
vehicle for the benefit of all or some of the employees of Golder, Thoma,
Cressey, Rauner, Inc., or any successor thereto.
18
<PAGE>
7G. Generally Accepted Accounting Principles. Where any accounting
----------------------------------------
determination or calculation is required to be made under this Agreement or the
exhibits hereto, such determination or calculation (unless otherwise provided)
shall be made in accordance with generally accepted accounting principles,
consistently applied, except that if because of a change in generally accepted
accounting principles the Company would have to alter a previously utilized
accounting method or policy in order to remain in compliance with generally
accepted accounting principles, such determination or calculation shall continue
to be made in accordance with the Company's previous accounting methods and
policies.
7H. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7I. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
7J. Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
Section of this Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
7K. Governing Law. The corporate law of Florida shall govern all
-------------
issues concerning the relative rights of the Company and its shareholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
7L. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Investor and to each Executive at the
addresses indicated on the Schedule of Holders attached to the Shareholders
Agreement and to the Company at the address of its corporate headquarters or to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
7M. Indemnification. In consideration of the execution and delivery
---------------
of this Agreement by the Investor and the purchase of Convertible Preferred
hereunder, the Company
19
<PAGE>
will indemnify and hold harmless each Purchaser and each of its present and
former respective officers, directors, members, employees, partners and agents
and Affiliates of each of the foregoing and each of the Executives
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, losses, costs, liabilities, damages, expenses (including, with
respect to the Executives (other than Edmund R. Miller), lost wages, benefits
and capital accounts) (irrespective of whether such Indemnitee is a party to the
action for which indemnification hereunder is sought), including attorney's fees
and disbursements (collectively, the "Indemnified Liabilities") incurred by any
Indemnitee arising out of or relating to the matters referred to on Schedule 5G
-----------
(Litigation) (including, without limitation, economic losses in its capacity as
- - ------------
a shareholder of the Company), this Agreement or the transactions contemplated
hereby, or any investigation, litigation, or proceeding related to any such
matters. Notwithstanding the foregoing, "Indemnified Liabilities" will not
include as to any Executive, his agents or Affiliates, any liabilities to the
extent arising by reason of such Indemnitee's (or such Indemnitee's agents or
Affiliates) breach of any management agreement with the Company to which such
Executive is from time to time a party. If and to the extent that the covenant
included in this Paragraph 7M may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
* * * * *
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
------------------------------------
Its: Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER
FUND V, L.P.
By: GTCR V, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By: /s/ Bruce V. Rauner
---------------------------------
Its: Principal
GATOR ASSOCIATES, LTD.
By: /s/ Edmund R. Miller
------------------------------------
Its:____________________________________
TARA VENTURES, LTD.
By: /s/ Edmund R. Miller
------------------------------------
Its:____________________________________
21
<PAGE>
MG CAPITAL PARTNERS II, L.P.
By: MT Capitol Corp.
Its: General Partner
By: [Illegible Signature]
------------------------------------
Its: Managing Director
22
<PAGE>
For purposes of Sections 4(iv) and 7M,
the undersigned hereby become a party
hereto as of the date first written above:
/s/ Ted A. Fernandez
- - --------------------------------------
Ted A. Fernandez
/s/ Allan R. Frank
- - --------------------------------------
Allan R. Frank
/s/ Ulysses S. Knotts, III
- - --------------------------------------
Ulysses S. Knotts, III
The Exhibits and Schedules to this Purchase Agreement are not included with this
Registration Statement on Form S-1. AnswerThink will provide these exhibits and
schedules upon the request of the Securities and Exchange Commission.
23
<PAGE>
Exhibit 10.2
ANSWERTHINK CONSULTING GROUP, INC.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
February 24, 1998
<PAGE>
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT is made as of the 24th day of February, 1998,
by and among (i) AnswerThink Consulting Group, Inc., a Florida corporation (the
"Company"), and (ii) Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware
limited partnership, GTCR Associates V, a Delaware general partnership, MG
Capital Partners II, LP, a Delaware limited partnership, and Miller Capital
Management, Inc., and each investor in Gator Associates, Ltd., a Florida limited
partnership ("Gator") and Tara Ventures, Ltd., a British Virgin Islands
corporation ("Tara"), who elects to exercise his, her or its preemptive rights
(each of which is herein referred to as an "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series A Preferred Stock. Subject to the
---------------------------------------------
terms and conditions of this Agreement, each Investor agrees, severally, to
purchase at the Closing (as defined below), and the Company agrees to sell and
issue to each Investor at the Closing, the following number of shares of the
Company's Series A Preferred Stock, $.001 par value (the "Investor Stock") for
the purchase price of $3.00 per share (the "Purchase Price"): (i) an aggregate
of 100,000 shares to Golder, Thoma, Cressey, Rauner Fund V, L.P. ("GTCRV"), GTCR
Associates V and MG Capital Partners II, LP ("MG") and (ii) an aggregate of
100,000 shares to Miller Capital Management, Inc. and each investor in Gator and
Tara who elects to exercise his, her or its preemptive rights.
1.2 Closing. The purchase and sale shall take place at the offices of
-------
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., 1221 Brickell Avenue,
Miami, Florida 33131 on or before February 24, 1998 (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor certificates representing the Investor Stock that such Investor is
purchasing against payment of the purchase price therefor by check or wire
transfer.
2. Joinder of Shareholders Agreement and Registration Agreement. By
------------------------------------------------------------
execution hereof, Miller Capital Management, Inc. agrees to be bound by the
provisions of the Shareholders Agreement (the "Shareholders Agreement") dated as
of April 23, 1997, by and among the Company and the shareholders of the Company
from time to time a party to thereto, initially including GTCRV, MG, Gator
Associates, Ltd., a Florida limited partnership ("Gator"), and Tara Ventures,
Ltd., a British Virgin Islands corporation ("Tara") and each of the individuals
listed on the signature page thereto; and the Registration Agreement (the
"Registration Agreement") dated as of April 23, 1997, by and among the Company
and the shareholders of the Company from time to time a party to thereto,
initially including, GTCRV, MG, Gator and Tara and each of the individuals
listed on the signature page thereto; and as if Miller Capital Management, Inc.
was a "Shareholder" and an "Executive", as such terms are defined therein.
3. Covenants. Each Investor shall be deemed a "Purchaser" for purposes of
---------
Section 3 of the Purchase Agreement (the "Purchase Agreement") dated as of April
23, 1997, by and among the Company and the shareholders of the Company from time
to time a party to thereto, initially including, GTCRV, MG, Gator and Tara and
each of the individuals listed on the signature page thereto.
4. Transfer of Investor Stock. Each of the shares of Investor Stock are
--------------------------
deemed Investor Stock and Restricted Securities and subject to the terms and
conditions of Section 4 of the Purchase Agreement.
5. Representations and Warranties of the Company. As a material
---------------------------------------------
inducement to each Investor to enter into this Agreement and purchase the
Investor Stock, the Company hereby represents and warrants to such Investor
that:
<PAGE>
5.1 Organization and Corporate Power. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of Florida,
and is qualified to do business in every jurisdiction in which the failure to so
qualify might reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement.
5.2 Capital Stock and Related Matters. The authorized capital stock
---------------------------------
of the Company consists of 100,000,000 shares of Common Stock $0.001 per share
and 7,200,000 shares of Preferred Stock, $0.001 par value per share. As of
December 31, 1997, (i) 46,872,179.88 shares of Common Stock were outstanding,
(ii) 3,346,731.97 shares of Preferred Stock were outstanding (3,653,265.87
shares of previously issued preferred stock have been converted into common
stock) and (iii) 1,387,812 options to purchase shares of Common Stock have been
granted pursuant to the Company's 1997 Stock Option Plan. All outstanding shares
of capital stock of the Company and all shares which may be issued pursuant to
this Agreement will be, when issued in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable.
5.3 Subsidiaries; Investments. The Company does not own or hold any
-------------------------
shares of stock or any other security or interest in any other Person or any
rights to acquire any such security or interest, except for The Hackett Group,
Inc., an Ohio corporation and Delphi Partners, Inc., a New Jersey corporation.
5.4 Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement has been duly authorized by the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms. The execution and delivery by the Company of this
Agreement, the offering, sale and issuance of the Investor Stock hereunder, and
the operation by the Company of its business and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company do not
and will not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation of
any lien, security interest, charge or encumbrance upon the Company's capital
stock or assets pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action by
or notice to any court or administrative or governmental body pursuant to, the
Articles of Incorporation or bylaws of the Company, or any law, statute, rule or
regulation to which the Company is subject, or any agreement, instrument, order,
judgment or decree to which the Company is a party or by which it or any of the
Executives is bound, including, without limitation, to the Company's knowledge,
any agreement, document or instrument with KPMG Peat Marwick.
5.5 Brokerage. There are no claims for brokerage commissions,
---------
finders fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company. The Company shall pay, and hold each Investor harmless
against, any liability, loss or expense (including, without limitation,
attorneys fees and out-of-pocket expenses) arising in connection with any such
claim.
5.6 Governmental Consent, etc. No permit, consent, approval or
--------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby.
5.7 Compliance with Agreements. Except for (i) certain payments due
---------------------------
on January 22, 1998 pursuant to the Employment Agreement with Gregory Hackett,
dated October 13, 1997, which are currently being renegotiated and (ii) the
provision which requires the Company to purchase key man
2
<PAGE>
insurance on Ted A. Fernandez, the Company is in compliance, in all material
respects, with the Revolving Credit Agreement with BankBoston, N.A., dated
November 7, 1997 (the "Credit Agreement") and the Purchase Agreement, and no
default or event of default exists with respect to the Credit Agreement.
6. Miscellaneous.
-------------
6.1 Expenses. The Company agrees to pay, and hold each Investor and
--------
all holders of Investor Stock harmless against liability for the payment of, (i)
the fees and expenses incurred with respect to the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby and
any amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, (ii) stamp and other taxes, which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition of any shares of Investor Stock purchased hereunder, and
(iii) the fees and expenses incurred with respect to the interpretation or
enforcement of the rights granted under this Agreement.
6.2 Remedies. Each holder of Investor Stock shall have all rights
--------
and remedies set forth in this Agreement and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any other agreement or contract
and all of the rights which such holders have under any law. Any Person having
any rights under any provision of this Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
6.3 Investor's Investment Representations. By its acquisition
-------------------------------------
thereof, each purchaser of Investor Stock hereby represents that (i) the
Investor Stock to be acquired by such purchaser pursuant to this Agreement will
be acquired for such purchaser's own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act, or any
applicable state securities laws, and the Investor Stock will not be disposed of
in contravention of the Securities Act or any applicable state securities laws;
(ii) such purchaser is an "accredited investor" and a sophisticated investor for
purposes of applicable foreign and U.S. federal and state securities laws and
regulations and is able to evaluate the risks and benefits of the investment in
the Investor Stock; (iii) such purchaser is able to bear the economic risk of
his investment in the Investor Stock for an indefinite period of time because
the Investor Stock has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available; (iv) such purchaser has
had an opportunity to ask questions and receive answers concerning the terms and
conditions of the offering of Investor Stock and has had full access to such
other information concerning the Company as it requested; and (v) this Agreement
and each of the other agreements contemplated hereby constitutes (or will
constitute) the legal, valid and binding obligation of such purchaser,
enforceable in accordance with its terms, and the execution, delivery and
performance of this Agreement and such other agreements by such purchaser does
not and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which such purchaser is a party or any judgment, order
or decree to which such purchaser is subject. Notwithstanding the foregoing,
nothing contained herein shall prevent such purchaser and subsequent holders of
Investor Stock from transferring such securities in compliance with the
provisions of Section 4 of the Purchase Agreement. Each certificate for Investor
Stock shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on February ___, 1998, and have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate
is subject to the conditions specified in the Series A
Preferred Stock Purchaser Agreement, dated as of February
__, 1998, between the issuer (the "Company") and a certain
investor, and the Company reserves the right to refuse the
transfer of such securities until
3
<PAGE>
such conditions have been fulfilled with respect to such
transfer. A copy of such conditions shall be furnished by
the Company to the holder hereof upon written request and
without charge."
6.4 Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of 70% of the Investor Stock. No other course of dealing between the
Company and the holder of any Stock or any delay in exercising any rights
hereunder or under the Articles of Incorporation shall operate as a waiver of
any rights of any such holders. For purposes of this Agreement, shares of Stock
held by the Company or any Subsidiaries shall not be deemed to be outstanding.
6.5 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Investor or on its behalf.
6.6 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Investor's benefit as a purchaser
or holder of Investor Stock are also for the benefit of, and enforceable by, any
subsequent holder of such Investor Stock. The rights and obligations of GTCR V
under this agreement and the agreements contemplated hereby may be assigned by
GTCR V at any time, in whole or in part, to any investment fund managed by
Golder, Thoma, Cressey, Rauner, Inc., or any successor thereto.
6.7 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
6.8 Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
6.9 Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
Section of this Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
6.10 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Florida.
6.11 Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and posted prepaid. Such notices, demands and other
communications shall be sent to each Investor at the address indicated on
Exhibit A and to the Company at the address of its corporate headquarters or to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
4
<PAGE>
6.12 Indemnification. In consideration of the execution and delivery
---------------
of this Agreement by the Investor and the purchase of Convertible Preferred
hereunder, the Company will indemnify and hold harmless each Investor and each
of its present and former respective officers, directors, members, employees,
partners and agents and Affiliates of each of the foregoing (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
losses, costs, liabilities, damages, expenses (irrespective of whether such
Indemnitee is a party to the action for which indemnification hereunder is
sought), including attorney fees and disbursements (collectively, the
"Indemnified Liabilities") incurred by any Indemnitee arising out of or relating
to the breach of the representations and warranties contained in Section 5.4
hereof (including, without limitation, economic losses in its capacity as a
shareholder of the Company). If and to the extent that the covenant included in
this Paragraph 6.12 may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ANSWERTHINK CONSULTING GROUP, INC.
By:/s/ Ted A. Fernandez
--------------------------------------
Ted A. Fernandez
Address:
INVESTORS:
GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P.
By: GTCRV, L.P.
Its: General Partner
By: Golder Thoma, Cressey, Rauner, Inc.
Its: General Partner
By:/s/ William C. Kessinger
--------------------------------------
a Principal
GTCR ASSOCIATES V
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: Managing General Partner
By:/s/ William C. Kessinger
--------------------------------------
a Principal
MG CAPITAL PARTNERS II, LP
By:[Illegible Signature]
--------------------------------------
Its:Manager/Principal
MILLER CAPITAL MANAGEMENT, INC.
By:/s/ Edmund R. Miller
--------------------------------------
General Partner
6
<PAGE>
Exhibit 10.3
PURCHASE AGREEMENT
------------------
THIS AGREEMENT is made as of March 5, 1998, among AnswerThink
Consulting Group, Inc., a Florida corporation (the "COMPANY"), and FSC Corp., a
Massachusetts corporation (the "PURCHASER"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 6 hereof.
The parties hereto agree as follows:
SECTION 1. AUTHORIZATION AND CLOSING.
-------------------------
1A. AUTHORIZATION OF THE STOCK. The Company shall authorize the
--------------------------
issuance and sale to the Purchaser of up to 33,333 shares of its Class B
Convertible Preferred Stock, par value $.001 per share (the "CLASS B CONVERTIBLE
PREFERRED") having the rights and preferences set forth in Exhibit A attached
---------
hereto.
1B. PURCHASE AND SALE OF THE CLASS B CONVERTIBLE PREFERRED. At the
------------------------------------------------------
Closing (as defined in subparagraph 1C below), the Company shall sell to the
Purchaser and, subject to the terms and conditions set forth herein, the
Purchaser shall purchase from the Company, up to 33,333 shares of the Class B
Convertible Preferred at a price of $15.00 per share.
1C. THE CLOSING. The closing of the purchase and sale of the Class B
-----------
Convertible Preferred to be purchased pursuant to paragraph 1B (the "CLOSING")
shall take place at the offices of Hogan & Hartson, LLP on March 5, 1998, or at
such other place or on such other date as may be mutually agreeable to the
Company and the Purchaser, or by mail or telecopy. At the Closing, the Company
shall deliver to the Purchaser stock certificates evidencing the Class B
Convertible Preferred to be purchased by the Purchaser, registered in such
Purchaser's name, upon payment of the purchase price thereof by wire transfer of
immediately available funds to such account as designated by the Company in the
amount required to be paid pursuant to paragraph 1B.
SECTION 2. CONDITIONS OF THE PURCHASER'S OBLIGATION AT THE CLOSING.
-------------------------------------------------------
The obligation of the Purchaser to purchase and pay for the Class B Convertible
Preferred at the Closing is subject to the satisfaction as of the Closing of the
following conditions:
2A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
-----------------------------------------
and warranties contained in Section 5 hereof shall be true and correct at and as
of the Closing as though then made, except to the extent of
<PAGE>
changes caused by the transactions expressly contemplated herein and except as
disclosed in the Loan Agreement, and the Company shall have performed in all
material respects all of the covenants required to be performed by it hereunder
prior to the Closing.
2B. RESTATED ARTICLES OF INCORPORATION. The Company's amended and
----------------------------------
restated articles of incorporation (the "RESTATED ARTICLES OF INCORPORATION")
shall be in form and substance substantially similar to Exhibit A hereto, shall
---------
not have been amended or modified and shall be in full force and effect under
the laws of Florida as of the Closing. The Company's by-laws (the "BY-LAWS")
shall be as set forth in Exhibit B hereto, shall not have been amended or
---------
modified and shall be in full force and effect under the laws of Florida as of
the Closing.
2C. SHAREHOLDERS AGREEMENT. The Company and the Purchaser shall have
----------------------
entered into a joinder to the Company's shareholders agreement dated April 23,
1997 and amended February 24, 1998 by and among the Company and the shareholders
of the Company (the "SHAREHOLDERS AGREEMENT"), such joinder to Shareholders
Agreement in form and substance as attached to Exhibit C attached hereto (the
---------
"JOINDER TO SHAREHOLDERS AGREEMENT"), and the Joinder to the Shareholders
Agreement shall be in full force and effect as of the Closing.
2D. REGISTRATION AGREEMENT. The Company and the Purchaser and
----------------------
certain of the shareholders of the Company shall have entered into a joinder to
that certain registration agreement dated April 23, 1997 by and among the
Company and certain other shareholders of the Company who are party thereto (the
"REGISTRATION AGREEMENT"), such joinder to the Registration Agreement in form
and substance substantially similar to Exhibit D attached hereto (the "JOINDER
---------
TO REGISTRATION AGREEMENT"), and the Joinder to the Registration Agreement shall
be in full force and effect as of the Closing.
2E WAIVER OF PREEMPTIVE RIGHTS. The parties which have preemptive
---------------------------
rights to purchase shares of capital stock of the Company in connection with the
transactions contemplated by this Agreement shall have entered into a waiver
(the "WAIVER"), in form and substance satisfactory to the Purchaser, in which
such parties shall waive such preemptive rights in connection with the sale of
Class B Convertible Preferred hereunder.
2F. CLOSING DOCUMENTS. The Company shall have delivered to each
-----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1 and paragraphs 2A
through 2E, inclusive, have been fully satisfied;
-2-
<PAGE>
(ii) (a) certified copies of the resolutions duly adopted by the
Board authorizing the execution, delivery and performance of this
Agreement, the Joinder to Shareholders Agreement, the Joinder to
Registration Agreement, and each of the other agreements contemplated
hereby, the filing of the Restated Articles of Incorporation referred to in
paragraph 2B, the issuance and sale of the Class B Convertible Preferred
and the consummation of all other transactions contemplated by this
Agreement, and (b) the resolutions duly adopted by the Company's
shareholders adopting the Restated Articles of Incorporation referred to in
paragraph 2B;
(iii) certified copies of the Restated Articles of Incorporation
and the By-laws, each as in effect at the Closing;
(iv) an opinion of Hogan & Hartson, LLP that the preferred stock
issued by the Company pursuant to the terms of this Agreement is validly
issued, fully paid and non-assessable; and
(v) such other documents relating to the transactions
contemplated by this Agreement as the Purchaser or its counsel may
reasonably request.
2G. FEES AND EXPENSES. The Company shall have reimbursed the
-----------------
Purchaser for the fees and expenss as set forth in Section 7A.
----------
2H. COMPLIANCE WITH APPLICABLE LAWS. The purchase of Class B
-------------------------------
Convertible Preferred by the Purchaser hereunder shall not be prohibited by any
applicable law or governmental regulation, shall not subject the Purchaser to
any penalty, liability or, in the Purchaser's sole judgment, other onerous
conditions under or pursuant to any applicable law or governmental regulation,
and shall be permitted by laws and regulations of the jurisdictions to which the
Purchaser is subject.
2I. SALE OF CLASS B CONVERTIBLE PREFERRED TO THE PURCHASER. The
------------------------------------------------------
Company shall have simultaneously sold to the Purchaser the Class B Convertible
Preferred to be purchased by the Purchaser hereunder at the Closing and shall
have received payment therefor in full.
2J. WAIVER. Any condition specified in this Section 2 may be waived
------
with respect to the Purchaser only if such waiver is set forth in a writing
executed by the Purchaser.
SECTION 3. COVENANTS.
---------
-3-
<PAGE>
3A. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
------------------------------------------
deliver to the Purchaser (so long as the Purchaser holds at least 1% of the
Investor Preferred or the Investor Common):
(i) as soon as available but in any event within 30 days after
the end of each quarterly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarter, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarterly period, all prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal year-
end adjustments;
(ii) accompanying the financial statements referred to in
subparagraph (i), an Officer's Certificate stating that neither the Company
nor any of its Subsidiaries is in default under any of its other material
agreements or, if any such default exists, specifying the nature and period
of existence thereof and what actions the Company and its Subsidiaries have
taken and propose to take with respect thereto;
(iii) within 120 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
annual budget and to the preceding fiscal year, all prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by (a) with respect to the consolidated portions of such
statements (except with respect to budget data), an opinion containing no
exceptions or qualifications (except for qualifications regarding specified
contingent liabilities) of an independent accounting firm acceptable to the
holders of a majority of each of the Investor Preferred and the Investor
Common, and (b) a copy of such firm's annual management letter to the
Board;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the
Company by its independent accountants (and not otherwise contained in
other materials provided hereunder);
(v) at least 30 days prior to the beginning of each fiscal
year, an annual budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of
income
-4-
<PAGE>
and cash flows), and promptly upon preparation thereof any other
significant budgets prepared by the Company and any revisions of such
annual or other budgets, and within 30 days after any monthly period in
which there is a material adverse deviation from the annual budget, an
Officer's Certificate explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto;
(vi) promptly (but in any event within five business days) after
the discovery or receipt of notice of any default under any material
agreement to which it or any of its Subsidiaries is a party or any other
event or circumstance affecting the Company or any Subsidiary which is
reasonably likely to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of
the Company or any Subsidiary (including the filing of any material
litigation against the Company or any Subsidiary or the existence of any
material dispute with any Person which involves a reasonable likelihood of
such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto; and
(vii) reasonable promptness, such other information and financial
data concerning the Company and its Subsidiaries as any Person entitled to
receive information under this paragraph 3A may reasonably request.
Each of the financial statements referred to in subparagraph (i) and (iii) shall
fairly present the consolidated financial position of the Company and its
Subsidiaries in all material respects as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end audit adjustments (none of which would, alone or
in the aggregate, be materially adverse to the financial condition, operating
results, assets, operations or business prospects of the Company and its
Subsidiaries taken as a whole). Nothwithstanding the foregoing, the Company
shall not be required to provide any financial information to the Purchaser in
accordance with this Paragraph 3A at any time in which the Company is required
to provide financial information to an Affiliate of the Purchaser pursuant to
the terms of the Loan Agreement.
3B. INSPECTION OF PROPERTY. The Company shall permit any
----------------------
representatives designated by any holder of at least 15% of the outstanding
Investor Preferred or at least 15% of the outstanding Investor Common, upon
reasonable notice and during normal business hours and such other times as any
such holder may reasonably request, to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the corporate and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such corporations with the
-5-
<PAGE>
directors, officers, key employees and independent accountants of the Company
and its Subsidiaries; provided that the Company shall have the right to have its
chief financial officer present at any meetings with the Company's independent
accountants; and provided further that, if requested by the Company, such
representatives shall first enter into a confidentiality and nondisclosure
agreement with the Company, in form and substance reasonably satisfactory to the
Company. Notwithstanding the foregoing, the Company may exclude such
representatives from receiving access to any information to the extent that the
Company has been advised by its independent legal counsel that the disclosure to
such representatives of such information would cause the Company or any
Subsidiary to waive its attorney-client privilege with respect to any such
information which is material to the Company or any of its Subsidiaries.
3C. AFFIRMATIVE COVENANTS. So long as the Purchaser holds any Stock,
---------------------
the Company shall, and shall cause each Subsidiary to:
(i) comply with all applicable laws, rules and regulations of
all governmental authorities, the violation of which would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company
and its Subsidiaries taken as a whole, and pay and discharge when payable
all taxes, assessments and governmental charges (except to the extent the
same are being contested in good faith and adequate reserves therefor have
been established);
(ii) enter into and maintain appropriate nondisclosure and
noncompete agreements with its key employees; and
(iii) take, or omit to take, all such actions as are necessary
so that the representation and warranty contained in Section 5D shall
continue to remain true and correct at all times as if such representation
and warranty were remade every day.
3D. CURRENT PUBLIC INFORMATION. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and, so
long as such action is not unduly burdensome on the employees of the Company,
shall take such further action as any holder of Restricted Securities may
reasonably request to comply with the provisions of (i) Rule 144 adopted by the
Securities and Exchange Commission under the Securities Act (as such rule may be
amended from time to time) or any similar rule or regulation hereafter adopted
by the Securities and Exchange Commission or (ii) General Instructions I of Form
S-2 or S-3 or any
-6-
<PAGE>
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Restricted
Securities a written statement as to whether it has complied with such
requirements.
3E. LIMITED PREEMPTIVE RIGHTS.
-------------------------
(i) Except for the issuance of Stock (a) to executives of the
Company pursuant to their management agreements (the "MANAGEMENT
AGREEMENTS"), (b) in connection with acquisitions exempted herefrom by the
Board, (c) to employees pursuant to stock option plans, stock ownership
plans and other employment arrangements approved by the Board, or (d)
pursuant to a public offering registered under the Securities Act, if the
Company at any time after the Closing authorizes the issuance or sale of
any shares of Stock or any securities containing options or rights to
acquire any shares of Stock (other than as a dividend on the outstanding
Stock), the Company shall first offer to sell to each holder of Investor
Stock a portion of such stock or securities equal to the quotient
determined by dividing (1) the number of shares of Underlying Common Stock
held by such holder by (2) the total number of shares of Underlying Common
Stock immediately prior to such issuance. Each holder of Investor Stock
shall be entitled to purchase all or any portion of such stock or
securities at the most favorable price and on the most favorable terms as
such stock or securities are to be offered to any other Persons.
(ii) in order to exercise its purchase rights hereunder, a
holder of Investor Stock must within 15 days after receipt of written
notice from the Company describing in reasonable detail the stock or
securities being offered, the purchase price thereof, the payment terms and
such holder's percentage allotment deliver a written notice to the Company
describing its election hereunder. If all of the stock and securities
offered to the holders of Investor Stock is not fully subscribed by such
holders, the remaining stock and securities shall be reoffered by the
Company to the holders purchasing their full allotment upon the terms set
forth in this paragraph, except that such holders must exercise their
purchase rights within five days after receipt of such reoffer.
(iii) Upon the expiration of the offering periods described
above, the Company shall be entitled to sell such stock or securities which
the holders of Investor Stock have not elected to purchase during the 90
days following such expiration on terms and conditions no more favorable to
the purchasers thereof than those offered to such holders. Any stock or
securities offered or sold by the Company after such 90-day period must be
reoffered to the holders of Investor Stock pursuant to the terms of this
paragraph.
-7-
<PAGE>
(iv) Nothing contained in this paragraph 3E shall be deemed to
amend, modify or limit in any way the restrictions on the issuance of
shares of stock set forth in this Agreement, in the Shareholders Agreement
or in any other agreement to which the Company is bound.
3F. PUBLIC DISCLOSURES. The Company shall not, nor shall it permit
------------------
any Subsidiary to, disclose the Purchaser's name or identity as an investor in
the Company in any press release or other public announcement or in any document
or material filed with any governmental entity, without the prior written
consent of the Purchaser, unless such disclosure is required by applicable law
or governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure the Company shall give written notice
to the Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit the Purchaser to review and comment upon the form
and substance of such disclosure.
SECTION 4. TRANSFER OF RESTRICTED SECURITIES.
---------------------------------
(i) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule
144A of the Securities and Exchange Commission (or any similar rule or
rules then in force) if such rule or rules are available and (c) subject to
the conditions specified in subparagraph (ii) below, any other legally
available means of transfer.
(ii) In connection with the transfer of any Restricted
Securities (other than a transfer described in subparagraph 4(i)(a) or (b)
above or a transfer to an Affiliate of the holder described in Section 7F
herein), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together
with an opinion of counsel acceptable to the Company to the effect that
such transfer of Restricted Securities may be effected without registration
of such Restricted Securities under the Securities Act. In addition, if the
holder of the Restricted Securities delivers to the Company an opinion of
such counsel that no subsequent transfer of such Restricted Securities
shall require registration under the Securities Act, the Company shall
promptly upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act legend set forth
in paragraph 7C. If the Company is not required to deliver new certificates
for such Restricted Securities not bearing such legend, the holder thereof
shall not transfer the same until the prospective transferee has confirmed
to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7C.
-8-
<PAGE>
(iii) Upon the request of the Purchaser, the Company shall
promptly supply to the Purchaser or its prospective transferees all
information regarding the Company required to be delivered in connection
with a transfer pursuant to Rule 144A of the Securities and Exchange
Commission.
(iv) Notwithstanding anything contained herein to the contrary,
except for any transfer pursuant to Section 4(i)(a) or (b) or a transfer to
an Affiliate of the holder described in Section 7F herein, if any holder of
Investor Stock (the "TRANSFERRING PURCHASER") desires to transfer all or a
portion of its Restricted Securities, the Transferring Purchaser shall
deliver a written notice (the "OFFER NOTICE") to the Company, and all of
the other holders of Investor Stock (the "OTHER HOLDERS"). The Offer Notice
shall disclose in reasonable detail the proposed number of Restricted
Securities to be transferred and the proposed sale price, terms and
conditions of the transfer. Each Other Holder may elect to purchase all or
any portion of the Restricted Securities specified in the Offer Notice at
the price and on the terms specified therein by delivering written notice
(the "REPLY NOTICE") of such election to the Company and each Other Holder
as soon as practical but in any event within 20 days after the delivery of
the Offer Notice. If the Other Holders elect to purchase an aggregate
number of any type of Restricted Securities greater then the number of such
type of Restricted Securities specified in the Offer Notice, such type of
Restricted Securities shall be allocated among the Other Holders pro rata
based upon the number of shares of Underlying Common Stock owned by each
Other Holder desiring to acquire such type of Restricted Securities
pursuant to this Section 4(iv) (but in no event shall the pro rata share of
any such Other Holder result in such Other Holder acquiring a number of any
type of Restricted Securities in excess of the number of such Restricted
Securities requested by such Other Holder). If the Other Holders have
elected to purchase all or any portion of the Restricted Securities from
the Transferring Purchaser, the transfer of such shares shall be
consummated as soon as practical after the delivery of the last Reply
Notice, but in any event within 40 days after the delivery of either such
notice. To the extent that the Other Holders have not elected to purchase
all of the Restricted Securities being offered, the Transferring Purchaser
may, within 90 days after a delivery of the Offer Notice, transfer such
Restricted Securities to one or more third parties at a price no less than
the price per share specified in the Reply Notice and on other terms no
more favorable to the transferees than offered to the Other Holders. The
purchase price specified in any Offer Notice shall be payable solely in
cash at the closing of the transaction or, if mutually agreed upon by the
parties, in installments over time.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a
---------------------------------------------
material inducement to the Purchaser to enter into this Agreement and
-9-
<PAGE>
purchase the Stock, the Company hereby represents and warrants to the Purchaser
that:
5A. ORGANIZATION AND CORPORATE POWER. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of Florida,
and is qualified to do business in every jurisdiction in which the failure to so
qualify might reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the Restated
Articles of Incorporation and By-laws being furnished to the Purchaser's counsel
on or prior to the Closing reflect all amendments made thereto at any time on or
prior to the Closing and are correct and complete.
5B. CAPITAL STOCK AND RELATED MATTERS.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 107,300,000 shares of Stock,
of which 7,200,000 shares shall be designated as Class A Convertible
Preferred, par value $.001 per share (the "CLASS A CONVERTIBLE PREFERRED"
and collectively with the Class B Convertible Preferred, the "CONVERTIBLE
PREFERRED"), 100,000 shall be designated as Class B Convertible Preferred,
and 100,000,000 shares shall be designated as Common Stock, par value $.001
per share (the "COMMON STOCK"). Each of the outstanding shares of Class A
Convertible Preferred and each of the shares of Class B Convertible
Preferred is convertible into four shares of Common Stock and as of
February 13, 1998, there were 1,797,942 shares of Common Stock that are
subject to stock options granted under the Company's 1997 Stock Option
Plan. As of the Closing, except as contemplated hereby, and as disclosed
in the Loan Agreement, the Company shall not have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock
or containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable
for its capital stock or any stock appreciation rights or phantom stock
plans other than pursuant to and as contemplated by this Agreement and the
Management Agreements, as set forth on the Capitalization Schedule attached
hereto as Schedule 5B hereto and in connection with additional options
-----------
which were issued (and subsequently exercised) to Golder, Thoma, Cressey,
Rauner Fund V, L.P. or its affiliates and MG Capital Partners II, L.P. or
its affiliates. As of the Closing, the Company shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
-10-
<PAGE>
retire any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except pursuant to this Agreement, the
Restated Articles of Incorporation and the Management Agreements. As of
the Closing, all of the outstanding shares of the Company's capital stock
shall be validly issued, fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, contractual shareholders preemptive rights or rights of refusal
with respect to the issuance of the Stock hereunder, except as provided
herein and as disclosed in the Loan Agreement. Based in part on the
investment representations of the Purchaser in paragraph 7C hereof and of
the employees of the Company in their employment agreements, the Company
has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital stock,
and the offer, sale and issuance of the Stock hereunder do not and will not
require registration under the Securities Act or any applicable state
securities laws. To the best of the Company's knowledge, there are no
agreements between the Company's shareholders with respect to the voting or
transfer of the Company's capital stock or with respect to any other aspect
of the Company's affairs, except for the Shareholders Agreement, restricted
securities agreements with the executives of the Company, restricted stock
agreements and option agreements with other employees of the Company, other
arrangements with certain equity holders of the Company, and the Management
Agreements.
5C. SUBSIDIARIES; INVESTMENTS. Except as disclosed in the Loan
-------------------------
Agreement (including, without limitation, The Hackett Group, Inc. and Delphi
Partners, Inc.), the Company does not own or hold any shares of stock or any
other security or interest in any other Person or any rights to acquire any such
security or interest, and the Company has never had any Subsidiary, except for
shares of stock or other securities or interests in any Person and Subsidiaries
acquired after November 7, 1997, in each case with the approval of the Board.
5D. AUTHORIZATION; NO BREACH. The execution, delivery and
------------------------
performance of this Agreement, the Joinder to Shareholders Agreement, the
Joinder to Registration Agreement and all other agreements contemplated hereby
to which the Company is a party and the filing of the Restated Articles of
Incorporation referred to in paragraph 2B have been duly authorized by the
Company. This Agreement, the Joinder to Shareholders Agreement, the Joinder to
Registration Agreement, the Restated Articles of Incorporation and all other
agreements contemplated hereby each constitutes a valid and binding obligation
of the Company, enforceable in accordance with its terms. The execution and
delivery by the Company of this Agreement, the Joinder to Shareholders
Agreement, the Joinder to Registration Agreement and all other agreements
contemplated hereby to which the Company is a party, the filing of the Restated
Articles of Incorporation
-11-
<PAGE>
referred to in paragraph 2B, and the operation by the Company of its business
and the fulfillment of and compliance with the respective terms hereof and
thereof by the Company do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's capital stock or assets pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body pursuant to, the Restated Articles of Incorporation or
bylaws of the Company, or any law, statute, rule or regulation to which the
Company is subject, or any agreement, instrument, order, judgment or decree to
which the Company is a party or by which it or any of the Executives is bound,
including, without limitation, to the Company's knowledge, any agreement,
document or instrument with KPMG Peat Marwick.
5E. CONDUCT OF BUSINESS; LIABILITIES. The Company and its
--------------------------------
Subsidiaries do not have any material obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known to the
Company or any Subsidiary, whether due or to become due and regardless of when
asserted) other than: (i) liabilities set forth on most recent balance sheet
(including any notes thereof); (ii) liabilities and obligations which have
arisen after the date of such balance sheet in the ordinary course of business
(none of which is a liability resulting from breach of contract, breach of
warranty, torn, infringement, claim or lawsuit), (iii) liabilities and
obligations disclosed in the Loan Agreement and (iv) liabilities and obligations
which have been disclosed to and approved by the Board.
5F. TAX MATTERS. The Company has filed all tax returns (if any)
-----------
which it is required to file under applicable laws and regulations; all such
returns are complete and correct in all material respects; the Company has paid
all taxes due and owing by it and has withheld and paid over all taxes which it
is obligated to withhold from amounts paid or owing to any employee,
shareholder, creditor or other third party; the Company has not waived any
statute of limitations with respect to taxes or agreed to any extension of time
with respect to a tax assessment or deficiency; the assessment of any additional
taxes for periods for which returns have been filed is not expected; no foreign,
federal, state or local tax audits are pending or being conducted with respect
to the Company, no information related to tax matters has been requested by any
foreign, federal, state or local taxing authority and no notice indicating an
intent to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority; and there are no
unresolved questions or claims concerning the Company's tax liability. The
Company has not made an election under (S)341 (f) of the IRC.
5G. LITIGATION, ETC. Except as disclosed in the Loan Agreement and
----------------
except for those other actions described in Schedule 5G, there are no actions,
-----------
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<PAGE>
suits, proceedings, orders, investigations or claims pending or, to the best of
the Company's knowledge, threatened against or affecting the Company (or to the
best of the Company's knowledge, pending or threatened against or affecting any
of the officers, directors or employees of the Company with respect to their
businesses or proposed business activities) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitations, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement). The Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of the Company's
knowledge, any governmental investigations or inquiries; and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. The Company is
not subject to any judgment, order or decree of any court or other governmental
agency.
5H. BROKERAGE. There are no claims for brokerage commissions,
---------
finders, fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company. The Company shall pay, and hold the Purchaser harmless
against, any liability, loss or expense (including, without limitation,
attorneys, fees and out-of-pocket expenses) arising in connection with any such
claim.
5I. GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
--------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby.
5J. ERISA. The Company does not maintain or have any obligation to
-----
contribute to or any other liability with respect to or under (including but not
limited to current or potential withdrawal liability), nor has it ever
maintained or had any obligation to contribute to or any other liability with
respect to or under, (i) any plan or arrangement whether or not terminated,
which provides medical, health, life insurance or other welfare type benefits
for current or future retired or terminated employees (except for limited
continued medical benefit coverage required to be provided under Section 4980B
of the IRC or as required under applicable state law), (ii) any "multi-employer
plan" (as defined in Section 3(37) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), (iii) any employee plan which is a tax-
qualified "defined benefit plan" (as defined in Section 3(35) of ERISA),
whether or not terminated, (iv) any employee plan which is a tax-qualified
"defined contribution plan" (as defined in Section 3(34) of ERISA), whether or
not terminated, or (v) any other plan or arrangement providing benefits to
current or former employees, including any bonus plan, plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated, in each case except for such plans or
arrangements
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<PAGE>
which have been approved by the Board. For purposes of this subparagraph 5J, the
term "COMPANY" includes all organizations under common control with the Company
pursuant to Section 414(b) or (c) of the IRC.
5K. COMPLIANCE WITH LAWS. The Company has not violated any law or
--------------------
any governmental regulation or requirement which violation would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company, and
the Company has not received notice of any such violation. The Company is not
subject to any clean up liability, and the Company has no reason to believe it
may become subject to any clean up liability, under any federal, state or local
environmental law, rule or regulation.
5L. DISCLOSURE. Neither this Agreement nor any of the schedules,
----------
attachments, written statements, documents, certificates or other items prepared
or supplied to the Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby or the Loan Agreement contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. To the knowledge of the
Company, there is no fact which the Company has not disclosed to the Purchaser
in writing and of which any of its officers, directors or executive employees is
aware and which has had or might reasonably be anticipated to have a material
adverse effect upon the existing or expected financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the Company or any of its Subsidiaries.
5M. CLOSING DATE. The representations and warranties of the Company
------------
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or under the Loan
Agreement or in any writing delivered by, or on behalf of, the Company to the
Purchaser shall be true and correct in all material respects on the date of the
Closing as though then made, except as affected by the transactions expressly
contemplated by this Agreement and except as disclosed and effected by the Loan
Agreement.
SECTION 6. DEFINITIONS. For the purposes of this Agreement, the
-----------
following terms have the meanings set forth below:
"AFFILIATE" of any particular person or entity means any other person
or entity controlling, controlled by or under common control with such
particular person or entity.
"INDEBTEDNESS" means all indebtedness for borrowed money (including
purchase money obligations) maturing one year or more from the date of creation
or incurrence thereof or renewable or extendible at the option of the debtor
-14-
<PAGE>
to a date one year or more from the date of creation or incurrence thereof, all
indebtedness under revolving credit arrangements extending over a year or more,
all capitalized lease obligations and all guarantees of any of the foregoing.
"INVESTOR COMMON" means (i) the Common Stock issued upon conversion of
any Investor Preferred and (ii) any Common Stock issued or issuable with respect
to the Common Stock referred to in clause (i) above by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular shares of
Investor Common, such shares shall cease to be Investor Common when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (b) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar rule then in force).
"INVESTOR PREFERRED" means (i) any Convertible Preferred issued
hereunder and (ii) any Convertible Preferred issued or issuable with respect to
the Class A Convertible Preferred or the Class B Convertible Preferred by way of
stock dividends or stock splits or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares of Investor Preferred, such shares shall cease to be Investor
Preferred when they have been (i) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them
or (ii) distributed to the public through a broker, dealer or market maker
pursuant to Rule 144 under the Securities Act (or any similar rule then in
force).
"INVESTOR STOCK" means the Investor Preferred and the Investor Common.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"LOAN AGREEMENT" means that certain Loan Agreement between the Company
and an Affiliate of the Purchaser dated November 7, 1997.
"OFFICER'S CERTIFICATE" means a certificate signed by the Company's
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
-15-
<PAGE>
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"RESTRICTED SECURITIES" means (i) the Convertible Preferred issued
hereunder, (ii) any Convertible Preferred issued or issuable with respect to the
Class A Convertible Preferred or the Class B Convertible Preferred referred to
in clause (i) above by way of stock dividends or stock splits or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, (iii) the Common Stock issued upon conversion of any Convertible
Preferred referred to in clauses (i) or (ii) above, and (iv) any Common Stock
issued or issuable with respect to the Common Stock referred to in clause (iii)
above by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7C have been delivered by the
Company in accordance with paragraph 4(ii). Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7C.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.
"STOCK" means the Convertible Preferred and the Common Stock.
"SUBSIDIARY" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
"UNDERLYING COMMON STOCK" means, at any time, the sum of (i) the
number of shares Common Stock of the Company outstanding as of such time plus
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<PAGE>
(ii) the number of shares of Common Stock of the Company issuable upon the
exercise or conversion of the Convertible Preferred at such time.
7. MISCELLANEOUS.
-------------
7A. EXPENSES. The Company agrees to pay, and hold the Purchaser and
--------
all holders of Investor Stock harmless against liability for the payment of, (i)
the fees and expenses of their counsel arising in connection with their due
diligence investigation of the Company, the negotiation and execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement (ii) the fees and expenses incurred with respect to any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement, the Joinder to Shareholders Agreement, the Joinder to Registration
Agreement, the other agreements contemplated hereby and the Restated Articles of
Incorporation, (iii) stamp and other taxes which may be payable in respect of
the execution and delivery of this Agreement or the issuance, delivery or
acquisition of any shares of Stock purchased hereunder, and (iv) the fees and
expenses incurred with respect to the interpretation or enforcement of the
rights granted under this Agreement, the Joinder to Shareholders Agreement, the
Joinder to Registration Agreement, the other agreements contemplated hereby and
the Restated Articles of Incorporation and the By-laws.
7B. REMEDIES. Each holder of Investor Stock shall have all rights
--------
and remedies set forth in this Agreement and the Restated Articles of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
7C. PURCHASER'S INVESTMENT REPRESENTATION. By its acquisition
-------------------------------------
thereof, each holder of Restricted Securities hereby represents that (i) the
Restricted Securities to be acquired by such holder pursuant to this Agreement
will be acquired for such holder's own account and not with a view to, or
intention of, distribution thereof in violation of the Securities Act, or any
applicable state securities laws, and the Restricted Securities will not be
disposed of in contravention of the Securities Act or any applicable state
securities laws; (ii) such holder is an "accredited investor" and a
sophisticated investor for purposes of applicable foreign and U.S. federal and
state securities laws and regulations and is able to evaluate the risks and
benefits of the investment in the Restricted Securities; (iii) such holder is
able to bear the economic risk of his investment in the Restricted Securities
for an indefinite period of time because the Restricted Securities have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption
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<PAGE>
from such registration is available; (iv) such holder has had an opportunity to
ask questions and receive answers concerning the terms and conditions of the
offering of Restricted Securities and has had full access to such other
information concerning the Company as it has requested; and (v) this Agreement
and each of the other agreements contemplated hereby constitutes (or will
constitute) the legal, valid and binding obligation of such holder, enforceable
in accordance with its terms, and the execution, delivery and performance of
this Agreement and such other agreements by such holder does not and will not
conflict with, violate or cause a breach of any agreement, contract or
instrument to which such holder is a party or any judgment, order or decree to
which such holder is subject. Notwithstanding the foregoing, nothing contained
herein shall prevent such holder and subsequent holders of Restricted Securities
from transferring such securities in compliance with the provisions of Section 4
hereof. Each certificate for Restricted Securities shall be imprinted with a
legend in substantially the following form:
"The securities represented by this certificate were
originally issued on March 5, 1998, and have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate
is subject to the conditions specified in the Purchase
Agreement, dated as of March 5, 1998, between the issuer
(the "Company") and a certain investor, and the Company
reserves the right to refuse the transfer of such securities
until such conditions have been fulfilled with respect to
such transfer. A copy of such conditions shall be furnished
by the Company to the holder hereof upon written request and
without charge."
7D. CONSENT TO AMENDMENTS. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of 70% of the Investor Stock. No other course of dealing between the
Company and the holder of any Stock or any delay in exercising any rights
hereunder or under the Restated Articles of Incorporation shall operate as a
waiver of any rights of any such holders. For purposes of this Agreement,
shares of Stock held by the Company or any Subsidiaries shall not be deemed to
be outstanding.
7E. SURVIVAL OF REPRESENTATION AND WARRANTIES. All representations
-----------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Purchaser or on its behalf.
-18-
<PAGE>
7F. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the Purchaser's benefit as a
purchaser or holder of Stock are also for the benefit of, and enforceable by,
any subsequent holder of such Stock. The rights and obligations of the
Purchaser under this Agreement and the agreements contemplated hereby may be
assigned by the Purchaser at any time, in whole or in part, to any Affiliate of
the Purchaser.
7G. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Where any accounting
----------------------------------------
determination or calculation is required to be made under this Agreement or the
exhibits hereto, such determination or calculation (unless otherwise provided)
shall be made in accordance with generally accepted accounting principles,
consistently applied, except that if because of a change in generally accepted
accounting principles the Company would have to alter a previously utilized
accounting method or policy in order to remain in compliance with generally
accepted accounting principles, such determination or calculation shall continue
to be made in accordance with the Company's previous accounting methods and
policies.
7H. SEVERABILITY. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7I. COUNTERPARTS FACSIMILE. This Agreement may be executed
----------------------
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement. Signatures transmitted by
facsimile shall be binding as evidence of a party's agreement to be bound by the
terms of this Agreement.
7J. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
Section of this Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
7K. GOVERNING LAW. The corporate law of Florida shall govern all
-------------
issues concerning the relative rights of the Company and its shareholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by and
construed in
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<PAGE>
accordance with the internal laws of the Commonwealth of Massachusetts, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the Commonwealth of Massachusetts or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the Commonwealth of
Massachusetts.
7L. NOTICES. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shell be sent to the Purchaser at 75 Federal Street, Boston,
Massachusetts 02110 Attention: Mary Josephs Reilly or to such other the address
or to the attention of such other person as the Purchaser has specified by prior
written notice to the sending party and to the Company at 1001 Brickell Bay
Drive, Suite 3000, Miami, Florida 33131 Attention: President or to such other
address or to the attention of such other person as the Company has specified by
prior written notice to the sending party.
7M. INDEMNIFICATION. In consideration of the execution and delivery
---------------
of this Agreement by the Purchaser and the purchase of Convertible Preferred
hereunder, the Company will indemnify and hold harmless the Purchaser and each
of its present and former respective officers, directors, members, employees,
partners and agents and Affiliates of each of the foregoing (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
losses, costs, liabilities, damages, expenses (irrespective of whether such
Indemnitee is a party to the action for which indemnification hereunder is
sought), including attorney's fees and disbursements (collectively, the
"INDEMNIFIED LIABILITIES") by any Indemnitee arising out of or relating to the
matters referred to in this Agreement or the transactions contemplated hereby,
or any investigation, litigation, or proceeding related to any such matters.
Notwithstanding the foregoing, "INDEMNIFIED LIABILITIES" will not include, as to
Purchaser, its agents or Affiliates, any liabilities to the extent arising by
reason of the Purchaser's (or its agents or Affiliate's) breach of the Loan
agreement with the Company. If and to the extent that the covenant included in
this Paragraph 7M may be unenforceable for any reason, the Company hereby agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
ANSWERTHINK CONSULTING GROUP, INC.
By: [Signature Appears Here]
------------------------------
Name:_________________________
Title:________________________
FSC CORP.
By: [Signature Appears Here]
------------------------------
Name:_________________________
Title:________________________
The Exhibits and Schedules to this Purchase Agreement are not included with this
Registration Statement on Form S-1. AnswerThink will provide these exhibits and
schedules upon the request of the Securites and Exchange Commission.
-21-
<PAGE>
Exhibit 10.6
REVOLVING CREDIT AGREEMENT
--------------------------
Dated as of November 7, 1997
among
ANSWERTHINK CONSULTING GROUP, INC.
BANKBOSTON, N.A. and the other lending institutions
set forth on Schedule 1 hereto
and
BANKBOSTON, N.A., AS AGENT
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION................................ 1
1.1. Definitions..................................................... 1
1.2. Rules of Interpretation......................................... 15
2. THE REVOLVING CREDIT FACILITY.......................................... 16
2.1. Commitment To Lend.............................................. 16
2.1.1. Commitment to Lend...................................... 16
2.1.2. Increase in Commitment and Total Commitment............. 16
2.2. Commitment Fee.................................................. 17
2.3. Reduction of Total Commitment................................... 17
2.4. The Revolving Credit Notes...................................... 17
2.5. Interest on Revolving Credit Loans.............................. 18
2.6. Requests for Revolving Credit Loans............................. 18
2.7. Conversion Options.............................................. 18
2.7.1. Conversion to Different Type of Revolving Credit Loan... 18
2.7.2. Continuation of Type of Revolving Credit Loan........... 19
2.7.3. LIBOR Rate Loans........................................ 19
2.8. Funds for Revolving Credit Loans................................ 19
2.8.1. Funding Procedures...................................... 19
2.8.2. Advances by Agent....................................... 20
3. REPAYMENT OF THE REVOLVING CREDIT LOANS................................ 20
3.1. Maturity........................................................ 20
3.2. Mandatory Repayments of Revolving Credit Loans.................. 20
3.3. Optional Repayments of Revolving Credit Loans................... 20
4. CERTAIN GENERAL PROVISIONS............................................. 21
4.1. Closing Fee .................................................... 21
4.2. Funds for Payments.............................................. 21
4.2.1. Payments to Agent....................................... 21
4.2.2. No Offset, etc.......................................... 21
4.3. Computations.................................................... 22
4.4. Inability to Determine LIBOR Rate............................... 22
4.5. Illegality...................................................... 22
4.6. Additional Costs, etc........................................... 23
4.7. Capital Adequacy................................................ 24
4.8. Certificate..................................................... 24
4.9. Indemnity....................................................... 24
4.10. Interest After Default......................................... 25
4.10.1. Overdue Amounts........................................ 25
4.10.2. Amounts Not Overdue.................................... 25
5. SECURITY AND GUARANTIES................................................ 25
5.1. Security of Borrower............................................ 25
5.2. Guaranties and Security of Subsidiaries......................... 25
6. REPRESENTATIONS AND WARRANTIES......................................... 25
6.1. Corporate Authority............................................. 26
6.1.1. Incorporation; Good Standing............................ 26
6.1.2. Authorization........................................... 26
6.1.3. Enforceability.......................................... 26
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
6.2. Governmental Approvals.......................................... 26
6.3. Title to Properties; Leases..................................... 26
6.4. Financial Statements and Projections............................ 27
6.4.1. Fiscal Year............................................. 27
6.4.2. Financial Statements.................................... 27
6.4.3. Projections............................................. 27
6.5. No Material Changes, etc.; Solvency............................. 27
6.5.1. No Changes.............................................. 27
6.5.2. Solvency................................................ 28
6.6. Franchises, Patents, Copyrights, etc............................ 28
6.7. Litigation...................................................... 28
6.8. No Materially Adverse Contracts, etc............................ 28
6.9. Compliance With Other Instruments, Laws, etc.................... 28
6.10. Tax Status...................................................... 29
6.11. No Event of Default............................................. 29
6.12. Holding Company and Investment Company Acts..................... 29
6.13. Absence of Financing Statements, etc............................ 29
6.14. Perfection of Security Interest................................. 29
6.15. Certain Transactions............................................ 29
6.16. Employee Benefit Plans.......................................... 30
6.16.1. In General............................................. 30
6.16.2. Terminability of Welfare Plans......................... 30
6.16.3. Guaranteed Pension Plans............................... 30
6.16.4. Multiemployer Plans.................................... 31
6.17. Use of Proceeds................................................ 31
6.17.1. General................................................ 31
6.17.2. Regulations U and X.................................... 31
6.17.3. Ineligible Securities.................................. 31
6.18. Environmental Compliance....................................... 31
6.19. Subsidiaries, etc.............................................. 33
6.20. Bank Accounts.................................................. 33
6.21. Disclosure..................................................... 33
6.22. Chief Executive Offices........................................ 33
6.23. No Amendments to Certain Documents............................. 34
6.24. Insurance...................................................... 34
7. AFFIRMATIVE COVENANTS OF THE BORROWER.................................. 34
7.1. Punctual Payment................................................ 34
7.2. Maintenance of Office........................................... 34
7.3. Records and Accounts............................................ 34
7.4. Financial Statements, Certificates and Information.............. 35
7.5. Notices......................................................... 36
7.5.1. Defaults................................................ 36
7.5.2. Environmental Events.................................... 36
7.5.3. Notification of Claims Against Collateral............... 37
7.5.4. Notice of Litigation and Judgments...................... 37
7.6. Corporate Existence; Maintenance of Properties.................. 37
7.7. Insurance; Life Insurance....................................... 37
7.7.1. Insurance............................................... 37
7.7.2. Life Insurance.......................................... 38
</TABLE>
<PAGE>
-iii-
<TABLE>
<S> <C>
7.8. Taxes........................................................... 38
7.9. Inspection of Properties and Books, etc......................... 39
7.9.1. General................................................. 39
7.9.2. Collateral Audit........................................ 39
7.9.3. Communication with Accountants.......................... 39
7.10. Compliance with Laws, Contracts, Licenses, and Permits.......... 39
7.11. Employee Benefit Plans.......................................... 39
7.12. Use of Proceeds................................................. 40
7.13. Bank Accounts................................................... 40
7.14. New Guarantors.................................................. 40
7.15. Further Assurances.............................................. 40
7.16. Preferred Stock................................................. 40
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER............................. 40
8.1. Restrictions on Indebtedness.................................... 41
8.2. Restrictions on Liens........................................... 41
8.3. Restrictions on Investments..................................... 43
8.4. Restricted Payments; Distributions.............................. 44
8.5. Merger, Consolidation........................................... 44
8.5.1. Mergers and Acquisitions................................ 44
8.5.2. Disposition of Assets................................... 45
8.6. Sale and Leaseback.............................................. 45
8.7. Compliance with Environmental Laws.............................. 45
8.8. Fiscal Year..................................................... 45
8.9. Employee Benefit Plans.......................................... 45
8.10. Business Activities............................................ 46
8.11. Change in Terms of Employment Agreements....................... 46
8.12. Transactions with Affiliates................................... 46
8.13. Bank Accounts.................................................. 47
8.14. Upstream Limitations........................................... 47
8.15. Inconsistent Agreements........................................ 47
8.16. Charter Amendments............................................. 47
9. FINANCIAL COVENANTS OF THE BORROWER.................................... 47
9.1. Leverage Ratio.................................................. 47
9.2. Profitable Operations........................................... 47
9.3. Consolidated Operating Cash Flow to Total Debt Service.......... 48
9.4. Quick Ratio..................................................... 48
9.5. Capital Expenditures............................................ 48
10. CLOSING CONDITIONS.................................................... 48
10.1. Loan Documents etc.............................................. 48
10.1.1. Loan Documents......................................... 48
10.2. Certified Copies of Charter Documents........................... 48
10.3. Corporate Action................................................ 48
10.4. Incumbency Certificate.......................................... 48
10.5. Validity of Liens............................................... 49
10.6. Perfection Certificates and UCC Search Results.................. 49
10.7. Certificates of Insurance....................................... 49
10.8. Opinions of Counsel............................................. 49
10.9. Payment of Fees................................................. 49
10.10.Completion of Successful Financial Inquiry and Due Diligence.... 49
</TABLE>
<PAGE>
-iv-
<TABLE>
<S> <C>
10.11. Consents and Approvals......................................... 50
11. CONDITIONS TO ALL BORROWINGS............................................ 50
11.1. Representations True; No Event of Default...................... 50
11.2. No Legal Impediment............................................ 50
11.3. Governmental Regulation........................................ 50
11.4. Proceedings and Documents...................................... 50
11.5. Pro Forma Compliance........................................... 50
12. EVENTS OF DEFAULT; ACCELERATION; ETC.................................... 51
12.1. Events of Default and Acceleration............................. 51
12.2. Termination of Commitments..................................... 54
12.3. Remedies....................................................... 55
12.4. Distribution of Collateral Proceeds............................ 55
13. SETOFF.................................................................. 56
14. THE AGENT............................................................... 56
14.1. Authorization.................................................. 56
14.2. Employees and Agents........................................... 57
14.3. No Liability................................................... 57
14.4. No Representations............................................. 57
14.4.1. General............................................... 57
14.4.2. Closing Documentation, etc............................ 58
14.5. Payments....................................................... 58
14.5.1. Payments to Agent..................................... 58
14.5.2. Distribution by Agent................................. 58
14.5.3. Delinquent Banks...................................... 59
14.6. Holders of Notes............................................... 59
14.7. Indemnity...................................................... 59
14.8. Agent as Bank.................................................. 59
14.9. Resignation.................................................... 59
14.10. Notification of Defaults and Events of Default................. 60
14.11. Duties in the Case of Enforcement.............................. 60
15. EXPENSES AND INDEMNIFICATION............................................ 60
15.1. Expenses....................................................... 60
15.2. Indemnification................................................ 61
15.3. Survival....................................................... 62
16. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION........................... 62
16.1. Sharing of Information with Section 20 Subsidiary.............. 62
16.2. Confidentiality................................................ 62
16.3. Prior Notification............................................. 63
16.4. Other.......................................................... 63
17. SURVIVAL OF COVENANTS, ETC.............................................. 63
18. ASSIGNMENT AND PARTICIPATION............................................ 63
18.1. Conditions to Assignment by Banks.............................. 63
18.2. Certain Representations and Warranties; Limitations; Covenants. 64
18.3. Register....................................................... 65
18.4. New Revolving Credit Notes..................................... 65
18.5. Participations................................................. 66
18.6. Disclosure..................................................... 66
18.7. Assignee or Participant Affiliated with the Borrower........... 66
18.8. Miscellaneous Assignment Provisions............................ 67
</TABLE>
<PAGE>
-v-
<TABLE>
<S> <C>
18.9. Assignment by Borrower........................................ 67
19. NOTICES, ETC.......................................................... 67
20. GOVERNING LAW......................................................... 68
21. HEADINGS.............................................................. 69
22. COUNTERPARTS.......................................................... 69
23. ENTIRE AGREEMENT, ETC................................................. 69
24. WAIVER OF JURY TRIAL.................................................. 69
25. CONSENTS, AMENDMENTS, WAIVERS, ETC.................................... 69
26. SEVERABILITY.......................................................... 70
</TABLE>
<PAGE>
REVOLVING CREDIT AGREEMENT
--------------------------
This REVOLVING CREDIT AGREEMENT is made as of November 7, 1997, by and
among ANSWERTHINK CONSULTING GROUP, INC. (the "Borrower"), a Florida corporation
having its principal place of business at 1401 Brickell Avenue, Suite 350,
Miami, Florida 33131, and BANKBOSTON, N.A., a national banking association and
the other lending institutions listed on Schedule 1 and BANKBOSTON, N.A. as
-------- -
agent for itself and such other lending institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. DEFINITIONS. The following terms shall have the meanings set forth in
-----------
this (S)1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Accounts Receivable. All rights of the Borrower or any of its Subsidiaries
-------- ----------
to payment for goods sold, leased or otherwise marketed in the ordinary course
of business and all rights of the Borrower or any of its Subsidiaries to payment
for services rendered in the ordinary course of business and all sums of money
or other proceeds due thereon pursuant to transactions with account debtors,
except for that portion of the sum of money or other proceeds due thereon that
relate to sales, use or property taxes in conjunction with such transactions,
recorded on books of account in accordance with generally accepted accounting
principles.
Adjustment Date. The first day of the month immediately following the
---------------
month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to (S)7.4(d).
Affiliate. Any Person that would be considered to be an affiliate of the
---------
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agent's Head Office. The Agent's head office located at 100 Federal
-------------------
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent. BankBoston, N.A. acting as agent for the Banks.
-----
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may be
-----------------------
approved by the Agent.
Applicable Margin. For each period commencing on an Adjustment Date
-----------------
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Leverage Ratio, as determined for the
fiscal period ending on the fiscal quarter ended immediately preceding the
applicable Rate Adjustment Period.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
TIER LEVERAGE RATIO BASE RATE LOANS LIBOR RATE LOANS
-------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
-2-
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------
1 Less than 2.00:1.00 0.25% 2.25%
-------------------------------------------------------------------------------
2 Greater than or equal to 0.50% 2.50%
2.00:1.00 but less than or
equal to 2.50:1.00
-------------------------------------------------------------------------------
3 Greater than 2.50:1.00 but less 1.00% 3.00%
than or equal to 2.75:1.00
-------------------------------------------------------------------------------
4 Greater than 2.75:1.00 1.25% 3.25%
-------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, (a) for Revolving Credit Loans outstanding
during the period commencing on the Closing Date through the date immediately
preceding the first Adjustment Date to occur after the fiscal quarter ending
December 31, 1997, the Applicable Margin shall be the Applicable Margin set
forth in Tier 2 above, and (b) if the Borrower fails to deliver any Compliance
Certificate pursuant to (S)7.4(d) hereof then, for the period commencing on the
Adjustment Date to occur subsequent to such failure through the date immediately
following the date on which such Compliance Certificate is delivered, the
Applicable Margin shall be the highest Applicable Margin set forth above.
Assignment and Acceptance. See (S)18.1.
-------------------------
Balance Sheet Date. September 30, 1997.
------------------
BankBoston. BankBoston, N.A. in its individual capacity.
----------
Banks. BankBoston and the other lending institutions listed on Schedule 1
----- -------- -
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to (S)18.
Base Rate. The higher of (a) the annual rate of interest announced from
---- ----
time to time by BankBoston at its head office in Boston, Massachusetts, as its
"base rate" and (b) one-half of one percent (1/2%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal Funds Effective
Rate" shall mean, for any day, the rate per annum equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans bearing interest calculated by
---- ---- -----
reference to the Base Rate.
BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a
---
national banking association, in its individual capacity.
Borrower. As defined in the preamble hereto.
--------
Business Day. Any day on which banking institutions in Boston,
-------- ---
Massachusetts, are open for the transaction of banking business and, in the case
of LIBOR Rate Loans, also a day which is a LIBOR Business Day.
<PAGE>
-3-
Capital Assets. Fixed assets, both tangible (such as land, buildings,
------- ------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
--------
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by the
------- ------------
Borrower or any of its Subsidiaries in connection with (a) the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles and (b) the lease of
any assets by the Borrower or any of its Subsidiaries as lessee under any
synthetic lease referred to in clause (f) of the definition of the term
"Indebtedness" to the extent that such assets would have been Capital Assets had
the synthetic lease been treated for accounting purposes as a Capitalized Lease.
Capitalized Leases. Leases under which the Borrower or any of its
----------- ------
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See (S)6.18.
------
Closing Date. The first date on which the conditions set forth in (S)10
------- ----
have been satisfied and any Revolving Credit Loans are to be made.
Code. The Internal Revenue Code of 1986.
----
Collateral. All of the property, rights and interests of the Borrower and
----------
its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
---------- -------- -
hereto as the amount of such Bank's commitment to make Revolving Credit Loans to
the Borrower, as the same may be reduced from time to time; or if such
commitment is terminated pursuant to the provisions hereof, zero. From the
Closing Date through the Commitment Increase Date, each Bank's Commitment shall
be the amount set forth on Schedule 1 hereto under the heading "Initial
----------
Commitment Amount" and after the Commitment Increase Date, each Bank's
Commitment shall be the amount set forth on Schedule 1 hereto under the heading
----------
"Increased Commitment Amount".
Commitment Increase Date. See (S)2.1.2 hereof.
------------------------
Commitment Percentage. With respect to each Bank, the percentage set forth
---------- ----------
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
-------- -
all of the Banks.
Compliance Certificate. See (S)7.4(d) hereof.
----------------------
<PAGE>
-4-
Consolidated or consolidated. With reference to any term defined herein,
------------ ------------
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Current Liabilities. All liabilities of the Borrower and its
------------ ------- -----------
Subsidiaries on a consolidated basis maturing on demand or within one (1) year
from the date as of which Consolidated Current Liabilities are to be determined,
and such other liabilities as may properly be classified as current liabilities
in accordance with generally accepted accounting principles; provided, however,
-------- -------
the Obligations under the Credit Agreement outstanding in the one year period
prior to the Revolving Credit Loan Maturity Date shall not be included as a
Consolidated Current Liability.
Consolidated Net Income (or Deficit). The consolidated net income (or
------------ --- ------ -----------
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles, after eliminating therefrom all extraordinary
nonrecurring items of income or expense; provided, however, for purposes of
calculating compliance with the financial covenants set forth in (S)9 hereof,
Consolidated Net Income shall not include (a) any non-cash writedowns of good
will and/or purchased research and development; and/or (b) compensation expenses
or additional goodwill amortization relating to the granting by the Borrower of
stock options and restricted stock.
Consolidated Operating Cash Flow. For any period, an amount equal to (a)
--------------------------------
EBITDA for such period, less (b) the sum of (i) cash payments for all income
----
taxes paid during such period, plus (ii) Capital Expenditures made during such
----
period to the extent permitted by (S)9, plus (iii) the portion of the costs of
----
software development required to be capitalized pursuant to FASB Statement No.
86; provided, however, until a period of four consecutive fiscal quarters has
-------- -------
elapsed since the Closing Date, (b)(i) shall only include income taxes expensed
during such period.
Consolidated Quick Assets. All cash and Accounts Receivable (including,
-------------------------
without duplication, the unbilled portion of Accounts Receivable for services
rendered in the ordinary course of business) of the Borrower and its
Subsidiaries on a consolidated basis that, in accordance with generally accepted
accounting principles, are properly classified as current assets, provided that
--------
Accounts Receivable shall be included only if good and collectible as determined
by the Borrower in accordance with established practice consistently applied
and, with respect to such accounts receivable, only if payable and outstanding
not more than ninety (90) days after the date of the invoices for services
rendered or other transaction out of which any such account receivable arose;
and such notes and accounts receivable shall be taken at their face value less
reserves determined to be sufficient in accordance with generally accepted
accounting principles.
Consolidated Total Interest Expense. For any period, the aggregate amount
-----------------------------------
of interest expense, both expensed and capitalized, of the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles, for such period on the aggregate amount of the
Borrower and its Subsidiaries Indebtedness, determined on a consolidated basis
in accordance with generally accepted accounting principles, and including
commitment fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money.
<PAGE>
-5-
Conversion Request. A notice given by the Borrower to the Agent of the
---------- -------
Borrower's election to convert or continue a Revolving Credit Loan in accordance
with (S)2.7.
Credit Agreement. This Revolving Credit Agreement, including the Schedules
------ ---------
and Exhibits hereto.
Default. See (S)12.
-------
Distribution. The declaration or payment of any dividend on or in respect
------------
of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower; provided, however, that (a) distributions to
reimburse the sellers of Relational Technologies, Inc. ("RTI") for their tax
liabilities in connection with the merger of RTI with and into the Borrower, and
(b) the retirements of capital stock in connection with the conversion of the
Borrower's preferred stock into common stock shall not constitute
"Distributions" hereunder.
Dollars or $. Dollars in lawful currency of the United States of America.
------- -
Domestic Lending Office. Initially, the office of each Bank designated as
-------- ------- ------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date. The date on which any Revolving Credit Loan is made or is
-------- ----
to be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with (S)2.7.
EBITDA. With respect to the Borrower and its Subsidiaries for any fiscal
------
period, an amount equal to Consolidated Net Income for such period, plus, to the
----
extent deducted in the calculation of Consolidated Net Income and without
duplication, (a) depreciation and amortization for such period; (b) income tax
expense for such period; and (c) Consolidated Total Interest Expense during such
period, and minus, to the extent added in computing Consolidated Net Income and
-----
without duplication, all income tax benefits for such period, all as determined
in accordance with generally accepted accounting principles.
Eligible Assignee. Any of (a) a commercial bank or finance company
-------- --------
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
--------
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, an
Event of Default has occurred and is
<PAGE>
-6-
continuing, any other bank, insurance company, commercial finance company or
other financial institution or other Person approved by the Agent, such approval
not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
-------- ------- ----
(S)3(3) of ERISA maintained or contributed to by the Borrower, other than a
Guaranteed Pension Plan or a Multiemployer Plan.
Employment Agreements. Collectively (a) each of the employment agreements
---------------------
dated on or prior to the Closing Date between the Borrower and certain of its
employees set forth on Schedule 1.1 hereto, which employment agreements shall be
in form and substance satisfactory to the Agent and (b) each employment
agreement dated after the Closing Date between the Borrower and certain of its
employees, which employment agreements shall be in form and substance
substantially similar to those employment agreements delivered to the Agent on
or prior to the Closing Date.
Environmental Laws. See (S)6.18(a).
------------- ----
EPA. See (S)6.18(b).
---
ERISA. The Employee Retirement Income Security Act of 1974.
-----
ERISA Affiliate. Any Person which is treated as a single employer with the
----- ---------
Borrower under (S)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
----------------------
Pension Plan within the meaning of (S)4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a LIBOR Rate Loan,
-------------------------
the maximum rate (expressed as a decimal) at which any lender subject thereto
would be required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor or similar regulations
relating to such reserve requirements) against "Eurocurrency Liabilities" (as
that term is used in Regulation D), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurocurrency Reserve Rate.
Event of Default. See (S)12.
----------------
Fee Letter. The fee letter dated or to be dated on or prior to the Closing
----------
Date between the Borrower and the Agent, in form and substance satisfactory to
the Agent.
generally accepted accounting principles. (a) When used in (S)9, whether
----------------------------------------
directly or indirectly through reference to a capitalized term used therein,
means (i) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal quarter ended on September 30, 1997, and (ii) to the
extent consistent with such principles, the accounting practice of the Borrower
reflected in its financial statements for the period ended on September 30,
1997, and (b) when used in general, other than as provided above, means
principles that are (i) consistent with the principles promulgated or adopted by
the Financial Accounting
<PAGE>
-7-
Standards Board and its predecessors, as in effect from time to time and (ii)
consistently applied with past financial statements of the Borrower adopting the
same principles. No "Accounting Changes" (as hereinafter defined) shall effect
financial covenants, standards or terms in this Credit Agreement; provided, that
the Borrower shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered hereunder (which reflect
such Accounting Changes) and the basis for calculating financial covenant
compliance and the Leverage Ratio set forth in computing the Applicable Margin
(in each case without reflecting such Accounting Changes). Accounting Changes
shall mean (a) changes in accounting principles required by generally accepted
accounting principles and implemented by the Borrower; (b) changes in accounting
principles recommended by the Borrower's certified public accountants and
implemented by the Borrower; and (c) changes in carrying value of the Borrower's
or any of its Subsidiaries' assets, liabilities or equity accounts resulting
from any adjustments that were applicable to, but not included in, any pro forma
calculations delivered to the Agent on or prior to the Closing Date. All such
adjustments resulting from expenditures made subsequent to the Closing Date
shall be treated as expenses in the period the expenditures are made.
Guaranteed Pension Plan. Any employee pension benefit plan within the
-----------------------
meaning of (S)3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guaranty. The Guaranty dated as of the date hereof made by each Subsidiary
--------
of the Borrower in favor of the Banks and the Agent pursuant to which each
Subsidiary of the Borrower guaranties to the Banks and the Agent the payment and
performance of the Obligations and in form and substance satisfactory to the
Banks and the Agent.
Hackett Acquisition. The acquisition by the Borrower on October 13, 1997
-------------------
of all of the outstanding shares of capital stock of The Hackett Group, Inc..
Hazardous Substances. See (S)6.18(b).
--------- ----------
Indebtedness. As to any Person and whether recourse is secured by or is
------------
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(a) every obligation of such Person for money borrowed,
(b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses, other
than notes issued in connection with any Permitted Acquisition representing
earn-out arrangements with the seller so long as such note would not be
required to be treated as a liability or debt pursuant to generally
accepted accounting principles,
(c) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person,
<PAGE>
-8-
(d) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable and excluding accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(e) every obligation of such Person under any Capitalized Lease,
(f) every obligation of such Person under any lease treated as an
operating lease under generally accepted accounting principles and as a
loan or financing for U.S. income tax purposes (a "synthetic lease");
provided, however, for purposes of this Credit Agreement synthetic leases
-------- -------
shall not include any lease arrangement entered into by the Borrower for
the lease of computer equipment so long as such arrangements are for
substantially the same purpose as those computer lease arrangements
existing on the Closing Date,
(g) all sales by such Person of (i) accounts or general intangibles
for money due or to become due, (ii) chattel paper, instruments or
documents creating or evidencing a right to payment of money or (iii) other
receivables (collectively "receivables"), whether pursuant to a purchase
facility or otherwise, other than in connection with the disposition of the
business operations of such Person relating thereto or a disposition of
defaulted receivables for collection and not as a financing arrangement,
and together with any obligation of such Person to pay any discount,
interest, fees, indemnities, penalties, recourse, expenses or other amounts
in connection therewith,
(h) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights; provided,
--------
however, those items which are covered in the proviso to the defined term
-------
"Restricted Payment" shall not constitute Indebtedness for purposes of this
paragraph (h),
(i) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices,
(j) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law,
(k) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(a) through (j) (the "primary
<PAGE>
-9-
obligation") of another Person (the "primary obligor"), in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person (i) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (ii) to purchase property, securities or services for the
purpose of assuring the payment of such primary obligation, or (iii) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (x) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (y) any synthetic lease shall be the
stipulated loss value, termination value or other equivalent amount and (z) any
equity related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt
---------------------
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. (S)24, Seventh), as amended.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of the
---------------------
calendar quarter which includes the Drawdown Date thereof; and (b) as to any
LIBOR Rate Loan in respect of which the Interest Period is (i) three (3) months
or less, the last day of such Interest Period and (ii) more than three (3)
months, the date that is three (3) months from the first day of such Interest
Period and, in addition, the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (a)
-------- ------
initially, the period commencing on the Drawdown Date of such Revolving Credit
Loan and ending on the last day of one of the periods set forth below, as
selected by the Borrower in a Loan Request (i) for any Base Rate Loan, the last
day of the calendar quarter; and (ii) for any LIBOR Rate Loan, 1, 2, 3, or 6
months; and (b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Revolving Credit Loan and ending on
the last day of one of the periods set forth above, as selected by the Borrower
in a Conversion Request; provided that all of the foregoing provisions relating
--------
to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a LIBOR Business Day, that Interest
Period shall be extended to the next succeeding LIBOR Business Day unless
the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding LIBOR Business Day;
<PAGE>
-10-
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in (S)2.7,
the Borrower shall be deemed to have requested a conversion of the affected
LIBOR Rate Loan to a Base Rate Loan and the continuance of all Base Rate
Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period that begins on the last LIBOR Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last LIBOR Business Day of a calendar month; and
(e) any Interest Period relating to any LIBOR Rate Loan that would
otherwise extend beyond the Revolving Credit Loan Maturity Date shall end
on the Revolving Credit Loan Maturity Date.
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Investors. Collectively, (a) Golder, Thoma, Cressey, Rauner Fund V, L.P.,
---------
a Delaware limited partnership, (b) MG Capital Partners II, L.P., a Delaware
limited partnership and any other investment fund managed by Golder, Thoma,
Cressey, Rauner Inc., (c) Gator Associates, Ltd., a Florida limited partnership
(including the general and limited partners thereof), (d) Tara Ventures, Ltd., a
British Virgin Islands corporation (including the shareholders thereof), (e) Ted
Fernandez, (e) David Dungan, (f) David Flaxman, (g) Ulysses Knotts, (h) Lee
White and (i) Allen Frank.
Leverage Ratio. As at any date of determination, the ratio of (a) Total
--------------
Funded Indebtedness of the Borrower and its Subsidiaries outstanding on such
date to (b) EBITDA of the Borrower and its Subsidiaries for the Reference Period
ended on such date.
LIBOR Business Day. Any day on which commercial banks are open for
------------------
international business (including dealings in Dollar deposits) in London or such
other
<PAGE>
-11-
eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
LIBOR Lending Office. Initially, the office of each Bank designated as
--------------------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
that shall be making or maintaining LIBOR Rate Loans.
LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan, the
----- ----
rate of interest equal to (a) the rate determined by the Agent at which Dollar
deposits for such Interest Period are offered based on information presented on
Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR Business Day
prior to the first day of such Interest Period, divided by (b) a number equal to
1.00 minus the Eurocurrency Reserve Rate, if applicable.
LIBOR Rate Loans. Revolving Credit Loans bearing interest calculated by
----------------
reference to the LIBOR Rate.
Life Insurance Assignment. The assignment of the Life Insurance Policy
---- --------- ----------
made by the Borrower to the Agent and in form and substance satisfactory to the
Banks and the Agent.
Life Insurance Policy. The policy of life insurance issued to the Borrower
---------------------
covering the life of Ted Fernandez, in the face amount of $2,000,000.
Loan Documents. This Credit Agreement, the Revolving Credit Notes, the Fee
---- ---------
Letter and the Security Documents.
Loan Request. See (S)2.6.
---- -------
Majority Banks. As of any date, the Banks holding at least fifty one
-------- -----
percent (51%) of the outstanding principal amount of the Revolving Credit Notes
on such date; and if no such principal is outstanding, the Banks whose aggregate
Commitments constitutes at least fifty one percent (51%) of the Total
Commitment.
Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37)
------------- ----
of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.
Obligations. All indebtedness, obligations and liabilities of any of the
-----------
Borrower and its Subsidiaries to any of the Banks and the Agent, individually or
collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement or any of the other Loan Documents or in respect of any of the
Revolving Credit Loans or any of the Revolving Credit Notes or other instruments
at any time evidencing any thereof.
outstanding. With respect to the Revolving Credit Loans, the aggregate
-----------
unpaid principal thereof as of any date of determination.
<PAGE>
-12-
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA
----
and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificate as defined in the
---------- ------------
Security Agreements.
Permitted Liens. Liens, security interests and other encumbrances
--------- -----
permitted by (S)8.2.
Person. Any individual, corporation, partnership, trust, unincorporated
------
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Pro Forma March 31, 1998 Calculation. For purposes of calculating EBITDA
------------------------------------
for compliance with (S)9 hereof and for purposes of calculating the EBITDA
component of the Leverage Ratio in connection with the determination of the
Applicable Margin for any date prior to the fiscal quarter ending March 31,
1998, EBITDA shall be calculated based on the Borrower's pro forma first quarter
1998 EBITDA, as determined by the Borrower in good faith and which calculation
is acceptable to the Agent.
Rate Adjustment Period. See the definition of Applicable Margin.
----------------------
RCRA. See (S)6.18(a).
----
Real Estate. All real property at any time owned or leased (as lessee or
---- ------
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Revolving Credit Note, or the continuation
------
of such grid, or any other similar record, including computer records,
maintained by any Bank with respect to any Revolving Credit Loan referred to in
such Revolving Credit Note.
Reference Bank. BankBoston, N.A.
--------- ----
Reference Period. The period of four (4) consecutive fiscal quarters of
----------------
the Borrower ending on the relevant date; provided, however, until four (4) full
-------- -------
fiscal quarters of the Borrower have elapsed after December 31, 1997, for any
covenant or test calculation to be made (a) prior to the fiscal quarter ending
March 31, 1998, the period consisting of the Pro Forma March 31, 1998
Calculation fiscal quarter multiplied by four; (b) after the fiscal quarter
ending March 31, 1998, the relevant amount applicable to such shorter period of
one, two or three full fiscal quarters elapsed since December 31, 1997, with the
relevant amount applicable to such shorter period annualized for the period by
multiplying such relevant amount by a fraction whose numerator is four (4) and
whose denominator is such actual number of elapsed full fiscal quarters.
Register. See (S)18.3.
--------
Restricted Payment. In relation to the Borrower and its Subsidiaries, any
------------------
(a) Distribution or (b) payment or prepayment by the Borrower or its
Subsidiaries to the Investors or to any other Affiliate of the Borrower, any of
its Subsidiaries or the Investors; provided, however, the term "Restricted
Payment" shall not include (i) the scheduled
<PAGE>
-13-
redemption of the Borrower's existing preferred stock on April 22, 2004; (ii) so
long as no Default or Event of Default has occurred and is continuing or would
exist a result thereof, any redemption of such preferred stock in contemplation
of an initial public offering of the Borrower's common stock in accordance with
the terms of the Borrower's Articles of Incorporation (as in effect on the
Closing Date); (iii) the repurchase of capital stock of the Borrower from
employees upon the termination of employment or otherwise pursuant to any
executive management or employment agreements between the Borrower and such
employees; and (iv) retirements or cancellations of capital stock in connection
with conversions pursuant to existing equity arrangements of the Borrower.
Revolving Credit Loan Maturity Date. November 7, 2000.
-----------------------------------
Revolving Credit Loans. Revolving credit loans made or to be made by the
----------------------
Banks to the Borrower pursuant to (S)2.
Revolving Credit Notes. See (S)2.4.
----------------------
SARA. See (S)6.18(a).
----
Section 20 Subsidiary. A Subsidiary of the bank holding company
---------------------
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreements. The several Security Agreements dated as of the date
-------- ----------
hereof between the Borrower and its Subsidiaries and the Agent and in form and
substance satisfactory to the Banks and the Agent.
Security Documents. The Guaranty, the Security Agreements, the Trademark
-------- ---------
Assignments, the Life Insurance Assignment, the Stock Pledge Agreement and all
other instruments and documents, including without limitation Uniform Commercial
Code financing statements, required to be executed or delivered pursuant to any
Security Document.
Stock Pledge Agreement. The Stock Pledge Agreement dated as of the date
----------------------
hereof between the Borrower and the Agent and in form and substance satisfactory
to the Banks and the Agent.
Subsidiary. Any corporation, association, trust, or other business entity
----------
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Total Commitment. The sum of the Commitments of the Banks, as in effect
----- ----------
from time to time.
Total Debt Service. For any period, all scheduled mandatory payments of
------------------
principal of Indebtedness of the Borrower and its Subsidiaries made or required
to be made in such period plus the Consolidated Total Interest Expense of the
Borrower and its Subsidiaries for that period; provided, however, for purposes
of calculating compliance with (S)9.3 hereof, the scheduled mandatory payment in
March, 1999 of not more than $300,000 in principal on
<PAGE>
-14-
any seller note issued in connection with the acquisition of Delphi Partners,
Inc. shall not be included in the calculation of Total Debt Service for such
period.
Total Funded Indebtedness. All Indebtedness of the Borrower and its
-------------------------
Subsidiaries for borrowed money (including without limitation, all guarantees by
such Person of Indebtedness of others for borrowed money), purchase money
Indebtedness and with respect to Capitalized Leases and synthetic leases (as
defined in clause (f) of the definition of "Indebtedness"), determined on a
consolidated basis in accordance with generally accepted accounting principles.
Trademark Assignments. The several Trademark Assignments dated as of the
--------- -----------
date hereof made by the Borrower and its Subsidiaries in favor of the Agent and
in form and substance satisfactory to the Banks and the Agent.
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
----
LIBOR Rate Loan.
Voting Stock. Stock or similar interests, of any class or classes (however
------ -----
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. RULES OF INTERPRETATION.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein, with the term "instrument" being that
defined under Article 9 of the Uniform Commercial Code.
<PAGE>
-15-
(h) Reference to a particular "(S)" refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1. COMMITMENT TO LEND.
------------------
2.1.1. COMMITMENT TO LEND. Subject to the terms and conditions set
------------------
forth in this Credit Agreement, each of the Banks severally agrees to lend
to the Borrower and the Borrower may borrow, repay, and reborrow from time
to time between the Closing Date and the Revolving Credit Loan Maturity
Date upon notice by the Borrower to the Agent given in accordance with
(S)2.6, such sums as are requested by the Borrower up to a maximum
aggregate principal amount outstanding (after giving effect to all amounts
requested) at any one time equal to such Bank's Commitment, provided that
--------
the sum of the outstanding amount of the Revolving Credit Loans (after
giving effect to all amounts requested) shall not at any time exceed the
Total Commitment. The Revolving Credit Loans shall be made pro rata in
--- ----
accordance with each Bank's Commitment Percentage. Each request for a
Revolving Credit Loan hereunder shall constitute a representation and
warranty by the Borrower that the conditions set forth in (S)10 and (S)11,
in the case of the initial Revolving Credit Loans to be made on the Closing
Date, and (S)11, in the case of all other Revolving Credit Loans, have been
satisfied on the date of such request.
2.1.2. INCREASE IN COMMITMENT AND TOTAL COMMITMENT. From the Closing
-------------------------------------------
Date until the Commitment Increase Date (as hereinafter defined), the
Commitment of each Bank and the Total Commitment shall be as set forth on
Schedule 1 attached hereto under the heading "Initial Commitment Amount";
----------
provided, however, five (5) Business Days following the date on which the
-------- -------
Borrower has demonstrated to the satisfaction of the Agent that (a) the
EBITDA of the Borrower and its Subsidiaries for the most recent period of
two consecutive fiscal quarters (treated as a single accounting period)
after the Closing Date exceeds $1,500,000 for each such quarter in such
period and (b) no Default or Event of Default has occurred and is
continuing under the Credit Agreement and the other Loan Documents (the
"Commitment Increase Date"), the Total Commitment shall be increased by
$10,000,000 (the "Increased Amount") and each Bank's Commitment shall be
increased by such Bank's Commitment Percentage of the Increased Amount. The
Agent shall notify each of the Banks at least two (2) Business Days prior
to the Commitment Increase Date that each Bank's Commitment and the Total
Commitment is being increased on the Commitment Increase Date.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
--------------
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee calculated at the rate of one-half of one percent (1/2%) per
annum on the average daily amount during each calendar quarter or portion
thereof from the date hereof to the Revolving Credit Loan Maturity Date by which
the Total Commitment exceeds the outstanding amount of Revolving Credit Loans
during such calendar quarter. The
<PAGE>
-16-
commitment fee shall be payable quarterly in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter commencing on
the first such date following the date hereof, with a final payment on the
Revolving Credit Maturity Date or any earlier date on which the Commitments
shall terminate.
2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right at
-----------------------------
any time and from time to time upon five (5) Business Days prior written notice
to the Agent to reduce by $1,000,000 or an integral multiple thereof or
terminate entirely the unborrowed portion of the Total Commitment, whereupon the
Commitments of the Banks shall be reduced pro rata in accordance with their
--- ----
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the Borrower
delivered pursuant to this (S)2.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any commitment fee then accrued on the amount of the reduction.
No reduction of the Commitments may be reinstated.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
--------------------------
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing
------- -
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Commitment or, if less, the outstanding amount of all Revolving Credit Loans
made by such Bank, plus interest accrued thereon, as set forth below. The
Borrower irrevocably authorizes each Bank to make or cause to be made, at or
about the time of the Drawdown Date of any Revolving Credit Loan or at the time
of receipt of any payment of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Record reflecting the making of such
Revolving Credit Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Revolving Credit Loans set forth on such Bank's Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
----- -----
to such Bank, but the failure to record, or any error in so recording, any such
amount on such Bank's Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in
----------------------------------
(S)4.10,
(a) Each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of the Interest
Period with respect thereto at the rate per annum equal to the Base Rate
plus the Applicable Margin.
----
(b) Each LIBOR Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate per annum equal to the
LIBOR Rate determined for such Interest Period plus the Applicable Margin.
----
(c) The Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto.
<PAGE>
-17-
2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall give to the
-----------------------------------
Agent written notice in the form of Exhibit B hereto (or telephonic notice
------- -
confirmed in a writing in the form of Exhibit B hereto) of each Revolving Credit
------- -
Loan requested hereunder (a "Loan Request") no later than (a) 11:00 a.m. (Boston
time) on the day of the proposed Drawdown Date of any Base Rate Loan and (b)
three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR
Rate Loan. Each such notice shall specify (i) the principal amount of the
Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such
Revolving Credit Loan, (iii) the Interest Period for such Revolving Credit Loan
and (iv) the Type of such Revolving Credit Loan. Promptly upon receipt of any
such notice, the Agent shall notify each of the Banks thereof. Each such notice
shall be irrevocable and binding on the Borrower and shall obligate the Borrower
to accept the Revolving Credit Loan requested from the Banks on the proposed
Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of
$500,000 or an integral multiple thereof.
2.7. CONVERSION OPTIONS.
------------------
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN.
-----------------------------------------------------
The Borrower may elect from time to time to convert any outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type, provided
--------
that (a) with respect to any such conversion of a Revolving Credit Loan to
a Base Rate Loan, the Borrower shall give the Agent at least two (2)
Business Days prior written notice of such election; (b) with respect to
any such conversion of a LIBOR Rate Loan into a Revolving Credit Loan of
another Type, such conversion shall only be made on the last day of the
Interest Period with respect thereto; (c) with respect to any such
conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall
give the Agent at least three (3) LIBOR Business Days prior written notice
of such election and (d) no Revolving Credit Loan may be converted into a
LIBOR Rate Loan when any Default or Event of Default has occurred and is
continuing. On the date on which such conversion is being made each Bank
shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office or
its LIBOR Lending Office, as the case may be. All or any part of
outstanding Revolving Credit Loans of any Type may be converted as provided
herein, provided that partial conversions shall be in an aggregate
--------
principal amount of $500,000 or a whole multiple thereof. Each Conversion
Request relating to the conversion of a Revolving Credit Loan to a LIBOR
Rate Loan shall be irrevocable by the Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any
---------------------------------------------
Revolving Credit Loans of any Type may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in (S)2.7.1; provided that
--------
no LIBOR Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto ending during the continuance of any Default or Event of
Default of which the officers of the Agent active upon the Borrower's
account have actual knowledge. In the event that the Borrower fails to
provide any such notice with respect to the continuation of any LIBOR Rate
Loan as such, then such LIBOR Rate Loan shall be automatically converted to
a Base Rate Loan on the last day of the first Interest Period relating
thereto. The Agent shall
<PAGE>
-18-
notify the Banks promptly when any such automatic conversion contemplated
by this (S)2.7 is scheduled to occur.
2.7.3. LIBOR RATE LOANS. Any conversion to or from LIBOR Rate
----------------
Loans shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of all
LIBOR Rate Loans having the same Interest Period shall not be less than
$500,000 or a whole multiple of $250,000 in excess thereof.
2.8. FUNDS FOR REVOLVING CREDIT LOANS.
--------------------------------
2.8.1. FUNDING PROCEDURES. Not later than 11 o'clock a.m.
-------------------
(Boston time) on the proposed Drawdown Date of any Revolving Credit Loans,
each of the Banks will make available to the Agent, at the Agent's Head
Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Revolving Credit
Loans. Upon receipt from each Bank of such amount, and upon receipt of the
documents required by (S)(S)10 and 11 and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make
available to the Borrower the aggregate amount of such Revolving Credit
Loans made available to the Agent by the Banks. The failure or refusal of
any Bank to make available to the Agent at the aforesaid time and place on
any Drawdown Date the amount of its Commitment Percentage of the requested
Revolving Credit Loans shall not relieve any other Bank from its several
obligation hereunder to make available to the Agent the amount of such
other Bank's Commitment Percentage of any requested Revolving Credit Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
-----------------
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (1) the average computed for the
period referred to in clause (c) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, times (b) the amount of such Bank's Commitment
-----
Percentage of such Revolving Credit Loans, times (c) a fraction, the
-----
numerator of which is the number of days that elapse from and including
such Drawdown Date to the date on which the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans shall become
immediately available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due
----- -----
and owing to the Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available
to the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum applicable
to the Revolving Credit Loans made on such Drawdown Date.
<PAGE>
-19-
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
---------------------------------------
3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
--------
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
----------------------------------------------
sum of the outstanding amount of the Revolving Credit Loans exceeds the Total
Commitment, then the Borrower shall immediately pay the amount of such excess to
the Agent for application to the Revolving Credit Loans.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. The Borrower shall have
---------------------------------------------
the right, at its election, to repay the outstanding amount of the Revolving
Credit Loans, as a whole or in part, at any time without penalty or premium,
provided that the full or partial prepayment of the outstanding amount of any
- - --------
LIBOR Rate Loans pursuant to this (S)3.3 may be made only on the last day of the
Interest Period relating thereto. The Borrower shall give the Agent, no later
than 11:00 a.m., Boston time, on the day of the proposed repayment, written
notice of any proposed repayment pursuant to this (S)3.3 of Base Rate Loans, and
three (3) LIBOR Business Days notice of any proposed repayment pursuant to this
(S)3.3 of LIBOR Rate Loans, in each case, specifying the proposed date of
payment of Revolving Credit Loans and the principal amount to be paid. Each
such partial prepayment of the Revolving Credit Loans shall be in an integral
multiple of $100,000, shall be accompanied by the payment of accrued interest on
the principal repaid to the date of payment and shall be applied first to the
principal of Base Rate Loans and then to the principal of LIBOR Rate Loans.
Each partial prepayment shall be allocated among the Banks, in proportion, as
nearly as practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior repayments not exactly in proportion.
4. CERTAIN GENERAL PROVISIONS.
--------------------------
4.1. CLOSING FEE. The Borrower agrees to pay to the Agent for the Agent's
-----------
own account on the Closing Date a closing fee in the amount set forth in the Fee
Letter.
4.2. FUNDS FOR PAYMENTS.
------------------
4.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
-----------------
commitment fees and any other amounts due hereunder or under any of the
other Loan Documents shall be made to the Agent, for the respective
accounts of the Banks and the Agent, at the Agent's Head Office or at such
other location in the Boston, Massachusetts, area that the Agent may from
time to time designate, in each case in immediately available funds.
4.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder
--------------
and under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is
<PAGE>
-20-
compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrower will
pay to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.
4.3. COMPUTATIONS. All computations of interest on the Revolving Credit
------------
Loans consisting of Base Rate Loans shall be based on a 365-day year and paid
for the actual number of days elapsed. All computations of interest on the
Revolving Credit Loans consisting of LIBOR Rate Loans and of commitment or other
fees shall be based on a 360-day year and paid for the actual number of days
elapsed. Except as otherwise provided in the definition of the term "Interest
Period" with respect to LIBOR Rate Loans, whenever a payment hereunder or under
any of the other Loan Documents becomes due on a day that is not a Business Day,
the due date for such payment shall be extended to the next succeeding Business
Day, and interest shall accrue during such extension. The outstanding amount of
the Revolving Credit Loans as reflected on the Records from time to time shall
be considered correct and binding on the Borrower unless within five (5)
Business Days after receipt of any notice by the Agent or any of the Banks of
such outstanding amount, the Borrower shall notify the Agent or such Bank to the
contrary.
4.4. INABILITY TO DETERMINE LIBOR RATE. In the event, prior to the
---------------------------------
commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent
shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the LIBOR Rate that would
otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan
during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (a) any Loan Request or
Conversion Request with respect to LIBOR Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (b) each LIBOR Rate
Loan will automatically, on the last day of the then current Interest Period
thereof, become a Base Rate Loan, and (c) the obligations of the Banks to make
LIBOR Rate Loans shall be suspended until the Agent or the Majority Banks
determine that the circumstances giving rise to such suspension no longer exist,
whereupon the Agent or, as the case may be, the Agent upon the instruction of
the Majority Banks, shall so notify the Borrower and the Banks.
4.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to
the Borrower and the other Banks and thereupon (a) the commitment of such Bank
to make LIBOR Rate Loans or convert Revolving Credit Loans of another Type to
LIBOR Rate Loans shall forthwith be suspended and (b) such Bank's Revolving
Credit Loans then outstanding as LIBOR Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
<PAGE>
-21-
applicable to such LIBOR Rate Loans or within such earlier period as may be
required by law. The Borrower hereby agrees promptly to pay the Agent for the
account of such Bank, upon demand by such Bank, any additional amounts
necessary to compensate such Bank for any costs incurred by such Bank in making
any conversion in accordance with this (S)4.5, including any interest or fees
payable by such Bank to lenders of funds obtained by it in order to make or
maintain its LIBOR Rate Loans hereunder.
4.6. ADDITIONAL COSTS, ETC. If any present or future applicable law, which
---------------------
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank or
the Agent by any central bank or other fiscal, monetary or other authority
(whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, such Bank's Commitment or the
Revolving Credit Loans (other than taxes based upon or measured by the
income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Revolving Credit Loans or any other amounts payable to
any Bank or the Agent under this Credit Agreement or the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or commitments of an
office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, the Revolving Credit Loans, such Bank's Commitment, or any class
of loans or commitments of which any of the Revolving Credit Loans or such
Bank's Commitment forms a part, and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Revolving
Credit Loans or such Bank's Commitment, or
(ii) to reduce the amount of principal, interest or other
amount payable to such Bank or the Agent hereunder on account of such
Bank's Commitment or any of the Revolving Credit Loans, or
(iii) to require such Bank or the Agent to make any payment or
to forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by
reference to the
<PAGE>
-22-
gross amount of any sum receivable or deemed received by such Bank or
the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum.
4.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
----------------
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Revolving Credit Loans to a level below that which such Bank or
the Agent could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's or the Agent's then existing policies
with respect to capital adequacy and assuming full utilization of such entity's
capital) by any amount deemed by such Bank or (as the case may be) the Agent to
be material, then such Bank or the Agent may notify the Borrower of such fact.
To the extent that the amount of such reduction in the return on capital is not
reflected in the Base Rate, the Borrower and such Bank shall thereafter attempt
to negotiate in good faith, within thirty (30) days of the day on which the
Borrower receives such notice, an adjustment payable hereunder that will
adequately compensate such Bank in light of these circumstances. If the Borrower
and such Bank are unable to agree to such adjustment within thirty (30) days of
the date on which the Borrower receives such notice, then commencing on the date
of such notice (but not earlier than the effective date of any such increased
capital requirement), the fees payable hereunder shall increase by an amount
that will, in such Bank's reasonable determination, provide adequate
compensation. Each Bank shall allocate such cost increases among its customers
in good faith and on an equitable basis.
4.8. CERTIFICATE. A certificate setting forth any additional amounts
-----------
payable pursuant to (S)4.6 or 4.7 and a brief explanation of such amounts which
are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
4.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold each
---------
Bank harmless from and against any loss, cost or expense that such Bank may
sustain or incur as a consequence of (a) default by the Borrower in payment of
the principal amount of or any interest on any LIBOR Rate Loans as and when due
and payable, including any such loss or expense arising from interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain its
LIBOR Rate Loans, (b) default by the Borrower in making a borrowing after the
Borrower has given (or is deemed to have given) a Loan Request or a Conversion
Request relating thereto in accordance with (S)2.6 or (S)2.7 or (c) the making
of any payment of a LIBOR Rate Loan or the making of any conversion of any such
Revolving Credit Loan to a Base Rate Loan on a day that is not the last day of
the
<PAGE>
-23-
applicable Interest Period with respect thereto, including interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain any
such Revolving Credit Loans.
4.10. INTEREST AFTER DEFAULT.
----------------------
4.10.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
---------------
permitted by applicable law) interest on the Revolving Credit Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded monthly and payable on demand at a
rate per annum equal to two percent (2%) above the Base Rate until such
amount shall be paid in full (after as well as before judgment).
4.10.2. AMOUNTS NOT OVERDUE. During the continuance of a Default
-------------------
or an Event of Default the principal of the Revolving Credit Loans not
overdue shall, until such Default or Event of Default has been cured or
remedied or such Default or Event of Default has been waived by the
Majority Banks pursuant to (S)25, bear interest at a rate per annum equal
to the greater of (a) two percent (2%) above the rate of interest otherwise
applicable to such Revolving Credit Loans pursuant to (S)2.5 and (b) the
rate of interest applicable to overdue principal pursuant to (S)4.10.1.
5. SECURITY AND GUARANTIES.
-----------------------
5.1. SECURITY OF BORROWER. The Obligations shall be secured by a perfected
--------------------
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the assets of the Borrower, whether now
owned or hereafter acquired, pursuant to the terms of the Security Documents to
which the Borrower is a party.
5.2. GUARANTIES AND SECURITY OF SUBSIDIARIES. The Obligations shall also be
---------------------------------------
guaranteed pursuant to the terms of the Guaranty. The obligations of the
Borrower's Subsidiaries under the Guaranty shall be in turn secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of each such
Subsidiary, whether now owned or hereafter acquired, pursuant to the terms of
the Security Documents to which such Subsidiary is a party.
6. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Banks and the Agent as follows:
<PAGE>
-24-
6.1. CORPORATE AUTHORITY.
-------------------
6.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and
----------------------------
its Subsidiaries (a) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as
now conducted and as presently contemplated, and (c) is in good standing as
a foreign corporation and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure
to be so qualified would not have a materially adverse effect on the
business, assets or financial condition of the Borrower or its
Subsidiaries.
6.1.2. AUTHORIZATION. The execution, delivery and performance of
-------------
this Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate authority of
such Person, (b) have been duly authorized by all necessary corporate
proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
the Borrower or any of its Subsidiaries is subject or any judgment, order,
writ, injunction, license or permit applicable to the Borrower or any of
its Subsidiaries and (d) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument
binding upon, the Borrower or any of its Subsidiaries.
6.1.3. ENFORCEABILITY. The execution and delivery of this Credit
--------------
Agreement and the other Loan Documents to which the Borrower or any of its
Subsidiaries is or is to become a party will result in valid and legally
binding obligations of such Person enforceable against it in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement
of creditors' rights and except to the extent that availability of the
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be
brought.
6.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by the
----------------------
Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is or is to become a
party and the transactions contemplated hereby and thereby do not require the
approval or consent of, or filing with, any governmental agency or authority
other than those already obtained.
6.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 6.3
--------------------------- -------- ---
hereto, the Borrower and its Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
6.4. FINANCIAL STATEMENTS AND PROJECTIONS.
------------------------------------
<PAGE>
-25-
6.4.1. FISCAL YEAR. The Borrower and each of its Subsidiaries
-----------
has a fiscal year which is the twelve months ending on December 31 of each
calendar year.
6.4.2. FINANCIAL STATEMENTS. There has been furnished to each of
--------------------
the Banks a consolidated balance sheet of the Borrower and its Subsidiaries
as at September 30, 1997, in substantially the form set forth on Schedule
--------
6.4.2(a) hereof. Except as set forth on Schedule 6.4.2(b), such balance
-------- -------- --------
sheet has been prepared in accordance with generally accepted accounting
principles and such balance sheet fairly presents the financial condition
of the Borrower as at the close of business on the date thereof. In
addition, the Borrower has delivered to the Banks copies of all financial
statements of The Hackett Group, Inc. received by the Borrower in
connection with the Hackett Acquisition, and, to the best of the Borrower's
knowledge, the financial statements for the period ended September 30, 1997
present fairly the financial position of The Hackett Group, Inc. and its
Subsidiaries for the periods covered by such financial statements. There
are no contingent liabilities of the Borrower or any of its Subsidiaries as
of such date involving material amounts, known to the officers of the
Borrower not disclosed in said balance sheet and the related notes thereto.
6.4.3. PROJECTIONS. The Borrower has delivered to the Agent and
-----------
the Banks the projections of the annual operating budgets of the Borrower
and its Subsidiaries on a consolidated basis, balance sheets and cash flow
statements for the 1998 to 1999 fiscal years. Such projections have been
produced by the Borrower using a methodology which is acceptable to the
Agent. To the knowledge of the Borrower or any of its Subsidiaries, no
facts exist on the Closing Date that (individually or in the aggregate)
would result in any material change in any of such projections. Except as
set forth on Schedule 6.4.2(b) the projections are based upon reasonable
-----------------
estimates and assumptions, have been prepared on the basis of the
assumptions stated therein and reflect the reasonable estimates of the
Borrower and its Subsidiaries of the results of operations and other
information projected therein.
6.5. NO MATERIAL CHANGES, ETC.; SOLVENCY
-----------------------------------
6.5.1. NO CHANGES. Since the Balance Sheet Date there has
----------
occurred no materially adverse change in the consolidated financial
condition or results of operations of the Borrower and its Subsidiaries as
shown on or reflected in the consolidated balance sheet of the Borrower and
its Subsidiaries as at such date, other than changes in the ordinary course
of business that have not had any materially adverse effect either
individually or in the aggregate on the business or financial condition of
the Borrower or its Subsidiaries. Since April 23, 1997, the Borrower has
not made any Distribution.
6.5.2. SOLVENCY. The Borrower and its Subsidiaries, on a going-
--------
concern basis and on a consolidated and consolidating basis, both before
and after giving effect to the transactions contemplated by this Credit
Agreement and the other Loan Documents (a) are solvent, (b) have assets
having a fair value in excess of their liabilities, (c) have assets having
a fair value in excess of the amount required to pay their liabilities on
existing debts as such debts become absolute and matured, and (d) have, and
expect to continue to have, access to adequate capital for the conduct of
<PAGE>
-26-
their business and the ability to pay their debts from time to time
incurred in connection with the operation of their business as such debts
mature.
6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrower and its
------------------------------------
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
6.7. LITIGATION. Except as set forth on Schedule 6.7 hereto, there are no
---------- ------------
actions, suits, proceedings or investigations of any kind pending or, to the
Borrower's knowledge, threatened against the Borrower or any of its Subsidiaries
before any court, tribunal or administrative agency or board that, if adversely
determined, might, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of the Borrower
and its Subsidiaries or materially impair the right of the Borrower and its
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower, or which question the validity of
this Credit Agreement or any of the other Loan Documents, or any action taken or
to be taken pursuant hereto or thereto.
6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Except as set forth on Schedule
------------------------------------ --------
6.8 hereto, neither the Borrower nor any of its Subsidiaries is subject to any
- - ---
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of the Borrower or
any of its Subsidiaries. Except as set forth on Schedule 6.8 hereto, neither the
------------
Borrower nor any of its Subsidiaries is a party to any contract or agreement
that has or is expected, in the judgment of the Borrower's officers, to have any
materially adverse effect on the business of the Borrower or any of its
Subsidiaries.
6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower nor
--------------------------------------------
any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of the Borrower or any of its Subsidiaries.
6.10. TAX STATUS. The Borrower and its Subsidiaries (a) have made or filed
----------
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which any of them is subject, (b) have paid all
taxes and other governmental assessments and charges shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and by appropriate proceedings and (c) have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrower know of no basis
for any such claim.
6.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and
-------------------
is continuing.
<PAGE>
-27-
6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower nor
-------------------------------------------
any of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
6.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
------------------------------------
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or rights
thereunder.
6.14. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges
-------------------------------
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral are not subject
to any setoff, claims, withholdings or other defenses, except for the Permitted
Liens. The Borrower or a Subsidiary of the Borrower party to one of the Security
Agreements is the owner of the Collateral free from any lien, security interest,
encumbrance and any other claim or demand, except for Permitted Liens.
6.15. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant
--------------------
to which the Borrower or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Borrower or such
Subsidiary could obtain from third parties, none of the officers, directors, or
employees of the Borrower or any of its Subsidiaries is presently a party to any
transaction with the Borrower or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
6.16. EMPLOYEE BENEFIT PLANS.
----------------------
6.16.1. IN GENERAL. Each Employee Benefit Plan and each
----------
Guaranteed Pension Plan has been maintained and operated in compliance in
all material respects with the provisions of ERISA and, to the extent
applicable, the Code, including but not limited to the provisions
thereunder respecting prohibited transactions and the bonding of
fiduciaries and other persons handling plan funds as required by (S)412 of
ERISA. The Borrower has heretofore delivered to the Agent the most recently
completed annual report, Form 5500, with all required attachments, and
actuarial statement required to be submitted under (S)103(d) of ERISA, with
respect to each Guaranteed Pension Plan.
6.16.2. TERMINABILITY OF WELFARE PLANS. No Employee Benefit Plan,
------------------------------
which is an employee welfare benefit plan within the meaning of (S)3(1) or
(S)3(2)(B) of ERISA, provides benefit coverage subsequent to termination of
employment,
<PAGE>
-28-
except as required by Title I, Part 6 of ERISA or the applicable state
insurance laws. The Borrower may terminate each such Plan at any time (or
at any time subsequent to the expiration of any applicable bargaining
agreement) in the discretion of the Borrower without liability to any
Person other than for claims arising prior to termination.
6.16.3. GUARANTEED PENSION PLANS. Each contribution required to
------------------------
be made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of (S)302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan, and
neither the Borrower nor any ERISA Affiliate is obligated to or has posted
security in connection with an amendment to a Guaranteed Pension Plan
pursuant to (S)307 of ERISA or (S)401(a)(29) of the Code. No liability to
the PBGC (other than required insurance premiums, all of which have been
paid) has been incurred by the Borrower or any ERISA Affiliate with respect
to any Guaranteed Pension Plan and there has not been any ERISA Reportable
Event (other than an ERISA Reportable Event as to which the requirement of
30 days notice has been waived), or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by
the PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of (S)4001 of ERISA did not exceed the
aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
6.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
-------------------
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under (S)4201 of ERISA or as a
result of a sale of assets described in (S)4204 of ERISA. Neither the
Borrower nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of
(S)4241 or (S)4245 of ERISA or is at risk of entering reorganization or
becoming insolvent, or that any Multiemployer Plan intends to terminate or
has been terminated under (S)4041A of ERISA.
6.17. USE OF PROCEEDS.
---------------
6.17.1. GENERAL. The proceeds of the Revolving Credit Loans shall
-------
be used for working capital and general corporate purposes (including
without limitation to fund Permitted Acquisitions).
6.17.2. REGULATIONS U AND X. No portion of any Revolving Credit
-------------------
Loan is to be used for the purpose of purchasing or carrying any "margin
security" or "margin stock" as such terms are used in Regulations U and X
of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
221 and 224.
<PAGE>
-29-
6.17.3. INELIGIBLE SECURITIES. No portion of the proceeds of any
---------------------
Revolving Credit Loans is to be used for the purpose of (a) knowingly
purchasing, or providing credit support for the purchase of, Ineligible
Securities from a Section 20 Subsidiary during any period in which such
Section 20 Subsidiary makes a market in such Ineligible Securities, (b)
knowingly purchasing, or providing credit support for the purchase of,
during the underwriting or placement period, any Ineligible Securities
being underwritten or privately placed by a Section 20 Subsidiary, or (c)
making, or providing credit support for the making of, payments of
principal or interest on Ineligible Securities underwritten or privately
placed by a Section 20 Subsidiary and issued by or for the benefit of the
Borrower or any Subsidiary or other Affiliate of the Borrower.
6.18. ENVIRONMENTAL COMPLIANCE. To the best of the Borrower's knowledge,
------------------------
except as disclosed on Schedule 6.18 hereto:
-------------
(a) none of the Borrower, its Subsidiaries or any operator of the
Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those
arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which violation would have
a material adverse effect on the environment or the business, assets or
financial condition of the Borrower or any of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries has received
notice from any third party including, without limitation, any federal,
state or local governmental authority, (i) that any one of them has been
identified by the United States Environmental Protection Agency ("EPA") as
a potentially responsible party under CERCLA with respect to a site listed
on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that
any hazardous waste, as defined by 42 U.S.C. (S)6903(5), any hazardous
substances as defined by 42 U.S.C. (S)9601(14), any pollutant or
contaminant as defined by 42 U.S.C. (S)9601(33) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by
any Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has
ordered that any Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances;
(c) except as set forth on Schedule 6.18 attached hereto: (i) no
-------- ----
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws or
<PAGE>
-30-
where a violation of such Environmental Laws would not have a material
adverse effect on the business, assets or financial condition of the
Borrower or any of its Subsidiaries; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on any
portion of the Real Estate; (ii) in the course of any activities conducted
by the Borrower, its Subsidiaries or operators of its properties, no
Hazardous Substances have been generated or are being used on the Real
Estate except in accordance with applicable Environmental Laws or where a
violation of such Environmental Laws would not have a material adverse
effect on the business, assets or financial condition of the Borrower or
any of its Subsidiaries; (iii) there have been no releases (i.e. any past
or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases would have a
material adverse effect on the value of any of the Real Estate or adjacent
properties or the environment; (iv) to the best of the Borrower's
knowledge, there have been no releases on, upon, from or into any real
property in the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on, and which would
have a material adverse effect on the value of, the Real Estate; and (v) in
addition, any Hazardous Substances that have been generated on any of the
Real Estate have been transported offsite only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities have
been and are, to the best of the Borrower's knowledge, operating in
compliance with such permits and applicable Environmental Laws; and
(d) None of the Borrower and its Subsidiaries or any of the other
Real Estate is subject to any applicable environmental law requiring the
performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any other transactions contemplated hereby.
6.19. SUBSIDIARIES, ETC. Schedule 6.19(a) sets forth each Subsidiary of the
----------------- -------- -------
Borrower, and each Subsidiary of any Subsidiary. Except as set forth on Schedule
--------
6.19(b) hereto, neither the Borrower nor any Subsidiary of the Borrower is
- - -------
engaged in any joint venture or partnership with any other Person.
6.20. BANK ACCOUNTS. Schedule 6.20 sets forth the account numbers and
------------- -------- ----
location of all bank accounts of the Borrower or any of its Subsidiaries.
6.21. DISCLOSURE. None of this Credit Agreement or any of the other Loan
----------
Documents contains any untrue statement of a material fact or omits to state a
material fact (known to the Borrower or any of its Subsidiaries in the case of
any document or information not furnished by it or any of its Subsidiaries)
necessary in order to make the statements herein or therein not misleading.
There is no fact known to the Borrower or any of its Subsidiaries which
materially adversely affects, or which is reasonably likely in the future to
materially adversely affect, the business, assets, financial condition or
prospects of
<PAGE>
-31-
the Borrower or any of its Subsidiaries, exclusive of effects resulting from
changes in general economic conditions, legal standards or regulatory
conditions.
6.22. CHIEF EXECUTIVE OFFICES. As of the date hereof, the Borrower's
-----------------------
principal place of business is at 1401 Brickell Avenue, Suite 350, Miami,
Florida 33131, at which location its books and records are kept.
6.23. NO AMENDMENTS TO CERTAIN DOCUMENTS. Each of the representations and
----------------------------------
warranties made by the Borrowers or any of its Subsidiaries in any of the Loan
Documents was true and correct in all material respects when made and continues
to be true and correct in all material respects on the date hereof, except to
the extent that any of such representations and warranties relate, by the
express terms thereof, solely to a date falling prior to the date hereof, and
except to the extent that any of such representations and warranties may have
been affected by the consummation of the transactions contemplated and permitted
or required by the Loan Documents.
6.24. INSURANCE. The Borrower and each of its Subsidiaries maintain with
---------
financially sound and reputable insurers insurance with respect to their
properties and businesses against such casualties and contingencies as are in
accordance with sound business practices.
7. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans:
7.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause
----------------
to be paid the principal and interest on the Revolving Credit Loans and the
commitment fees and all other amounts provided for in this Credit Agreement and
the other Loan Documents to which the Borrower or any of its Subsidiaries is a
party, all in accordance with the terms of this Credit Agreement and such other
Loan Documents.
7.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief executive
---------------------
office in Miami, Florida, or at such other place in the United States of America
as the Borrower shall designate upon written notice to the Agent, where notices,
presentations and demands to or upon the Borrower in respect of the Loan
Documents may be given or made.
7.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause each of
--------------------
its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles; (b) to the extent required by generally accepted
accounting principles, maintain adequate accounts and reserves for all taxes
(including income taxes), depreciation, depletion, obsolescence and amortization
of its properties and the properties of its Subsidiaries, contingencies, and
other reserves; and (c) within thirty (30) days from the Closing Date and at all
times thereafter engage a "Big Six" accounting firm or, if not a "Big Six"
accounting firm, such other independent certified public accountants
satisfactory to the Agent as the independent certified public accountants of the
Borrower and its Subsidiaries and will not permit more than thirty (30) days to
elapse between the cessation of such firm's (or any successor firm's) engagement
as the independent certified public accountants of the
<PAGE>
-32-
Borrower and its Subsidiaries and the appointment in such capacity of a
successor firm as shall be satisfactory to the Agent.
7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower will
--------------------------------------------------
deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries and the
consolidating balance sheet of the Borrower and its Subsidiaries, each as
at the end of such year, and the related consolidated statement of income
and consolidated statement of cash flow and consolidating statement of
income for such year, each setting forth in comparative form the figures
for the previous fiscal year and all such consolidated and consolidating
statements to be in reasonable detail, prepared in accordance with
generally accepted accounting principles, and certified without
qualification by a "Big Six" accounting firm or by other independent
certified public accountants satisfactory to the Agent, together with a
written statement from such accountants to the effect that they have read a
copy of this Credit Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default; provided
--------
that such accountants shall not be liable to the Banks for failure to
obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than (i) sixty
(60) days after the fiscal quarter ending December 31, 1997; and (iv)
forty-five (45) days after the end of each of the other fiscal quarters of
the Borrower, copies of the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries and the unaudited consolidating balance sheet
of the Borrower and its Subsidiaries, each as at the end of such quarter,
and the related consolidated statement of income and consolidated statement
of cash flow and consolidating statement of income for the portion of the
Borrower's fiscal year then elapsed, all in reasonable detail and prepared
in accordance with generally accepted accounting principles, together with
a certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements fairly
presents the financial position of the Borrower and its Subsidiaries on the
date thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each fiscal year of the Borrower, unaudited
monthly consolidated financial statements of the Borrower and its
Subsidiaries for such month and unaudited monthly consolidating financial
statements of the Borrower and its Subsidiaries for such month, each
prepared in accordance with generally accepted accounting principles,
together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such financial
statements fairly presents the financial condition of the Borrower and its
Subsidiaries on the date thereof (subject to year-end adjustments);
<PAGE>
-33-
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of the Borrower in substantially
the form of Exhibit C hereto (the "Compliance Certificate") and setting
------- -
forth in reasonable detail computations evidencing compliance with the
covenants contained in (S)9 and (if applicable) reconciliations to reflect
changes in generally accepted accounting principles since the Balance Sheet
Date; provided, however, the Borrower shall not be required to deliver a
-------- -------
Compliance Certificate for the fiscal quarter ending December 31 of each
year until ninety (90) days after the end of such fiscal quarter;
(e) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of the Borrower;
(f) from time to time upon request of the Agent, projections of the
Borrower and its Subsidiaries updating those projections delivered to the
Banks and referred to in (S)6.4.3 or, if applicable, updating any later
such projections delivered in response to a request pursuant to this
(S)7.4(f);
(g) from time to time such other financial data and information
(including accountants' management letters) as the Agent or any Bank may
reasonably request; and
(h) by not later than November 30, 1997, a consolidated balance sheet
of the Borrower and its Subsidiaries as at October 31, 1997.
7.5. NOTICES.
-------
7.5.1. DEFAULTS. The Borrower will promptly notify the Agent and
--------
each of the Banks in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice or take any other action in
respect of a claimed default (whether or not constituting an Event of
Default) under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to
which the Borrower or any of its Subsidiaries is a party or obligor,
whether as principal or surety, the Borrower shall forthwith give written
notice thereof to each of the Banks, describing the notice or action and
the nature of the claimed default.
7.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give notice
--------------------
to the Agent (a) of any violation of any Environmental Law that the
Borrower or any of its Subsidiaries reports in writing or is reportable by
such Person in writing (or for which any written report supplemental to any
oral report is made) to any federal, state or local environmental agency
and (b) upon becoming aware thereof, of any inquiry, proceeding,
investigation, or other action, including a notice from any agency of
potential environmental liability, of any federal, state or local
environmental agency or board, that has the potential to materially affect
the assets, liabilities, financial conditions or operations of the Borrower
or any of its Subsidiaries, or the Agent's security interests pursuant to
the Security Documents.
<PAGE>
-34-
7.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. The Borrower
-----------------------------------------
will, immediately upon becoming aware thereof, notify the Agent and each of
the Banks in writing of any setoff, claims (including, with respect to the
Real Estate, environmental claims), withholdings or other defenses to which
any of the Collateral, or the Agent's rights with respect to the
Collateral, are subject.
7.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will, and
----------------------------------
will cause each of its Subsidiaries to, give notice to the Agent and each
of the Banks in writing within fifteen (15) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower or any of its Subsidiaries or to
which the Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a materially adverse
effect on the Borrower or any of its Subsidiaries and stating the nature
and status of such litigation or proceedings. The Borrower will, and will
cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks, in writing, in form and detail satisfactory to the Agent, within ten
(10) days of any judgment not covered by insurance, final or otherwise,
against the Borrower or any of its Subsidiaries in an amount in excess of
$1,000,000.
7.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will
----------------------------------------------
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Borrower may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) will, and will cause
each of its Subsidiaries to, continue to engage primarily in the businesses now
conducted by them and in related businesses; provided that nothing in this
(S)7.6 shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties or those of its Subsidiaries if such
discontinuance is, in the judgment of the Borrower, desirable in the conduct of
its or their business and that do not in the aggregate materially adversely
affect the business of the Borrower and its Subsidiaries on a consolidated
basis.
7.7. INSURANCE; LIFE INSURANCE.
-------------------------
7.7.1. INSURANCE. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such
periods as may be reasonable and prudent and in accordance with the terms
of the Security Agreements.
7.7.2 LIFE INSURANCE. The Borrower shall obtain the Life Insurance
--------------
Policy and deliver the Life Insurance Assignment within sixty (60) days of
the Closing
<PAGE>
-35-
Date. In addition, the Borrower will pay all premiums when due on the Life
Insurance Policy and properly notify the Agent in writing of the death of
the individual covered by the Life Insurance Policy. In the event of the
death of such individual, if an Event of Default shall have occurred and be
continuing or, if no Event of Default shall have occurred and be continuing
but six months has elapsed from the receipt of such proceeds without a
Proceeds Request (as hereinafter defined) from the Borrower, the Borrower
agrees that the Agent may, upon three (3) Business Days prior written
notice to the Borrower, apply the proceeds of the Life Insurance Policy as
a mandatory prepayment of the amounts payable hereunder and the other Loan
Documents in such order of priority as is contemplated in (S)12.4, with the
Total Commitment (if not then terminated) being reduced by the amount
applied to the principal of the Revolving Credit Notes. In the event of the
death of such individual, so long as no Event of Default has occurred and
is continuing, at the request of the Borrower (which request shall not be
later than six (6) months after the death of the insured individual) (the
"Proceeds Request") the Agent shall deliver to the Borrower any proceeds
received by the Agent from the Life Insurance Policy so long as the
Borrower has demonstrated to the reasonable satisfaction of the Agent that
such proceeds will be applied by the Borrower to fund the search for and
employment of a replacement for the insured individual.
7.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
-----
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
(other than taxes, assessments and other governmental charges imposed by foreign
jurisdictions that in the aggregate are not material to the business or assets
of the Borrower on an individual basis or of the Borrower and its Subsidiaries
on a consolidated basis) imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto in accordance with generally accepted
accounting principles; and provided further that the Borrower and each
-------- -------
Subsidiary of the Borrower will pay all such taxes, assessments, charges, levies
or claims forthwith upon the commencement of proceedings to foreclose any lien
that may have attached as security therefor.
<PAGE>
-36-
7.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
---------------------------------------
7.9.1. GENERAL. The Borrower shall permit the Banks, through the
-------
Agent or any of the Banks' other designated representatives, to visit and
inspect any of the properties of the Borrower or any of its Subsidiaries to
examine the books of account of the Borrower and its Subsidiaries (and to
make copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, its and their officers, all at such reasonable
times and intervals as the Agent or any Bank may reasonably request.
7.9.2. COLLATERAL AUDIT. No more frequently than once each
----------------
calendar year, or more frequently as determined by the Agent if an Event of
Default shall have occurred and be continuing, upon the request of the
Agent, the Borrower shall permit the Banks, the Agent or any of the Banks'
other designated representatives, to conduct a collateral audit and
inspection. All such audits and inspections shall be made at the expense of
the Borrower.
7.9.3. COMMUNICATION WITH ACCOUNTANTS. The Borrower authorizes the
------------------------------
Agent and, if accompanied by the Agent, the Banks to communicate directly
with the Borrower's independent certified public accountants and authorizes
such accountants to disclose to the Agent and the Banks any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of the Borrower or any of its
Subsidiaries. The Borrower shall have the right to be present at all such
communications. At the request of the Agent, the Borrower shall deliver a
letter addressed to such accountants instructing them to comply with the
provisions of this (S)7.9.3.
7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
------------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to, comply with (a) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws, (b) the provisions of its charter documents and by-laws,
(c) all agreements and instruments by which it or any of its properties may be
bound and (d) all applicable decrees, orders, and judgments. If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that the Borrower or any of its Subsidiaries may fulfill any of its obligations
hereunder or under any of the other Loan Documents to which the Borrower or such
Subsidiary is a party, the Borrower will, or (as the case may be) will cause
such Subsidiary to, immediately take or cause to be taken all reasonable steps
within the power of the Borrower or such Subsidiary to obtain such
authorization, consent, approval, permit or license and furnish the Agent and
the Banks with evidence thereof.
7.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly upon filing
----------------------
the same with the Department of Labor or Internal Revenue Service, furnish to
the Agent a copy of the most recent actuarial statement required to be submitted
under (S)103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under (S)(S)302,
<PAGE>
-37-
4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245 of ERISA.
7.12. USE OF PROCEEDS. The Borrower will use the proceeds of the
---------------
Revolving Credit Loans solely for working capital and general corporate purposes
(including, without limitation, to finance all or any portion of Permitted
Acquisitions).
7.13. BANK ACCOUNTS. The Borrower will, and will cause each of its
-------------
Subsidiaries to, together with the employees, agents and other Persons acting on
behalf of the Borrower or such Subsidiary, receive and hold in trust for the
Agent and the Banks all payments constituting proceeds of Accounts Receivable or
other Collateral which come into their possession or under their control and,
upon the written request of the Agent, immediately upon receipt thereof, deposit
such payments in the form received, with any appropriate endorsements, in one of
the accounts designated as a central depository account on Schedule 6.20.
-------- ----
7.14. NEW GUARANTORS. In the event any Subsidiary is formed or acquired
--------------
after the date hereof, such Subsidiary shall, on the date of its formation or
acquisition, guarantee the Obligations and shall execute and deliver to the
Agent a joinder to the Guaranty in form and substance satisfactory to the Agent.
In addition, such new Subsidiary shall also be bound by the security provisions
of (S)6 hereof, shall execute and deliver to the Agent a Security Agreement to
the Agent and shall take all other action necessary to grant to the Agent for
the benefit of the Agent and the Banks a first priority perfected security
interest in all of its assets (subject only to Permitted Liens).
7.15. FURTHER ASSURANCES. The Borrower will, and will cause each of its
------------------
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
7.16. PREFERRED STOCK. The Borrower will, within thirty (30) days of the
---------------
Closing Date, enter into documentation with BKB or any of its affiliates which
shall be satisfactory to BKB to effect, at BKB's sole and absolute discretion,
the purchase by BKB of certain of the preferred capital stock of the Borrower at
a purchase price of $15.00 per share, up to an aggregate maximum investment of
$500,000.
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans:
8.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
----------------------------
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any of
the Loan Documents;
<PAGE>
-38-
(b) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
(c) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by the Borrower or
such Subsidiary or under any Capitalized Lease, provided that the aggregate
--------
principal amount of such Indebtedness of the Borrower and its Subsidiaries
shall not exceed the aggregate amount of $2,000,000 at any one time;
(d) Indebtedness existing on the date of this Credit Agreement
and listed and described on Schedule 8.1 hereto;
-------- ---
(e) Indebtedness of a Subsidiary of the Borrower to the Borrower
so long as such Subsidiary has guaranteed all the Obligations hereunder
pursuant to the Guaranty;
(f) in addition to those items set forth on Schedule 8.1,
------------
Indebtedness of the Borrower incurred in connection with the issuance of a
letter of credit for the account of the Borrower to be issued to a landlord
of the Borrower as substitution for a cash security deposit by the
Borrower, so long as the aggregate face amount of all such letters of
credit so issued does not exceed $250,000; and
(g) other unsecured Indebtedness not otherwise expressly
permitted pursuant to this (S)8.1 in an aggregate amount not to exceed
$500,000 at any time outstanding.
8.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
---------------------
any of its Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (e) sell, assign, pledge or otherwise
transfer any "receivables" as defined in clause (g) of the definition of the
term "Indebtedness" with or without recourse; or (f) enter into or permit to
exist any arrangement or agreement, enforceable under applicable law, which
directly or indirectly prohibits the Borrower or any of its Subsidiaries from
creating or incurring any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest other than in favor of the Agent for the
benefit of the Banks and the Agent under the Loan Documents and other customary
anti-assignment provisions in leases and licensing agreements entered into by
the Borrower or such Subsidiary in the ordinary course of its business, provided
--------
that the Borrower or any of its Subsidiaries may create or incur or suffer to be
created or incurred or to exist:
<PAGE>
-39-
(a) liens in favor of the Borrower on all or part of the assets
of Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries
of the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties to
secure claims for labor, material or supplies in respect of obligations not
overdue;
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) liens on properties in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which the
Borrower or such Subsidiary shall at the time in good faith be prosecuting
an appeal or proceeding for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;
(e) liens of carriers, warehousemen, mechanics and materialmen,
and other like liens on properties in existence less than 120 days from the
date of creation thereof in respect of obligations not overdue;
(f) encumbrances on Real Estate consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the Borrower is
a party, and other minor liens or encumbrances none of which in the opinion
of the Borrower interferes materially with the use of the property affected
in the ordinary conduct of the business of the Borrower and its
Subsidiaries, which defects do not individually or in the aggregate have a
materially adverse effect on the business of the Borrower individually or
of the Borrower and its Subsidiaries on a consolidated basis;
(g) liens existing on the date hereof and listed on Schedule 8.2
------------
hereto;
(h) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof to
secure purchase money Indebtedness of the type and amount permitted by
(S)8.1(c), incurred in connection with the acquisition of such property,
which security interests or mortgages cover only the real or personal
property so acquired; and
(i) liens in favor of the Agent for the benefit of the Banks and
the Agent under the Loan Documents.
8.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
---------------------------
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase
by the Borrower;
<PAGE>
-40-
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total assets in
excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Services, Inc., and not less than "A 1" if rated by Standard and
Poor's Rating Group;
(d) Investments existing on the date hereof and listed on
Schedule 8.3 hereto;
-------- ---
(e) Investments with respect to Indebtedness permitted by
(S)8.1(e) so long as such entities remain Subsidiaries of the Borrower and
such Subsidiary is a party to the Guaranty;
(f) Investments consisting of the Guaranty or Investments by the
Borrower in Subsidiaries of the Borrower which are party to the Guaranty;
and
(g) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by (S)8.5.2;
provided, however, that, with the exception of demand deposits referred to in
- - -------- -------
(S)8.3(b), such Investments will be considered Investments permitted by this
(S)8.3 only if all actions have been taken to the satisfaction of the Agent to
provide to the Agent, for the benefit of the Banks and the Agent, a first
priority perfected security interest in all of such Investments free of all
encumbrances other than Permitted Liens.
8.4. RESTRICTED PAYMENTS; DISTRIBUTIONS. The Borrower and its
----------------------------------
Subsidiaries will not make any Restricted Payments; provided, however, the
Subsidiaries of the Borrower shall be permitted to make Distributions to the
Borrower or to any other Subsidiary which is party to the Guaranty.
8.5. MERGER, CONSOLIDATION.
---------------------
8.5.1 MERGERS AND ACQUISITIONS. The Borrower will not, and will
------------------------
not permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary course of
business consistent with past practices) except (a) the merger or
consolidation of one or more of the Subsidiaries of the Borrower with and
into the Borrower; (b) or the merger or consolidation of two or more
Subsidiaries of the Borrower; (c) the acquisition of the assets and/or
stock of Delphi Partners, Inc. (the "Delphi Acquisition"), provided (i) no
Default or Event of Default has occurred and is continuing, (ii) the
Borrower has delivered to the Agent all documents, instruments and
agreements to be entered into in connection therewith; and (iv) the
Borrower has demonstrated to the Agent compliance with (S)8.5.1(d)(iii) -
(iv) hereof; and (d) other asset or stock acquisitions of Persons in the
same or a similar line of business as the Borrower (a "Permitted
Acquisition", and, collectively with the Delphi Acquisition, the "Permitted
Acquisitions") where (i) the Borrower
<PAGE>
-41-
has provided the Agent with five (5) Business Days prior written notice of
such Permitted Acquisition, which notice shall include a reasonably
detailed description of such Permitted Acquisition; (ii) the Borrower has
provided the Agent with all documents, instruments and agreements to be
entered into in connection with the Permitted Acquisition; (iii) the
business to be acquired would not subject the Agent or any of the Banks to
regulatory or third party approvals in connection with the exercise of its
rights and remedies under this Credit Agreement and the other Loan
Documents; (iv) the business and assets so acquired in such Permitted
Acquisition shall be acquired by the Borrower free and clear of all liens
(other than Permitted Liens) and all Indebtedness (other than Indebtedness
expressly permitted pursuant to (S)8.1 hereof); (v) the Borrower has taken
or caused to be taken all necessary actions to grant to the Agent a first
priority perfected lien in all assets and stock to be acquired in
connection with such Permitted Acquisition; (vi) the Borrower has
demonstrated to the satisfaction of the Agent, based on a pro forma
Compliance Certificate (which pro forma Compliance Certificate has been
prepared with a methodology consistent with that used in preparing the
projections delivered to the Agent and the Banks on the Closing Date),
compliance with (S)9 hereof of a pro forma basis both immediately prior to
and after giving effect to such Permitted Acquisition; (vii) the Borrower
is the survivor of any merger consummated in connection with such Permitted
Acquisition; and (viii) the Borrower has delivered to the Agent a
certificate of the chief financial officer of the Borrower to the effect
that (1) the Borrower will be solvent on a going-concern basis upon the
consummation of the Permitted Acquisition; (2) the pro forma Compliance
Certificate fairly presents the financial condition of the Borrower and its
Subsidiaries as of the date thereof and after giving effect to such
Permitted Acquisition and (3) no Default or Event of Default then exists or
would result after giving effect to the Permitted Acquisition.
In the event any new Subsidiary is formed or acquired as a result of
or in connection with any acquisition, the Loan Documents shall be amended
and/or supplemented as necessary to make the terms and conditions of the
Loan Documents applicable to such Subsidiary.
8.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will not
---------------------
permit any of its Subsidiaries to, become a party to or agree to or effect
any disposition of assets, other than the licensing of intellectual
property and the disposition of obsolete assets, in each case in the
ordinary course of business, consistent with past practices.
8.6. SALE AND LEASEBACK. Except for the sale and leaseback of up to
------------------
$1,500,000 in the aggregate of computer equipment currently owned by the
Borrower, the Borrower will not, and will not permit any of its Subsidiaries to,
enter into any arrangement, directly or indirectly, whereby the Borrower or any
Subsidiary of the Borrower shall sell or transfer any property owned by it in
order then or thereafter to lease such property or lease other property that the
Borrower or any Subsidiary of the Borrower intends to use for substantially the
same purpose as the property being sold or transferred.
8.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and will
----------------------------------
not permit any of its Subsidiaries to, (a) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage
<PAGE>
-42-
receptacle for Hazardous Substances, (c) generate any Hazardous Substances on
any of the Real Estate, (d) conduct any activity at any Real Estate or use any
Real Estate in any manner so as to cause a release (i.e. releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping) or threatened release of Hazardous Substances
on, upon or into the Real Estate or (e) otherwise conduct any activity at any
Real Estate or use any Real Estate in any manner that would violate any
Environmental Law or bring such Real Estate in violation of any Environmental
Law.
8.8. FISCAL YEAR. The Borrower will not, and will not permit any of its
-----------
Subsidiaries to, change the date of the end of their respective fiscal years
from that set forth in (S)6.4.1.
8.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
----------------------
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (S)302 of ERISA, whether or
not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner which,
could result in the imposition of a lien or encumbrance on the assets of
the Borrower or any of its Subsidiaries pursuant to (S)302(f) or (S)4068 of
ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring
the posting of security pursuant to (S)307 of ERISA or (S)401(a)(29) of the
Code; or
(e) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities.
8.10. BUSINESS ACTIVITIES. The Borrower will not, and will not permit any
-------------------
of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by them on the Closing Date and in related businesses.
8.11. CHANGE IN TERMS OF EMPLOYMENT AGREEMENTS. The Borrower will not,
----------------------------------------
and will not permit any of it Subsidiaries to, amend, supplement of modify, or
consent to any such amendment, supplement or modification to, any provisions of
the Employment Agreement pertaining to (a) any repurchase options by the
Borrower; (b) any rights of first refusal upon transfers of the capital stock of
the Borrower; (c) non competition and non solicitation requirements; (d)
confidentiality requirements by the employee; (e) ownership of inventions,
patents, developments and similar or related information; and (f) the
assignability by the Borrower of such agreements without the prior written
consent of the Agent, unless such amendment, supplement or modification is of an
immaterial and
<PAGE>
-43-
ministerial nature and would not have a material adverse effect on the assets,
business or financial condition of the Borrower or such Subsidiary.
8.12. TRANSACTIONS WITH AFFILIATES. Except as otherwise expressly set
----------------------------
forth on Schedule 6.15 hereto, the Borrower will not, and will not permit any of
its Subsidiaries to, engage in any transaction with any Affiliate (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such Affiliate or, to the knowledge of the
Borrower, any corporation, partnership, trust or other entity in which any such
Affiliate has a substantial interest or is an officer, director, trustee or
partner, on terms more favorable to such Person than would have been obtainable
on an arm's-length basis in the ordinary course of business.
8.13. BANK ACCOUNTS. The Borrower will not, and will not permit any of
-------------
its Subsidiaries to, violate directly or indirectly any bank agency or lock box
agreement in favor of the Agent for the benefit of the Banks and the Agent with
respect to any bank account.
8.14. UPSTREAM LIMITATIONS. The Borrowers will not, and will not permit
--------------------
any of its Subsidiaries to, enter into any agreement, contract or arrangement
(other than the Credit Agreement and the other Loan Documents) restricting the
ability of any Subsidiary to pay or make dividends or distributions in cash or
kind, to make loans, advances or other payments of whatsoever nature or to make
transfers or distributions of all or any part of its assets (other than as
permitted by (S)8.2 hereof) to the Borrower or any of its Subsidiaries.
8.15. INCONSISTENT AGREEMENTS. The Borrower will not, and will not permit
-----------------------
any of its Subsidiaries to, enter into any agreement containing any provision
which would be violated or breached by the performance by the Borrower or any of
its Subsidiaries of their respective obligations hereunder or under any of the
Loan Documents.
8.16. CHARTER AMENDMENTS. The Borrower will not, nor will it permit any
------------------
of its Subsidiaries to, amend its certificate of incorporation or bylaws, or
similar organizational documents, except if such change is of an immaterial and
ministerial nature.
9. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Revolving Credit
Loan or Revolving Credit Note is outstanding or any Bank has any obligation to
make any Revolving Credit Loans:
9.1. LEVERAGE RATIO.
--------------
The Borrower will not permit the Leverage Ratio at any time in any fiscal
quarter ending during any period described in the table set forth below to
exceed the ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
PERIOD RATIO
- - ------------------------------------------------------------------------
<S> <C>
Closing Date - June 30, 1998 2.00:1.00
- - ------------------------------------------------------------------------
any time thereafter 3.00:1.00
- - ------------------------------------------------------------------------
</TABLE>
<PAGE>
-44-
9.2. PROFITABLE OPERATIONS. The Borrower will not permit (a) a
---------------------
Consolidated Net Deficit of (i) greater than $4,000,000 in the fiscal quarter
ended September 30, 1997 and (ii) greater than $750,000 in the fiscal quarter
ending December 31, 1997; and (b) Consolidated Net Income to be less than (i)
$750,000 in each fiscal quarter in the 1998 fiscal year; (ii) $1,800,000 at the
end of each fiscal quarter for the period of the immediately two preceding
fiscal quarters in the 1998 fiscal year; (iii) $1,000,000 in each fiscal quarter
in each fiscal year thereafter; and (iv) $2,500,000 at the end of each fiscal
quarter for the period of the immediately two preceding fiscal quarters in each
fiscal year thereafter.
9.3. CONSOLIDATED OPERATING CASH FLOW TO TOTAL DEBT SERVICE. The
------------------------------------------------------
Borrower will not permit the ratio of Consolidated Operating Cash Flow to the
Total Debt Service for any fiscal quarter ending on or after March 31, 1998 to
be less than 3.00:1.00 for such fiscal quarter.
9.4. QUICK RATIO. The Borrower will not permit the ratio of Consolidated
-----------
Quick Assets to Consolidated Current Liabilities to be less than 2.00:1.00 at
any time.
9.5. CAPITAL EXPENDITURES. The Borrower will not make, or permit any
--------------------
Subsidiary of the Borrower to make, Capital Expenditures (a) in the 1997 fiscal
year that exceed, in the aggregate, $3,000,000 for such fiscal year; and (b) in
any fiscal year thereafter that exceed, in the aggregate, $2,000,000 for such
fiscal year.
10. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit Loans
shall be subject to the satisfaction of the following conditions precedent:
10.1. LOAN DOCUMENTS ETC.
------------------
10.1.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been
--------------
duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory to
each of the Banks. Each Bank shall have received a fully executed copy of
each such document.
10.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall have
-------------------------------------
received from the Borrower and each of its Subsidiaries, a copy, certified by a
duly authorized officer of such Person to be true and complete on the Closing
Date, of each of (a) its charter or other incorporation documents as in effect
on such date of certification, and (b) its by-laws as in effect on such date.
10.3. CORPORATE ACTION. All corporate action necessary for the valid
----------------
execution, delivery and performance by the Borrower and each of its Subsidiaries
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
10.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from
----------------------
the Borrower and each of its Subsidiaries an incumbency certificate, dated as of
the Closing Date, signed by a duly authorized officer of the Borrower or such
Subsidiary, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to
<PAGE>
-45-
sign, in the name and on behalf of each of the Borrower of such Subsidiary, each
of the Loan Documents to which the Borrower or such Subsidiary is or is to
become a party; (b) in the case of the Borrower, to make Loan Requests and
Conversion Requests; and (c) to give notices and to take other action on its
behalf under the Loan Documents.
10.5. VALIDITY OF LIENS. The Security Documents shall be effective to
-----------------
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent shall
have received evidence thereof in form and substance satisfactory to the Agent.
10.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall have
----------------------------------------------
received from each of the Borrower and its Subsidiaries a completed and fully
executed Perfection Certificate and the results of UCC searches with respect to
its Collateral, indicating no liens other than Permitted Liens and otherwise in
form and substance satisfactory to the Agent.
10.7. CERTIFICATES OF INSURANCE. The Agent shall have received (a) a
-------------------------
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreements and (b) certified copies of all
policies evidencing such insurance (or certificates therefore signed by the
insurer or an agent authorized to bind the insurer).
10.8. OPINIONS OF COUNSEL. Each of the Banks and the Agent shall have
-------------------
received a favorable opinion addressed to the Banks and the Agent, dated as of
the Closing Date, in form and substance satisfactory to the Banks and the Agent,
from :
(a) Hogan & Hartson LLP, counsel to the Borrower and its
Subsidiaries; and
(b) Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., local
counsel to the Borrower and its Subsidiaries with respect to the
incorporation and Security Documents involving the laws of the State of
Florida.
10.9. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
---------------
Agent, as appropriate, the closing fees pursuant to (S)4.1.
10.10. COMPLETION OF SUCCESSFUL FINANCIAL INQUIRY AND DUE DILIGENCE. The
------------------------------------------------------------
Agent shall be reasonably satisfied (a) that all financial statements of the
Borrower and its Subsidiaries provided to the Agent prior to the Closing Date
accurately set forth the financial condition of the Borrower and its
Subsidiaries for the period covered thereby; (b) with the results of its due
diligence conducted in connection with the Hackett Acquisition and the
transaction; (c) with the results of a commercial financial audit by its field
examiners; and (d) with the results of the most recent management letter
delivered to the Agent.
10.11. CONSENTS AND APPROVALS. The Agent shall have received evidence that
----------------------
all consents and approvals necessary to complete the transactions contemplated
hereby have been obtained.
<PAGE>
-46-
11. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Revolving Credit Loan, whether on
or after the Closing Date, shall also be subject to the satisfaction of the
following conditions precedent:
11.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
-----------------------------------------
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Revolving Credit Loan, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit Agreement
and the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.
11.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
-------------------
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Revolving Credit
Loan.
11.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
-----------------------
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
11.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
-------------------------
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
11.5. PRO FORMA COMPLIANCE. The Agent shall have received either (a) an
--------------------
updated pro forma Compliance Certificate demonstrating compliance with the
Leverage Ratio covenant set forth in (S)9.1 hereof on a pro forma basis both
--- -----
before and after giving effect to the making of the Revolving Credit Loan being
requested by the Borrower or (b) to the extent there are no changes to the
Compliance Certificate previously delivered to the Agent, a certification from
the Borrower that the Compliance Certificate as previously delivered continues
to demonstrate compliance with the Leverage Ratio covenant set forth in (S)9.1
hereof on a pro forma basis both before and after giving effect to the making of
--- -----
the Revolving Credit Loan being requested by the Borrower.
12. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
----------------------------------
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
<PAGE>
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(a) the Borrower shall fail to pay any principal of the Revolving
Credit Loans when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Revolving
Credit Loans, the commitment fee or other sums due hereunder or under any
of the other Loan Documents, when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment and such failure shall continue for
three (3) Business Days;
(c) the Borrower shall fail to comply with any of its covenants
contained in (S)(S)7.1, 7.4, 7.5.1, 7.9, 7.14, 8 or 9;
(d) the Borrower or any of its Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this (S)12.1) for thirty
(30) days after written notice of such failure has been given to the
Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or
in any other document or instrument delivered pursuant to or in connection
with this Credit Agreement shall prove to have been false in any material
respect upon the date when made or deemed to have been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized Leases,
in an amount in excess of $250,000 in the aggregate, or fail to observe or
perform any material term, covenant or agreement contained in any agreement
by which it is bound, evidencing or securing borrowed money or credit
received or in respect of any Capitalized Leases for such period of time as
would permit (assuming the giving of appropriate notice if required) the
holder or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an assignment
for the benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower or any of its Subsidiaries or of any
substantial part of the assets of the Borrower or any of its Subsidiaries
or shall commence any case or other proceeding relating to the Borrower or
any of its Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law
of any jurisdiction, now or hereafter in effect, or shall take any action
to authorize or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other proceeding
shall be commenced against the Borrower or any of its Subsidiaries and the
Borrower or any of its Subsidiaries shall indicate its approval thereof,
consent thereto or acquiescence therein or such petition or application
shall not have been dismissed within forty-five (45) days following the
filing thereof;
<PAGE>
-48-
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of
its Subsidiaries bankrupt or insolvent, or approving a petition in any such
case or other proceeding, or a decree or order for relief is entered in
respect of the Borrower or any Subsidiary of the Borrower in an involuntary
case under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged, against the Borrower or any of
its Subsidiaries exceeds in the aggregate $1,000,000, or the Borrower shall
pay an uninsured judgment or enter into one or more settlements of any
litigation with the aggregate judgment and/or settlement amounts not
otherwise covered by insurance of more than $1,000,000 in the aggregate;
(j) if any of the loan documents shall be canceled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in a substantial portion of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents, in
each case otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Banks, or any
action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind any of the loan documents shall be commenced by or on
behalf of the Borrower or any of its Subsidiaries party thereto or any of
their respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(k) the Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an
aggregate amount exceeding $500,000, or the Borrower or any ERISA Affiliate
is assessed withdrawal liability pursuant to Title IV of ERISA by a
Multiemployer Plan requiring aggregate annual payments exceeding $500,000,
or any of the following occurs with respect to a Guaranteed Pension Plan:
(i) an ERISA Reportable Event, or a failure to make a required installment
or other payment (within the meaning of (S)302(f)(1) of ERISA), provided
--------
that the Agent determines in its reasonable discretion that such event (A)
could be expected to result in liability of the Borrower or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate
amount exceeding $500,000 and (B) could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC, for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan or for the imposition of a lien in
favor of such Guaranteed Pension Plan; or (ii) the appointment by a United
States District Court of a trustee to administer such Guaranteed Pension
Plan; or (iii) the institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
(l) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory
<PAGE>
-49-
agency from conducting any material part of its business and such order
shall continue in effect for more than thirty (30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral if such Collateral is not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty, which in any such case causes, for more than
fifteen (15) consecutive days, the cessation or substantial curtailment of
revenue producing activities at any facility of the Borrower or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a material adverse effect on the
business or financial condition of the Borrower or such Subsidiary;
(n) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Borrower or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a material adverse effect on the
business or financial condition of the Borrower or such Subsidiary;
(o) the Borrower or any of its Subsidiaries shall be indicted for a
state or federal crime, or any civil or criminal action shall otherwise
have been brought or threatened against the Borrower or any of its
Subsidiaries, a punishment for which in any such case could include the
forfeiture of any assets of the Borrower or such Subsidiary having a fair
market value in excess of $1,000,000;
(p) the Borrower shall at any time, legally or beneficially own less
than 100% of the capital stock of each Subsidiary, as adjusted pursuant to
any stock split, stock dividend or recapitalization or reclassification of
the capital of such Subsidiary; or
(q) prior to the initial public offering of the capital stock of the
Borrower (the "IPO"), the Investors shall at any time, legally or
beneficially own less than fifty percent (50%) of the capital stock of the
Borrower, as adjusted pursuant to any stock split, stock dividend or
recapitalization or reclassification of the capital of the Borrower and
subsequent to the IPO, any person or group of persons (within the meaning
of Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of
twenty percent (20%) or more of the outstanding shares of the common stock
of the Borrower, or during any period of twelve consecutive calendar
months, individuals who were directors of the Borrower on the first day of
such period shall cease to constitute a majority of the board of directors
of the Borrower;
then, and in any such event, so long as the same may be continuing, the Agent
shall, upon the request of the Majority Banks, by notice in writing to the
Borrower declare all amounts owing with respect to this Credit Agreement, the
Revolving Credit Notes and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower; provided that in the event of any Event of Default
--------
specified in (S)13.1(g) or 13.1(h), all such amounts shall become immediately
due and payable automatically and without any requirement of notice from the
Agent or any Bank.
<PAGE>
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12.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
--------------------------
Default specified in (S)13.1(g) or (S)13.1(h) shall occur, any unused portion of
the credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all obligations to make Revolving Credit Loans to the Borrower. If
any other Event of Default shall have occurred and be continuing, or if on any
Drawdown Date the conditions precedent to the making of the Revolving Credit
Loans to be made on such Drawdown Date are not satisfied, the Agent may and,
upon the request of the Majority Banks, shall, by notice to the Borrower,
terminate the unused portion of the credit hereunder, and upon such notice being
given such unused portion of the credit hereunder shall terminate immediately
and each of the Banks shall be relieved of all further obligations to make
Revolving Credit Loans. No termination of the credit hereunder shall relieve the
Borrower of any of the Obligations or any of its existing obligations to any of
the Banks arising under other agreements or instruments.
12.3. REMEDIES. In case any one or more of the Events of Default shall
--------
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Revolving Credit Loans pursuant to (S)13.1, each
Bank, if owed any amount with respect to the Revolving Credit Loans, may, with
the consent of the Majority Banks but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the ex parte
-- -----
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Note is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law.
12.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that the Agent
-----------------------------------
receives proceeds from the Life Insurance Policy contemplated by (S)7.7.2 or in
the event that, following the occurrence or during the continuance of any
Default or Event of Default, the Agent or any Bank, as the case may be, receives
any monies in connection with the enforcement of any the security documents, or
otherwise with respect to the realization upon any of the Collateral, such
monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other loan documents or in respect of
the collateral and supports the provision of adequate indemnity to the
Agent against all taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that distributions
-------- -------
shall be made with respect to each type of Obligation owing to the Banks,
such as interest, principal, fees and expenses, among the Banks pro rata;
--- ----
and provided, further, that
-------- -------
<PAGE>
-51-
the Agent may in its discretion make proper allowance to take into account
any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Banks and the Agent of
all of the Obligations, to the payment of any obligations required to be
paid pursuant to (S)9-504(1)(c) of the Uniform Commercial Code of the
Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower
or to such other Persons as are entitled thereto.
13. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (a) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by
the Revolving Credit Notes held by such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all such
Revolving Credit Notes held by such Bank, and (b) if such Bank shall receive
from the Borrower, whether by voluntary payment, exercise of the right of
setoff, counterclaim, cross action, enforcement of the claim evidenced by the
Revolving Credit Notes held by such Bank by proceedings against the Borrower at
law or in equity or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, and shall retain and apply to
the payment of the Revolving Credit Note or Revolving Credit Notes held by such
Bank any amount in excess of its ratable portion of the payments received by all
of the Banks with respect to the Revolving Credit Notes held by all of the
Banks, such Bank will make such disposition and arrangements with the other
Banks with respect to such excess, either by way of distribution, pro tanto
--- -----
assignment of claims, subrogation or otherwise as shall result in each Bank
receiving in respect of the Revolving Credit Notes held by its proportionate
payment as contemplated by this Credit Agreement; provided that if all or any
--------
part of such excess payment is thereafter recovered from such Bank, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.
14. THE AGENT.
---------
14.1. AUTHORIZATION.
-------------
(a) The Agent is authorized to take such action on behalf of each
of the Banks and to exercise all such powers as are hereunder and under any
of the other Loan Documents and any related documents delegated to the
Agent, together with such powers as are reasonably incident thereto,
provided that no duties or responsibilities not expressly assumed herein or
--------
therein shall be implied to have been assumed by the Agent.
<PAGE>
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(b) The relationship between the Agent and each of the Banks is
that of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation
of the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
14.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute
--------------------
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
14.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
------------
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
14.4. NO REPRESENTATIONS.
------------------
14.4.1. GENERAL. The Agent shall not be responsible for the
-------
execution or validity or enforceability of this Credit Agreement, the
Revolving Credit Notes, any of the other Loan Documents or any instrument
at any time constituting, or intended to constitute, collateral security
for the Revolving Credit Notes, or for the value of any such collateral
security or for the validity, enforceability or collectability of any such
amounts owing with respect to the Revolving Credit Notes, or for any
recitals or statements, warranties or representations made herein or in any
of the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any of its Subsidiaries,
or be bound to ascertain or inquire as to the performance or observance of
any of the terms, conditions, covenants or agreements herein or in any
instrument at any time constituting, or intended to constitute, collateral
security for the Revolving Credit Notes or to inspect any of the
<PAGE>
-53-
properties, books or records of the Borrower or any of its Subsidiaries.
The Agent shall not be bound to ascertain whether any notice, consent,
waiver or request delivered to it by the Borrower or any holder of any of
the Notes shall have been duly authorized or is true, accurate and
complete. The Agent has not made nor does it now make any representations
or warranties, express or implied, nor does it assume any liability to the
Banks, with respect to the credit worthiness or financial conditions of the
Borrower or any of its Subsidiaries. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based upon such information and documents as it has deemed appropriate,
made its own credit analysis and decision to enter into this Credit
Agreement.
14.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining
---------------------------
compliance with the conditions set forth in (S)10, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent or any of its affiliates to
such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be to be consent to or approved by or acceptable or
satisfactory to such Bank, unless an officer of the Agent or any of its
affiliates active upon the Borrower's account shall have received notice
from such Bank prior to the Closing Date specifying such Bank's objection
thereto and such objection shall not have been withdrawn by notice to the
Agent or any of its affiliates to such effect on or prior to the Closing
Date.
14.5 PAYMENTS.
--------
14.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
-----------------
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by
--- ----
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
14.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
---------------------
distribution of any amount received by it in such capacity hereunder, under
the Revolving Credit Notes or under any of the other Loan Documents might
involve it in liability, it may refrain from making distribution until its
right to make distribution shall have been adjudicated by a court of
competent jurisdiction. If a court of competent jurisdiction shall adjudge
that any amount received and distributed by the Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either
repay to the Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such Persons as
shall be determined by such court.
14.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
----------------
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (a) to make available to the Agent its pro rata share of
--- ----
any Revolving Credit Loan or (b) to comply with the provisions of (S)13
with respect to making dispositions and arrangements with the other Banks,
where such Bank's share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and
--- ----
payable to all of the Banks, in each case as, when and to
<PAGE>
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the full extent required by the provisions of this Credit Agreement, shall
be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent
Bank until such time as such delinquency is satisfied. A Delinquent Bank
shall be deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Revolving Credit Loans,
interest, fees or otherwise, to the remaining nondelinquent Banks for
application to, and reduction of, their respective pro rata shares of all
--- ----
outstanding Revolving Credit Loans. The Delinquent Bank hereby authorizes
the Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective pro rata shares of all outstanding Revolving
--- ----
Credit Loans. A Delinquent Bank shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned
payments to all outstanding Revolving Credit Loans of the nondelinquent
Banks, the Banks' respective pro rata shares of all outstanding Revolving
Credit Loans have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency.
14.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
----------------
Revolving Credit Note as the absolute owner or purchaser thereof for all
purposes hereof until it shall have been furnished in writing with a different
name by such payee or by a subsequent holder, assignee or transferee.
14.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
---------
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by (S)15), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Revolving Credit Notes, or any of the other Loan Documents or the transactions
contemplated or evidenced hereby or thereby, or the Agent's actions taken
hereunder or thereunder, except to the extent that any of the same shall be
directly caused by the Agent's willful misconduct or gross negligence.
14.8. AGENT AS BANK. In its individual capacity, BKB shall have the same
-------------
obligations and the same rights, powers and privileges in respect to its
Commitment and the Revolving Credit Loans made by it, and as the holder of any
of the Revolving Credit Notes, as it would have were it not also the Agent.
14.9. RESIGNATION. The Agent may resign at any time by giving sixty (60)
-----------
days prior written notice thereof to the Banks and the Borrower; provided,
however, notwithstanding the foregoing, BkB agrees that so long as its
Commitment Percentage is 51% or greater, it will not resign as the Agent
hereunder without the Borrower's prior written consent. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and
<PAGE>
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the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
----------------------------------------------
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this (S)14.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
14.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
---------------------------------
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
--------
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
15. EXPENSES AND INDEMNIFICATION.
----------------------------
15.1. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of
--------
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (b) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (c) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel or any local counsel to the Agent incurred in connection with
the preparation, syndication, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, any
amendments, modifications, approvals, consents or waivers hereto or hereunder,
or the cancellation of any Loan Document upon payment in full in cash of all of
the Obligations or pursuant to any terms of such Loan Document for providing for
such cancellation, (d) the fees, expenses and disbursements of the Agent or any
of its affiliates incurred by the Agent or such affiliate in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, (e) any fees, costs, expenses and bank
charges, including bank charges for returned checks, incurred by the Agent in
establishing, maintaining or handling agency accounts, lock box accounts and
other accounts for the collection of any of the Collateral; (f) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of any Bank or the Agent, and
reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Bank or the Agent in
<PAGE>
-56-
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default and
(ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Borrower or any of its Subsidiaries and (g) all reasonable fees, expenses and
disbursements of any Bank or the Agent incurred in connection with UCC searches
or UCC filings.
15.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless
---------------
the Agent, its affiliates and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (a) any actual
or proposed use by the Borrower or any of its Subsidiaries of the proceeds of
any of the Revolving Credit Loans, (b) the reversal or withdrawal of any
provisional credits granted by the Agent upon the transfer of funds from lock
box, bank agency or concentration accounts or in connection with the provisional
honoring of checks or other items, (c) any actual or alleged infringement of any
patent, copyright, trademark, service mark or similar right of the Borrower or
any of its Subsidiaries comprised in the Collateral, (d) the Borrower or any of
its Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (e) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding. In litigation, or the preparation
therefor, the Banks and the Agent and its affiliates shall be entitled to select
their own counsel and, in addition to the foregoing indemnity, the Borrower
agrees to pay promptly the reasonable fees and expenses of such counsel. If, and
to the extent that the obligations of the Borrower under this (S)15.2 are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law.
15.3. SURVIVAL. The covenants contained in this (S)15 shall survive
--------
payment or satisfaction in full of all other Obligations.
16. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
---------------------------------------------
16.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Borrower
-------------------------------------------------
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one or more of its
Subsidiaries, in connection with this Credit Agreement or otherwise, by a
Section 20 Subsidiary. The Borrower, for itself and each of its Subsidiaries,
hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and
each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Agent and each Bank to share
with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Borrower or any of its Subsidiaries pursuant to this Credit
Agreement, or in
<PAGE>
-57-
connection with the decision of such Bank to enter into this Credit Agreement;
it being understood, in each case, that any such Section 20 Subsidiary receiving
such information shall be bound by the confidentiality provisions of this Credit
Agreement. Such authorization shall survive the payment and satisfaction in full
of all of Obligations.
16.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf
---------------
of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower or any of its Subsidiaries
pursuant to this Credit Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
- - --------
(a) after such information shall have become public other than through a
violation of this (S)16, (b) to the extent required by statute, rule, regulation
or judicial process, (c) to counsel for any of the Banks or the Agent, (d) to
bank examiners or any other regulatory authority having jurisdiction over any
Bank or the Agent, or to auditors or accountants in respect of such regulatory
matters, (e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in
connection with any litigation to which any one or more of the Banks, the Agent
or any Section 20 Subsidiary is a party, or in connection with the enforcement
of rights or remedies hereunder or under any other Loan Document, (g) to a
Subsidiary or affiliate of such Bank as provided in (S)16.1 or (h) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant agrees to be bound by the provisions of (S)18.6. Each
Bank and the Agent agrees to indemnify the Borrower from and against any and all
claims, actions and suits and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of such Bank's or
the Agent's gross negligence or willful misconduct in complying with its
obligations under this (S)16.2.
16.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable
------------------
law or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such non-
public information by any governmental agency or representative thereof (other
than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
16.4. OTHER. In no event shall any Bank or the Agent be obligated or
-----
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of its Subsidiaries. The obligations of each Bank under this
(S)16 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrower prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in, any interest in any of the
Revolving Credit Loans from any Bank.
17. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Revolving Credit Notes, in any of the other Loan Documents or in any
documents or other papers delivered by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by
<PAGE>
-58-
the Banks of any of the Revolving Credit Loans as herein contemplated, and shall
continue in full force and effect so long as any Letter of Credit or any amount
due under this Credit Agreement or the Revolving Credits or any of the other
Loan Documents remains outstanding or any Bank has any obligation to make any
Revolving Credit Loans, and for such further time as may be otherwise expressly
specified in this Credit Agreement. All representations and warranties made or
contained in any certificate or other paper delivered to any Bank or the Agent
at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower or such Subsidiary
hereunder.
18. ASSIGNMENT AND PARTICIPATION.
----------------------------
18.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
---------------------------------
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Revolving Credit Loans at the time owing to it, the Revolving Credits held
by it); provided that (a) each of the Agent and, unless a Default or Event of
--------
Default shall have occurred and be continuing, the Borrower shall have given its
prior written consent to such assignment, which consent, in the case of the
Borrower, will not be unreasonably withheld, (b) each such assignment shall be
of a constant, and not a varying, percentage of all the assigning Bank's rights
and obligations under this Credit Agreement, (c) each assignment shall be in an
amount that is a whole multiple of $2,500,000, (d) so long as no Default or
Event of Default has occurred and is continuing, BKB shall at all times retain a
Commitment Percentage of not less than 51%, and (e) the parties to such
assignment shall execute and deliver to the Agent, for recording in the Register
(as hereinafter defined), an Assignment and Acceptance, substantially in the
form of Exhibit D hereto (an "Assignment and Acceptance"), together with any
---------
Revolving Credit Notes subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
(5) Business Days after the execution thereof, (i) the assignee thereunder shall
be a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank
shall, to the extent provided in such assignment and upon payment to the Agent
of the registration fee referred to in (S)18.3, be released from its obligations
under this Credit Agreement.
18.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
--------------------------------------------------------------
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
<PAGE>
-59-
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower and its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations, or the performance or
observance by the Borrower and its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations of any
of their obligations under this Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto;
(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in (S)6.4 and (S)7.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank; and
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance.
18.3. REGISTER. The Agent shall maintain a copy of each Assignment and
--------
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to the
Banks from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Banks may treat
each Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower and the Banks at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation, the assigning
Bank agrees to pay to the Agent a registration fee in the sum of $3,000.
18.4. NEW REVOLVING CREDIT NOTES. Upon its receipt of an Assignment and
--------------------------
Acceptance executed by the parties to such assignment, together with each
Revolving Credit subject to such assignment, the Agent shall (a) record the
information contained therein in the Register, and (b) give prompt notice
thereof to the Borrower and the Banks (other than the assigning Bank). Within
five (5) Business Days after receipt of such notice, the
<PAGE>
-60-
Borrower, at its own expense, shall execute and deliver to the Agent, in
exchange for each surrendered Revolving Credit Note, a new Revolving Credit Note
to the order of such Eligible Assignee in an amount equal to the amount assumed
by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained some portion of its obligations hereunder, a new
Revolving Credit Note to the order of the assigning Bank in an amount equal to
the amount retained by it hereunder. Such new Revolving Credit Notes shall
provide that they are replacements for the surrendered Revolving Credit Notes,
shall be in an aggregate principal amount equal to the aggregate principal
amount of the surrendered Revolving Credit Notes, shall be dated the effective
date of such in Assignment and Acceptance and shall otherwise be substantially
the form of the assigned Revolving Credit Notes. Within five (5) days of
issuance of any new Revolving Credit Notes pursuant to this (S)18.4, the
Borrower shall deliver an opinion of counsel, addressed to the Banks and the
Agent, relating to the due authorization, execution and delivery of such new
Revolving Credit Notes and the legality, validity and binding effect thereof, in
form and substance satisfactory to the Banks. The surrendered Revolving Credit
Notes shall be canceled and returned to the Borrower.
18.5. PARTICIPATIONS. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
--------
that (a) each such participation shall be in an amount of not less than
$2,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Revolving Credit Loans, extend the term
or increase the amount of the Commitment of such Bank as it relates to such
participant, reduce the amount of any commitment fees to which such participant
is entitled or extend any regularly scheduled payment date for principal or
interest.
18.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
----------
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
- - --------
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation.
18.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
----------------------------------------------------
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to (S)12.1 or (S)12.2, and
the determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Revolving Credit Loans. If any Bank sells a
participating interest in any of the Revolving Credit Loans to a participant,
and such participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall
<PAGE>
-61-
promptly notify the Agent of the sale of such participation. A transferor Bank
shall have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Agent pursuant to (S)12.1 or (S)12.2 to the
extent that such participation is beneficially owned by the Borrower or any
Affiliate of the Borrower, and the determination of the Majority Banks shall for
all purposes of this Credit Agreement and the other Loan Documents be made
without regard to the interest of such transferor Bank in the Revolving Credit
Loans. The provisions of this (S)18.7 shall not apply to an assignee Bank or
participant which is also a Bank on the Closing Date or to an assignee Bank or
participant which has disclosed to the other Banks that it is an Affiliate of
the Borrower and which, following such disclosure, has been excepted from the
provisions of this (S)18.7 in a writing signed by the Majority Banks determined
without regard to the interest of such assignee Bank or transferor Bank, to the
extent of such participation, in Revolving Credit Loans.
18.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall retain
-----------------------------------
its rights to be indemnified pursuant to (S)15 with respect to any claims or
actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. If any Reference Bank
transfers all of its interest, rights and obligations under this Credit
Agreement, the Agent shall, in consultation with the Borrower and with the
consent of the Borrower and the Majority Banks, appoint another Bank to act as a
Reference Bank hereunder. Anything contained in this (S)18 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Revolving Credit Notes) to any of the twelve Federal Reserve Banks organized
under (S)4 of the Federal Reserve Act, 12 U.S.C. (S)341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
18.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
----------------------
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
19. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Revolving Credit Notes shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first class
mail, postage prepaid, sent by overnight courier, or sent by telegraph,
telecopy, facsimile or telex and confirmed by delivery via courier or postal
service, addressed as follows:
(a) if to the Borrower, at 1401 Brickell Avenue, Suite 350, Miami,
Florida 33131, Attention: John F. Brennan, Executive Vice President, with
a copy to J. Hovey Kemp, Esq., Hogan & Hartson L.L.P., Columbia Square, 555
Thirteenth Street, N.W., Washington, DC 20004-1109 or at such other
address for notice as the Borrower shall last have furnished in writing to
the Person giving the notice,;
<PAGE>
-62-
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Jay L. Massimo, Vice President, or such other
address for notice as the Agent shall last have furnished in writing to the
Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
-------- -
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(b) if sent by registered or certified first-class mail, postage prepaid, on the
third Business Day following the mailing thereof.
20. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN (S)19. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
21. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
22. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
<PAGE>
-63-
23. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
(S)25.
24. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Revolving Credit Notes or any of the other Loan Documents, any
rights or obligations hereunder or thereunder or the performance of which rights
and obligations. Except as prohibited by law, the Borrower hereby waives any
right it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Borrower (a)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
25. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of its
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Borrower and
the written consent of the Majority Banks. Notwithstanding the foregoing, the
rate of interest on the Revolving Credit Notes (other than interest accruing
pursuant to (S)4.10.2 following the effective date of any waiver by the Majority
Banks of the Default or Event of Default relating thereto), the amount of the
Commitments of the Banks (except as expressly provided in (S)2.1.2 hereof), and
the amount of commitment fee hereunder may not be changed without the written
consent of the Borrower and the written consent of each Bank affected thereby;
the Revolving Credit Loan Maturity Date may not be postponed without the written
consent of each Bank affected thereby; this (S)25 and the definition of Majority
Banks may not be amended, without the written consent of all of the Banks; and
(S)14 may not be amended without the written consent of the Agent. No waiver
shall extend to or affect any obligation not expressly waived or impair any
right consequent thereon. No course of dealing or delay or omission on the part
of the Agent or any Bank in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto. No notice to or demand upon the
Borrower shall entitle the Borrower to other or further notice or demand in
similar or other circumstances.
<PAGE>
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26. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE>
-65-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
---------------------------------------
Name: Ted A. Fernandez
Title: President
BANKBOSTON, N.A., individually and as Agent
By: /s/ Jay L. Massimo
---------------------------------------
Name: Jay L. Massimo
Title: Vice President
The Exhibits and Schedules to this Revolving Credit Agreement are not included
with this Registration Statement on Form S-1. AnswerThink will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.7
- - --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of August 1, 1997
AMONG
ANSWERTHINK CONSULTING GROUP, INC.
RELATIONAL TECHNOLOGIES, INC.
AND
ALL OF THE SHAREHOLDERS
OF
RELATIONAL TECHNOLOGIES, INC.
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE MERGER.................................................................................. 1
SECTION 1.1. The Merger............................................................... 1
SECTION 1.2. Closing.................................................................. 1
SECTION 1.3. Effective Time........................................................... 1
SECTION 1.4. Effects of the Merger.................................................... 1
SECTION 1.5. Articles of Incorporation and By-Laws.................................... 1
SECTION 1.6. Directors................................................................ 2
SECTION 1.7. Officers................................................................. 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES.......................................... 2
SECTION 2.1. Effect on Capital Stock.................................................. 2
SECTION 2.2. Exchange of Certificates and Actions at Closing.......................... 2
SECTION 2.3. Appointment of Seller's Agent............................................ 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................................................. 4
SECTION 3.1. Representations and Warranties of the Company............................ 4
SECTION 3.2. Representations and Warranties of Purchaser.............................. 11
SECTION 3.3. Representations and Warranties of Sellers................................ 13
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS................................................... 14
SECTION 4.1. Conduct of Business; Other Actions; and Certain Tax Matters.............. 14
SECTION 4.2. No Solicitation.......................................................... 15
ARTICLE V
ADDITIONAL AGREEMENTS....................................................................... 16
SECTION 5.2. Accounting and Tax Matters............................................... 16
SECTION 5.3. Access to Information.................................................... 16
SECTION 5.4. Reasonable Efforts....................................................... 17
SECTION 5.5 Public Announcements..................................................... 17
SECTION 5.6. Affiliates............................................................... 17
SECTION 5.7. Employment Agreements.................................................... 17
SECTION 5.8. Employee Restricted Stock Plan........................................... 17
SECTION 5.9. Expenses................................................................. 17
SECTION 5.10. Restrictions on Transfer of Purchaser Common Stock....................... 17
SECTION 5.11. Tax Matters.............................................................. 19
SECTION 5.12. Indemnification Waiver................................................... 20
SECTION 5.13. Shareholders' Agreement.................................................. 20
SECTION 5.14. Bonus Plans.............................................................. 20
ARTICLE VI
CONDITIONS PRECEDENT........................................................................ 21
SECTION 6.1. Conditions to Each Party's Obligation To Effect the Merger............... 21
SECTION 6.2. Conditions to Obligations of Purchaser................................... 21
SECTION 6.3. Conditions to Obligations of the Company................................. 21
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER...............................................................22
SECTION 7.1. Termination..................................................................22
SECTION 7.2. Effect of Termination........................................................22
SECTION 7.3. Amendment....................................................................22
SECTION 7.4. Extension; Waiver............................................................23
ARTICLE VIII
GENERAL PROVISIONS..............................................................................23
SECTION 8.1. Survival of Terms; Indemnification...........................................23
SECTION 8.2. Notices......................................................................25
SECTION 8.3. Definitions..................................................................26
SECTION 8.4. Interpretation...............................................................28
SECTION 8.5. Counterparts.................................................................28
SECTION 8.6. Entire Agreement; No Third-Party Beneficiaries...............................28
SECTION 8.7. Governing Law................................................................28
SECTION 8.8. Assignment...................................................................28
SECTION 8.9. Enforcement..................................................................28
</TABLE>
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THE AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of August 1,
1997, among AnswerThink Consulting Group, Inc., a Florida corporation (the
"Purchaser"), Relational Technologies, Inc., a Georgia corporation (the
"Company"), and all of the shareholders of the Company as listed on Exhibit "A"
attached hereto (collectively, the "Sellers").
WHEREAS the respective Boards of Directors of the Purchaser and the Company
have approved the merger of the Company into the Purchaser (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of common stock, no par value, of the Company
("Company Common Stock") will be converted into the right to receive common
stock, par value $.001 per share, of the Purchaser ("Purchaser Common Stock");
and
WHEREAS the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, said representations, warranties, covenants and agreements made and
given to induce the other party to enter into this Agreement and consummate the
transactions contemplated by this Agreement in reliance thereon, and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Florida Business Corporation
Act (the "FBCA") and the Georgia Business Corporation Code (the "GBCC"), the
Company shall be merged with and into the Purchaser at the Effective Time (as
hereinafter defined in Section 1.3). Following the Merger, the separate
corporate existence of Company shall cease and the Purchaser shall continue as
the surviving corporation (the "Surviving Corporation").
SECTION 1.2. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VI (the "Closing Date"), at the offices of
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell
Avenue, Miami, Florida, 33131, unless another date, time or place is agreed to
in writing by the parties hereto, provided that the Closing shall not occur, in
any event, after August 5, 1997.
SECTION 1.3. Effective Time. As soon as practicable on the Closing Date,
the parties shall deliver articles of merger or other appropriate documents (the
"Certificate of Merger"), complying with the relevant provisions of the FBCA to
the Florida Department of State for filing as required under the FBCA and shall
make all other filings or recordings required under the FBCA, and the parties
shall deliver the Certificate of Merger and such other appropriate documents
complying with the relevant provisions of the GBCC to the Georgia Secretary of
State for filing under the GBCC and shall make all other filings or recordings
required under the GBCC. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Florida Department of State and the
Georgia Secretary of State, or at such other time as the Purchaser and the
Company shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being the "Effective Time").
SECTION 1.4. Effects of the Merger. (a) The Merger shall have the effects
set forth in Section 607.1106 of the FBCA.
(b) The parties intend that the Merger qualify as a tax-free
reorganization pursuant to Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
SECTION 1.5. Articles of Incorporation and By-Laws. (a) The Articles of
Incorporation of the Purchaser, as in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
<PAGE>
(b) The By-laws of the Purchaser as in effect at the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.6. Directors. The directors of the Purchaser at the Effective
Time shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.7. Officers. The officers of the Purchaser at the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of Purchaser Common Stock:
(a) Cancellation of Treasury Stock. Each share of Company Common
Stock that is held in treasury of the Company immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist, and
(b) Conversion of Company Common Stock. Notwithstanding the
following or the provisions of Section 2.2(c), in no event shall the Purchaser
be required to issue more than 1,444,900 shares of Purchaser Common Stock (the
"Merger Consideration") pursuant to the provisions of this Section 2.1(b).
Subject to Section 2.2(e), each issued and outstanding share of Company Common
Stock (other than shares to be canceled in accordance with Section 2.1(a)) shall
be converted into the right to receive 14.449 issued, fully paid and
nonassessable shares of Purchaser Common Stock (the "Exchange Ratio"). As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto. If prior to
the Effective Date, the Purchaser should split or combine the shares of
Purchaser Common Stock, or pay a stock dividend or other stock distribution in
shares of Purchaser Common Stock, then the Exchange Ratio will be appropriately
adjusted to reflect such split, combination, dividend or other distribution.
SECTION 2.2. Exchange of Certificates and Actions at Closing. (a) At the
Closing, the Company and Sellers shall deliver to the Purchaser:
(i) the various certificates, instruments and documents
required to be delivered to the Purchaser as a condition precedent to the
Purchaser's obligations hereunder, including certificates representing all of
the outstanding shares of Company Common Stock (the "Certificates") duly
endorsed (or accompanied by duly executed stock powers), for transfer to
Purchaser;
(ii) the certificate as required by Section 6.2(a); and
(iii) employment agreements executed by those persons listed on
Exhibit "B", attached hereto, and substantially in the form of Exhibit "C",
attached hereto, on said terms as shall be set forth by Purchaser (collectively,
the "Employment Agreements").
(b) At Closing, the Purchaser shall deliver to the Company and the
Sellers:
(i) the various certificates, instruments and documents
required to be delivered to the Company and the Sellers by the Purchaser as a
condition precedent to the Company's obligations hereunder;
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(ii) the certificate as required by Section 6.3(a);
(iii) the Registration Agreement in the form attached hereto as
Exhibit "E";
(iv) the Merger Consideration in accordance with Section 2.1;
and
(v) the Employment Agreements.
(c) Exchange Procedures. Upon surrender of a Certificate for
cancellation and subject to the limitation of Section 2.1(b), the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of shares of Purchaser Common Stock (rounded to the
nearest number of whole shares, with any one-half share being rounded up) which
such holder has the right to receive pursuant to the provisions of this Article
II after taking into account all the shares of Company Common Stock then held by
such holder under all such Certificates so surrendered, and the Certificate so
surrendered shall forthwith be canceled. Until surrendered as contemplated by
this Section 2.2(c), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificate representing shares of Purchaser Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
of Purchaser Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared, made or accrued
by the Company on such shares of Company Common Stock in accordance with the
terms of this Agreement or prior to the date of this Agreement and which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) No Fractional Shares. No certificates representing fractional
shares of Purchaser Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Purchaser.
(f) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Surviving Corporation will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Purchaser Common Stock pursuant to this Agreement.
(g) Tax-Free Reorganization. The parties intend that the Merger
qualify as a tax-free reorganization pursuant to Section 368 of the Code. Each
party agrees to report the transaction to the Internal Revenue Service and any
other relevant taxing authority authorities consistent with such treatment.
SECTION 2.3. Appointment of Seller's Agent (a) Each of the Sellers hereby
irrevocably appoints Scott Smith (the "Seller's Agent") as such Sellers'
representative, attorney-in-fact and agent, with full power and authority to
execute and deliver and to receive, on behalf of such Sellers, all certificates,
statements, notices, approvals, extensions, waivers, undertakings and amendments
to this Agreement required or permitted to be made, given or delivered hereunder
or in connection with the transactions contemplated hereunder. Upon the
resignation of the foregoing person, whether by death, disability or otherwise,
such person shall be replaced by another person selected by the affirmative vote
of the Sellers holding a majority of the Sellers' shares in Purchaser. Any
person who becomes a replacement Sellers' Agent shall execute a counterpart of
this Agreement to evidence his or her agreement with the terms and conditions of
this Agreement.
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(b) The Sellers' Agent shall, after the Closing, (i) receive all
information and notices required under this Agreement on behalf of Sellers; (ii)
take, on behalf of Sellers, any action it may deem appropriate with respect to
any dispute arising out of or relating to this Agreement; and (iii) execute and
deliver all instruments and documents of every kind incident to the foregoing.
(c) The Sellers' Agent may confer with counsel with respect to any
question relating to his duties or responsibilities under this Agreement. The
Sellers' Agent shall not be liable or responsible for anything done or omitted
to be done by it in good faith or on the advice or counsel.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company. Each of the
Sellers and the Company jointly and severally represents and warrants to the
Purchaser as follows:
(a) Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Georgia and has the requisite corporate power and authority to
carry on its business as now being conducted. To the best knowledge of the
Company, the Company is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed or to be in good standing (individually or in the aggregate) would
not have a material adverse effect on the Company. The Company has delivered to
the Purchaser complete and correct copies of its articles of incorporation and
by-laws (or similar organizational documents), as amended to the date hereof.
The Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
(b) Capital Structure. The authorized capital stock of the Company
consists of 1,000,000 shares of Company Common Stock and no shares of preferred
stock. As of the date of this Agreement, 100,000 shares of Company Common Stock
were issued and outstanding, and no shares of Company Common Stock were held by
the Company in its treasury. Except as set forth above, as of the date of this
Agreement, no shares of capital stock or other voting securities of the Company
were issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. There are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into securities having the right to vote) on any matters
on which shareholders of the Company may vote. Except as set forth above, as of
the date of this Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which any of them is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company.
(c) Authority; Noncontravention.
(i) The Company has the requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated by it. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and each of the
Sellers and constitutes a valid and binding obligation of the Company and each
of the Sellers, enforceable against the Company and each of the Sellers in
accordance with its terms.
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<PAGE>
(ii) Except as set forth on Schedule 3.1(c), the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or constitute
a default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of the Company under, any provision of (A) the
articles of incorporation or by-laws of the Company (B) any loan or credit
agreement, note, bond, mortgage, indenture, lease, contract or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or its properties or assets or (C) subject to the governmental filings and other
matters referred to in the following sentence, any (x) statute, law, ordinance,
rule or regulation or (y) judgment, order or decree applicable to the Company or
its properties or assets, other than, in the case of clauses (B) and (C), any
such conflict, violation, default or failure to file which would not have a
material adverse effect on the Company. To the best knowledge of the Company, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
the Company or any the Sellers in connection with the execution and delivery of
this Agreement by the Company or the Sellers or the consummation by the Company
or any of the Sellers of the transactions contemplated by this Agreement to be
consummated by it, except for (i) to effectuate the Merger, the filing of the
Certificate of Merger with the Florida Department of State and the Georgia
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, and (ii) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required, the failure of which to be obtained or made
would not, individually or in the aggregate, have a material adverse effect on
the Company or any of the Sellers or prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
(d) Financial Statements. Attached as Schedule 3.1(d) hereto are
audited year-end balance sheets and statements of operations, changes in
shareholders' equity and cash flow of the Company as of December 31, 1996 for
the fiscal year 1996 and an unaudited balance sheet for the 3-month period
commencing January 1, 1997 and ending March 31, 1997 and unaudited statements of
operations of the Company for the 3-month period then ended. The December 31,
1996 balance sheets and the notes thereto fairly present the financial position
of the Company at the respective dates thereof, and such statements of
operations, changes in shareholders' equity and cash flow and the notes thereto
fairly present the results of operations for the periods and the financial
condition at the end of the period therein referred to, all in accordance with
generally accepted accounting principles ("GAAP") (except as stated therein or
in the notes thereto and permitting normal year end adjustments for interim
statements). The balance sheet for the 3-month period commencing January 1, 1997
and ending March 31, 1997 were internally prepared by management of the Company
and fairly present the financial position of the Company. The balance sheet and
statements of operations, changes in shareholders' equity and cash flow as at
December 31, 1996 and the notes thereto are herein collectively referred to as
the "Financial Statements" and December 31, 1996 is herein referred to as the
"Financial Statement Date."
(e) Liabilities. Except as set forth in Schedule 3.1(e) hereto, the
Company does not have any indebtedness, obligation or liability (whether
accrued, absolute, contingent, unliquidated or otherwise, known or unknown to
the Company, whether due or to become due) arising out of transactions entered
into at or prior to the date of this Agreement, or any state of facts existing
at or prior to the date of this Agreement, other than: (i) liabilities set
forth in the Financial Statements (including any notes thereto), or (ii)
liabilities and obligations which have arisen after the Financial Statement Date
in the ordinary course of business (none of which is a liability resulting from
a breach of contract, breach of warranty, tort, infringement or other claims).
All liabilities of the Company are, and as of the Closing Date, will have been
incurred in the ordinary course of the Company's business.
(f) Absence of Certain Changes or Events. Except as expressly
contemplated by this Agreement or in Schedule 3.1(f), since the Financial
Statement Date, the Company has conducted its business only in the ordinary
course, and there has not been (i) any material adverse change with respect to
the Company, (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock, (iii) combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (x) any granting by the Company to any officer of the
Company of any increase in compensation, (y) any granting by the Company to any
officer of any increase in severance or termination pay or (z) any entry by the
Company into any employment, severance or termination agreement with any
officer, (v) any
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change in accounting methods, principles or practices by the Company, except
insofar as may have been required by a change in GAAP, or (vi) any sale,
agreement to sell or option to purchase or sell the Company or any of its assets
other than in the ordinary course of business in a manner consistent with past
practices.
(g) Litigation. Except as disclosed in Schedule 3.1(g), there is no
suit, action or proceeding pending or, to the best knowledge of the Company,
contemplated or threatened against the Company, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company.
(h) Compliance with Laws. The Company is, to the best knowledge of
the Company, in compliance with all applicable statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any Governmental Entity
applicable to its business or operations, except when such failure to comply
would not have a material adverse effect. The Company has in effect, to the best
knowledge of the Company, all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits"), necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and, to the
best knowledge of the Company, there has occurred no default under any such
Permit which, individually or in the aggregate, would have a material adverse
effect on the Company.
(i) Benefit Plan Compliance.
(i) Schedule 3.1(i) contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other Benefit Plans (as defined in
Section 3.1(j)) maintained, or contributed to, or required to be contributed to,
by the Company or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (a) of the Code
(the Company and each such other person or entity, a "Commonly Controlled
Entity") for the benefit of any current or former employees, officers or
directors of the Company. The Company has delivered or made available to the
Purchaser true, complete and correct copies of (1) each Benefit Plan (or, in the
case of any unwritten Benefit Plans, descriptions thereof), (2) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan (if any such report was required), (3) the most recent
summary plan description for each Benefit Plan for which such summary plan
description is required and (4) each trust agreement and group annuity contract
relating to any Benefit Plan. Each Benefit Plan has been administered in all
material respects in accordance with its terms and is in compliance with the
applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements except where the failure to comply
would not be reasonably expected to result in a material adverse effect on the
Company.
(ii) Except as disclosed in Schedule 3.1(i), all Pension Plans
have been the subject of determination letters from the Internal Revenue
Service, or have filed a timely application therefor, to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under Section
401 (a) and 501 (a), respectively, of the Code, and no such determination letter
has been revoked nor has any such Pension Plan been amended since the date of
its most recent determination letter or application therefor in any respect that
would adversely affect its qualification or materially increase its costs.
(iii) No Commonly Controlled Entity has incurred any liability
which has not been fully paid to a Pension Plan under Title IV of ERISA (other
than for contributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for payment of premiums not yet due) that, when
aggregated with other such liabilities, would result in a material adverse
effect on the Company.
(iv) As of the most recent valuation date for each Pension Plan
that is a "defined benefit pension plan" (as defined in Section 3 (35) of ERISA
subject to Title IV of ERISA (other than a multiemployer plan) (hereinafter a
"Defined Benefit Plan")), there was not any material amount of "unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA) under such Defined
Benefit Plan, and the Company is not aware of any facts or circumstances that
would materially adversely change the funded status of any such Defined Benefit
Plan. The Company has furnished or made available to Purchaser the most recent
actuarial report or
6
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valuation with respect to each Defined Benefit Plan and has no reason to believe
that the conclusions expressed in those reports or valuations are incorrect.
(v) No Commonly Controlled Entity has been required at any
time within the five calendar years preceding the date hereof or is required
currently to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such
withdrawal has resulted or would result in any "withdrawal liability" (within
the meaning of Section 4201 of ERISA) that has not been fully paid.
(vi) With respect to any Benefit Plan that is an employee
welfare benefit plan, except as disclosed in Schedule 3.1(i), (1) no such
Benefit Plan is funded through a "welfare benefits fund," as such term is
defined in Section 419(e) of the Code, and (2) each such Benefit Plan that is a
"group health plan," as such term is defined in Section 5000(b)(1) of the Code,
complies substantially with the applicable requirements of Section 4980B(f) of
the Code.
(vii) Except as provided in Section 5.9(i) or as provided by the
Company's (S)401(k) plan, or as listed on Schedule 3.1(i), no employee of the
Company will be entitled to any additional compensation or benefits or any
acceleration of the time of payment or vesting of any compensation or benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement.
(viii) Except as set forth in Schedule 3.1(i) or as contemplated
under Section 5.8, neither the Company nor any person acting on behalf of the
Company has, in contemplation of any corporate transaction involving Purchaser,
issued any written communication to, or otherwise made or entered into any
legally binding commitment with, any employees of the Company to the effect
that, following the date hereof, (i) any benefits or compensation provided to
such employees under existing Benefit Plans or under any other plan or
arrangement will be enhanced, (ii) any new plans or arrangements providing
benefits or compensation will be adopted, (iii) any Benefit Plans will be
continued for any period of time, or (iv) any plans or arrangements provided by
Purchaser will be made available to such employees.
(j) Absence of Changes in Benefit Plans; Labor Relations. There has
not been any adoption or amendment in any material respect by the Company of any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding in
each case maintained or contributed to, or required to be maintained or
contributed to, by the Company for the benefit of any current or former
employee, officer or director of the Company (each, a "Benefit Plan" and,
collectively, "Benefit Plans"). Except as set forth in Schedule 3.1(j), there
exist no employment, severance, termination or indemnification agreements,
arrangements or understandings between the Company and any current or former
employee, officer or director of the Company or any consulting agreement with
the Company with respect to which the aggregate liability thereunder exceeds
$5,000 or which cannot be cancelled by the Company without penalty on 30 days'
or less notice.
(k) Taxes. Except as disclosed in Schedule 3.1(k), the Company and
each affiliated, consolidated, combined or unitary group of which the Company is
a member (an "Affiliated Group"), has filed all tax returns and reports required
to be filed by it and has paid (or the Company has paid on its behalf), all
taxes required to be paid by it (other than taxes, the failure to pay which
would not, individually or in the aggregate, have a material adverse effect on
the Company), for all taxable periods and portions thereof ending prior to the
date of this Agreement. The Company has not received any notice of a deficiency
for any taxes that have been proposed, claimed, asserted or assessed against the
Company or any Affiliated Group, and no requests for waivers of the time to
assess any taxes are pending. None of the assets or properties of the Company is
subject to any tax lien. As used in this Agreement, "taxes" shall include all
Federal, state, local and foreign income, property, sales, excise, intangible
and other taxes, tariffs or governmental charges of any nature whatsoever,
including any interest, penalties or additions with respect thereto.
(l) Certain Agreements. Except as set forth in Schedule 3.1(l)
hereto, as of the date of this Agreement, the Company is not a party to any
written or oral contract including:
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(i) Contract relating to loans to officers, directors, or
affiliates of the Company;
(ii) Contract relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a Lien on any asset of the Company;
(iii) Guarantee of any obligation, any "keep well" or other
agreement to maintain a financial condition of another person.;
(iv) Contract under which the Company has advanced or loaned or
is obligated to advance or loan any person amounts in the aggregate exceeding
$10,000;
(v) Contract under which the Company is lessee of or holds or
operates any property, real or personal, owned by any other party, except for
any lease of real or personal property under which the aggregate annual rental
payments do not exceed $5,000;
(vi) Contract pursuant to which the Company is lessor of or
permits any third party to hold or operate any property, real or personal, owned
or controlled by the Company;
(vii) Contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves annual
consideration in excess of $5,000;
(viii) Retainer agreements or any similar contracts relating to
services provided, or to be provided, by the Company;
(ix) Assignment, license, indemnification or contract with
respect to any intangible property (including, without limitation, any
Proprietary Rights as defined in Section 3.1(p));
(x) Warranty contract with respect to its services rendered;
(xi) Contract under which it has granted any person any
registration rights (including piggyback rights) with respect to any of the
Company's securities;
(xii) Contract or non-competition provision in any contract
prohibiting it from freely engaging in any business or competing anywhere in the
world;
(xiii) Contract for the purchase, acquisition or supply of
property, whether for resale or otherwise in excess of $10,000;
(xiv) Employment, consulting, sales, commissions, advertising or
marketing contracts; or
(xv) Shareholder agreements or contracts relating to the equity
of the Company.
The Company has performed in all material respects all obligations required
to be performed by it and is not in default in any respect under or in breach of
nor in receipt of any claim of default or breach under any contract to which it
is subject; no event has occurred which with the passage of time or the giving
of notice or both would result in a default, breach or event of noncompliance
under any contract to which the Company is subject; the Company has a present
expectation or intention of fully performing all such obligations; the Company
has no knowledge of any breach or anticipated breach by the other parties to any
contract to which it is a party.
(m) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
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(n) Investment Company. The Company is not an "investment company" as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(o) Title and Related Matters. (i) Except as set forth in Schedule
3.1(o) hereto, the Company has and as of the Closing Date will have good and
marketable title to all real and personal property and other assets reflected in
the Financial Statements or acquired after the Financial Statement Date, free
and clear of all Liens, except Permitted Liens. All properties used in the
Company's business operations as of the Financial Statement Date are reflected
in the Financial Statements and are reflected therein in accordance with and to
the extent required by GAAP, except as to those assets which are leased. There
has not been since the Financial Statement Date and will not be prior to the
Closing Date, any sale, lease, or any other disposition or distribution by the
Company of any of its assets or properties, now or hereafter owned by it, except
transactions in the ordinary and regular course of business or as otherwise
consented to by the Purchaser. After the Closing, the Purchaser will own, or
have the unrestricted right to use all properties and assets that are currently
used in connection with the Company's business.
(1) All the Company's leases are in full force and effect,
and valid and enforceable in accordance with their respective terms. The Company
has not received any notice of any, and to the best knowledge of the Company
there exists no event of default or event which constitutes or would constitute
(with notice or lapse of time or both) a default by the Company or any other
person under any lease.
(2) All rent and other amounts due and payable with respect
to the Company's leases have been paid through the date of this Agreement and
all rent and other amounts due and payable with respect to the Company's leases
which are due and payable on or prior to the Closing Date will have been paid
prior to the Closing Date.
(3) All lessors under the Company's real property leases
have consented (where such consent is necessary) or prior to Closing will have
consented (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement without requiring material
modification in the rights or obligations thereunder.
(4) The Company has received no written notice that the
landlord with respect to any real property lease would refuse to renew such
lease upon expiration of the period thereof upon substantially the same terms,
except for rent increases consistent with past experience or market rentals.
(ii) Except as set forth in Schedule 3.1(o) hereto, the
buildings, structures and improvements included within the real property owned
by the Company (collectively, the "Improvements") comply in all material
respects with all applicable restrictions, building ordinances and zoning
ordinances and all regulations, and no material alteration, repair, improvement
or other work which could give rise to a Lien has been performed in respect to
such Improvements within the last 120 days. The Improvements and the mechanical
systems situated therein, including without limitation the heating, electrical,
air conditioning and plumbing systems, are in good operating condition and
repair, ordinary wear and tear excepted, and are adequate and suitable for the
purposes for which they are presently being used, and the roof of each
Improvement is in satisfactory condition and is not in need of current repair.
The real property owned by the Company and its continued use, occupancy and
operation as currently used, occupied and operated does not constitute a
nonconforming use under any regulation or order affecting the real property
(other than possible set back violations, none of which will have a material
adverse effect on the Company's real property or its continued use, occupancy
and operation as currently used, occupied and operated), and the continued
existence, use, occupancy and operation of each Improvement, and the right and
ability to repair and/or rebuild such Improvements in the event of casualty, is
not dependent on any special permit, exception, approval or variance. There is
no pending, and to the best knowledge of the Company, there is no threatened or
proposed proceeding or governmental action to modify the zoning classification
of, or to take by the power of eminent domain (or to purchase in lieu thereof),
or to classify as a landmark, or to impose special assessments on, or otherwise
to take or restrict in any way the right to use, develop or alter, all or any
part of the Company's real property which would have a material adverse effect.
There are no encroachments upon any of the Company's real property, and no
portion of any Improvement owned by the Company, encroaches upon any property
not included within the Company's real property or upon the area of any easement
affecting the Company's real property. Each Improvement has direct access,
adequate for the operation of the business of the Company, in the ordinary
course, to a public street adjoining the Company's real property on which such
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Improvement is situated, and no existing way of access to any Improvement
crosses or encroaches upon any property or property interest not owned by the
Company.
(p) Intellectual Property.
(i) Schedule 3.1(p) hereto sets forth a complete and accurate
list of all of the Company's Proprietary Rights. "Proprietary Rights" means all
(1) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination, utility,
model, certificate of invention and design patents, patent applications,
registrations and applications for registrations, (2) trademarks, service marks,
trade dress, logos, trade names and corporate names and registrations and
applications for registration thereof, (3) copyrights and registrations and
applications for registration thereof, (4) mask works and registrations and
applications for registration thereof, (5) computer software, data and
documentation, (6) trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research and development
information, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (7) client or customer and prospective client or
customer lists or information relating to the same, (8) other Proprietary Rights
relating to any of the foregoing, and (9) copies and tangible embodiments
thereof. The Company has delivered to the Purchaser correct and complete copies
of all Proprietary Rights (that are in written form) as amended to date and has
made available to the Purchaser correct and complete copies of all other written
documentation evidencing ownership of, and any claims relating to, each such
item. The Company has taken all reasonable measures to protect the proprietary
nature of each Proprietary Right, and to maintain in confidence all trade
secrets and confidential information that it owns or uses.
(ii) No person has made any claim or demand that challenges the
rights of the Company with respect to the Proprietary Rights or claims that the
same infringes on the rights of others. To the best knowledge of the Company,
except as specified in Schedule 3.1(p) hereto, (x) no other person has any
rights to any of the Proprietary Rights owned or used by the Company, (y) no
other person is infringing, violating or misappropriating any such proprietary
right that the Company owns or uses, and (z) no Proprietary Right is subject to
any outstanding order or claim.
(iii) The current software applications used by the Company in
the operation of its business, as set forth and described on Schedule 3.1(p)
hereto (the "Software"), to the extent they have been designed or developed by
the Company's management information or development staff or by consultants on
the Company's behalf, is original and capable of copyright protection in the
United States, and the Company has complete rights to and ownership of such
Software. No part of any such Software is an imitation or copy of, or infringes
upon, the software of any other person or violates or infringes upon any common
law or statutory rights of any other person, including, without limitation,
rights relating to defamation, contractual rights, copyrights, trade secrets,
and rights of privacy or publicity. The Company has not sold, assigned,
licensed, distributed or in any other way disposed of or encumbered the
Software.
(iv) The Software, to the extent it is licensed from any third
party licensor or constitutes "off-the-shelf" software, is held by the Company
legitimately and is fully transferable to the Purchaser without any third party
consent. All of the Company's computer hardware has legitimately-licensed
software installed therein.
(v) The Software is free from any significant software defect
or programming or documentation error, operates and runs in a reasonable and
efficient business manner, conforms to the specifications thereof, and, with
respect to owned Software, the applications can be recreated from their
associated source code.
(vi) The Company has not knowingly altered the data or any
Software or supporting software which may, in turn, damage the integrity of the
data stored in electronic, optical or magnetic form.
(vii) The Company has furnished all documentation relating to the
use, maintenance and operation of the Software, all of which, to the knowledge
of the Company, is true and accurate.
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(q) Insurance. The Company currently has, and through the Closing
Date will have, policies in full force and effect which provide for coverages
that are usual and customary as to amount and scope in the business of the
Company. All premiums with respect thereto covering all periods up to and
including the Closing Date have been paid or accrued therefor, and no notice of
cancellation or termination has been received with respect to any policy.
Schedule 3.1(q) hereto sets forth a complete and accurate summary of all
policies, including name of insurer, the types, dates and amounts of coverage,
expiration date and any material coverage exclusion. The Company has not
breached or otherwise failed to perform in any material respects its obligations
under any of the policies nor has the Company received any adverse notice or
communication from any of the insurers party to the policies with respect to any
such alleged breach or failure in connection with any of the policies. All
policies are sufficient for compliance with all regulations and all contracts to
which the Company is subject, are to the Company's knowledge valid, outstanding,
collectible and enforceable policies, and will not in any way be affected by, or
terminate or lapse by reason of, the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby. The Company has never
been denied any insurance with respect to its assets or operations, nor has
coverage ever been limited by any insurance carrier to which the Company has
applied for any policy or with which it has carried a policy.
(r) Accounts Receivable; Inventories. Except as provided in Schedule
3.1(r), the accounts receivable of the Company reflected in the Financial
Statements and all additional accounts receivable arising prior to the date of
this Agreement are good and collectible within either the contractually agreed
period for payment or, where no such agreement exists, within the period normal
and customary for such accounts, except to the extent reserved against thereon.
All such accounts receivable (except to the extent so reserved against) are
valid, genuine and subsisting, arise out of bona fide performance of services or
other business transactions and are not subject to defenses, set-off or
counterclaims. All unbilled work-in-progress or uncollected billings based on
past or future services have arisen under enforceable contracts, written or
implied, which contracts continue to be in full force and effect. The Company
has no reason to believe that such contracts will not continue to be fully
enforceable and that such work-in-progress will not be completely billed and
such billings will not be collected in their entirety within the periods
described in the first sentence of this section.
(s) Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items which
were prepared for or supplied to the Purchaser by or on behalf of the Company
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading in light of the
circumstances when made.
(t) No Redemptions or Issuances. Since the Financial Statement Date,
the Company has not (i) redeemed or repurchased, directly or indirectly, any
shares of capital stock; (ii) issued, sold or transferred any notes, bonds or
other debt securities or any equity securities, securities convertible,
exchangeable or exercisable into equity securities, or warrants, options or
other rights to acquire equity securities, of the Company; or (iii) made any
payments or other forms of consideration (whether for services, property or
otherwise) to any insiders (as defined in Section 3.1(u)).
(u) Affiliate Transactions. No executive officer, director or
shareholder of the Company or any affiliate thereof or any person related by
blood or marriage to any such person in which any such person owns any
beneficial interest (collectively, the "insiders") is a party to any agreement,
contract, commitment or transaction with the Company or which is pertaining to
the business of the Company or has any interest in any property, real or
personal or mixed, tangible or intangible, used in or pertaining to the business
of the Company.
SECTION 3.2. Representations and Warranties of Purchaser . Purchaser
represents and warrants to the Company and the Sellers as follows:
(a) Organization Standing and Corporate Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Florida and has the requisite corporate power and authority to carry on its
business as now being conducted. Purchaser is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its Properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed or to be in good standing (individually or in the
aggregate) would not have a material adverse effect on
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Purchaser. Purchaser has delivered to the Company complete and correct copies of
its articles of incorporation and by-laws, as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Purchaser
consists of 100,000,000 shares of Purchaser Common Stock and 7,200,000 shares of
preferred stock, par value $.001 per share, ("Purchaser Preferred Stock"). As of
the date hereof (i) 31,813,072 shares of Purchaser Common Stock were issued and
outstanding (subject to adjustment for shares issued hereunder), (ii) 13,386,928
shares of Purchaser Preferred Stock were issued and outstanding, and (ii) not
more than 5,000,000 and 10,000,000 shares of Purchaser Common Stock were
reserved for issuance under the Purchaser's Stock Option Plan and Restricted
Stock Plan, respectively. All outstanding shares of capital stock of the
Purchaser are, and all shares which may be issued pursuant to this Agreement
will be, when issued in accordance with the terms hereof, duly authorized,
validly issued, fully paid and nonassessable.
(c) Authority; Noncontravention. Purchaser has the requisite power
and authority to enter into this Agreement and to consummate the transactions
contemplated by it. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser, and constitutes a
valid and binding obligation, enforceable in accordance with its terms. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Purchaser under, any provision
of (i) the articles of incorporation or by-laws of Purchaser, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Purchaser or
its properties or assets, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any (A) statute, law, ordinance,
rule or regulation or (B) judgment, order or decree applicable to Purchaser or
its properties or assets, other than, in the case of clause (ii) and clause
(iii), any such conflict, violation, default, or failure to file which would not
have a material adverse effect on Purchaser. To the best of the knowledge of the
Purchaser, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Purchaser in connection with the execution and delivery of this
Agreement by Purchaser or the consummation by Purchaser of the transactions
contemplated by this Agreement to be consummated by Purchaser, except for (i)
the filing of the Certificate of Merger with the Florida Department of State and
the Georgia Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (ii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required, the failure of which to be obtained
or made would not, individually or in the aggregate, have a material adverse
effect on Purchaser or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
(d) Accounting Matters. Purchaser has taken or agreed to take any
action that (without regard to any action taken or agreed to be taken by the
Company or any of its affiliates) would enable the transaction contemplated by
this Agreement to be accounted for as a "pooling of interests."
(e) Litigation Matters. There is no suit, action or proceeding
pending or, to the best knowledge of the Purchaser, contemplated or threatened
against the Purchaser, nor is there any judgment, decree, injunction, rule or
order of any Government Entity or arbitrator outstanding against the Purchaser.
(f) Incorporation of Previous Representations. Purchaser hereby
restates the representations and warranties made by Purchaser in Section 5 of
that certain Purchase Agreement dated April 23, 1997, among Purchaser, Golder,
Thoma, Cressey, Rauner Fund V, L.P. ("GTCR"), MG Capital Partners II, L.P.
("MG"), Gator Associates, Ltd. ("Gator") and Tara Ventures, Ltd. ("Tara")(the
"Purchase Agreement"), herein and such representations and warranties are
incorporated by reference and are true and correct as of the date of this
Agreement, except as set forth on Schedule 3.2(f) hereto. The Company and the
Sellers may rely upon such representations and warranties as if made herein.
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SECTION 3.3. Representations and Warranties of Sellers . Each of the
Sellers individually, represents, warrants and covenants to Purchaser as
follows:
(a) Such Seller is acquiring the shares of Purchaser Common Stock
to be issued to him pursuant to the Merger (the "Merger Shares") for his own
account and not on behalf of any other person; the Seller is aware and
acknowledges that the Merger Shares have not been registered under the
Securities Act of 1933 (as amended) (the "Securities Act") and may not be
offered or sold unless the Merger Shares are registered under the Securities Act
or an exemption from the registration requirements of the Securities Act is
available;
(b) Such Seller has received and carefully reviewed all provisions
of this Agreement; and the Seller has not been furnished with any offering
materials or literature relating to the offer and sale of the Merger Shares;
(c) Such Seller has been furnished all information that he deems
necessary to enable him to evaluate the merits and risks of an investment in the
Purchaser; such Seller has had a reasonable opportunity to ask questions of and
receive answers from Purchaser concerning Purchaser and the Merger Shares, and
all such questions, if any, have been answered to the full satisfaction of such
Seller;
(d) No person or entity other than such Seller has (i) any rights
in and to the Merger Shares, which rights were obtained through or from such
Seller or (ii) any rights to acquire the Merger Shares, which rights were
obtained through or from such Seller;
(e) Such Seller has such knowledge and expertise in financial and
business matters (including knowledge and expertise in the Purchaser's business)
that he is capable of evaluating the merits and risks involved in an investment
in the Merger Shares; and such Seller is financially able to bear the economic
risk of the investment in the Merger Shares, including a total loss of such
investment;
(f) Such Seller represents that he has adequate means of providing
for his current needs and has no need for liquidity in its investment in the
Merger Shares; such Seller has no reason to anticipate any material change in
its financial condition for the foreseeable future;
(g) Such Seller is aware that the acquisition of the Merger Shares
is a speculative investment involving a high degree of risk and that there is no
guarantee that the Seller will realize any gain from this investment, and that
such Seller could lose the total amount of his investment;
(h) Such Seller understands that no United States federal or state
agency had made any finding or determination regarding the fairness of the
offering of the Merger Shares for investment, or any recommendation or
endorsement of the offering of the Merger Shares;
(i) Such Seller is acquiring the Merger Shares for investment, with
no present intention of dividing or allowing others to participate in such
investments or of reselling, or otherwise participating directly or indirectly,
in a distribution of the Merger Shares, and shall not make any sale, transfer,
assignment or pledge thereof, except (i) pursuant to an effective registration
statement under the Securities Act, (ii) in a transaction which, in the opinion
of counsel reasonably satisfactory to Purchaser, is not required to be
registered under the Act;
(j) No representations or warranties have been made to such Seller
by the Purchaser or any agent, employee or affiliate of the Purchaser, and in
entering into this transaction such Seller is not relying upon any information,
other than the results of independent investigation by such Seller;
(k) Such Seller understands that the Merger Shares are being
offered to him in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Purchaser is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Seller set
forth herein in order to determine the applicability of such exemptions and the
suitability of such Seller to acquire the Merger Shares; and
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(l) Such Seller is the shareholder of record and the owner of the
shares of Company Common Stock set forth opposite such Sellers' name provided in
Exhibit "A", free and clear of any claims, security interests, liens or other
restrictions on title or transferability of the Company Common Stock. Such
Seller has full power and authority to enter into this Agreement and transfer
such shares of Company Common Stock without the need for any consent of any
other person. Such Seller does not oppose the Merger, has not and will not vote
against the consummation of any transactions contemplated by this Agreement, and
has not and will not seek to exercise any dissenter rights or other rights in
opposition to, or disagreement with, the transactions contemplated hereunder.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business; Other Actions; and Certain Tax Matters.
(a) Conduct of Business. During the period from the date of this Agreement to
the Effective Time, the Company shall, except as expressly contemplated or
permitted by this Agreement or to the extent that Purchaser shall otherwise
consent in writing, carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with it
to the end that its goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company shall not (except as expressly contemplated or permitted by
this Agreement or to the extent that Purchaser shall otherwise consent in
writing):
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
its capital stock; provided, however, that the Company may declare and pay
dividends in the cumulative amount of $416,340 [CONFIRM] with respect to its S
Corporation income for the period January 1, 1997 through the Effective Date,
(y) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
shares of Company Common Stock upon the exercise of options outstanding on the
date of this Agreement and in accordance with their present terms);
(iii) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (y) any assets that are
material, individually or in the aggregate, to the Company;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
other than in the ordinary course of business consistent with past practices;
(vi) (y) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary course of
business consistent with past practice, or (z) make any loans, advances or
capital contributions to, or investments in, any other person, other than to the
Company or advances to employees in accordance with past practice;
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(vii) except for the items listed on Schedule 4.1(a)(vii), make
or agree to make any new capital expenditure or expenditures which,
individually, is in excess of $10,000 or, in the aggregate, are in excess of
$25,000;
(viii) make any tax election or settle or compromise any tax
liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the Financial Statements of the Company or incurred in the
ordinary course of business consistent with past practice;
(x) waive any material benefits of, or agree to modify in any
material respect, any confidentiality, standstill or similar agreements to which
the Company is a party;
(xi) modify, amend or terminate any material contract or
agreement to which the Company is a party or waive, release or assign any
material rights or claims;
(xii) except as required to comply with applicable law, (A)
adopt, enter into, terminate or amend any Benefit Plan or other arrangement for
the benefit or welfare of any director, officer or current or former employee,
(B) increase in any manner the compensation or fringe benefits of, or pay any
bonus to, any director, officer or employee (except for normal increases or
bonuses in the ordinary course of business consistent with past practice), (C)
pay any benefit not provided-for under any Benefit Plan, (D) except as permitted
in clause (B), grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Benefit Plans or agreement or awards made thereunder) or (E) take any
action to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or Benefit
Plan;
(xiii) make any change in any method of accounting or accounting
practice or policy other than those required by GAAP;
(xiv) take any action that (without regard to any action taken
or agreed to be taken by Purchaser or any of its affiliates) would prevent
Purchaser from accounting for the business combination to be effected by the
Merger as a pooling of interests; or
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Purchaser shall not take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue, or
(iii) any of the conditions to the Merger set forth in Article VI not being
satisfied.
(c) Certain Tax Matters. From the date hereof until the Effective
Time, (i) the Company will accurately prepare and timely file (within applicable
periods of extension) with the relevant taxing authority all tax returns and
reports required to be filed; (ii) the Company will timely pay all taxes due and
payable; (iii) the Company will make adequate provision on its books and
records, to the extent required in accordance with GAAP, for all taxes due and
payable after the Effective Time; and (iv) the Company will promptly notify
Purchaser of any action, suit, proceeding, claim or audit pending against or
with respect to the Company in respect of any tax where there is a reasonable
possibility of a determination or decision which would reasonably be expected to
have a material adverse effect on the Company's tax liabilities or tax
attributes.
SECTION 4.2. No Solicitation. (a) The Company and its officers, directors,
executive employees, representatives and agents shall immediately cease any
discussions or negotiations with any parties that may be ongoing with respect to
a takeover proposal. The Company shall not, nor shall it authorize or permit any
of its
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officers, directors or executive employees or any investment banker, attorney or
other advisor or representative retained by it to, (i) solicit, initiate or
knowingly encourage the submission of, any takeover proposal, or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action
knowingly to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any takeover proposal.
For purposes of this Agreement, "takeover proposal" means any inquiry, proposal
or offer from any person relating to any direct or indirect acquisition or
purchase of 15% or more of the consolidated assets of the Company or of any
equity securities of the Company or any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or which would reasonably be expected to
dilute materially the benefits to Purchaser of the transactions contemplated
hereby.
(b) The Company promptly shall advise Purchaser in writing of any
request for information or of any takeover proposal or any inquiry with respect
to or which reasonably could be expected to lead to any takeover proposal, and
the material terms and conditions of such request, takeover proposal or inquiry.
The Company will keep Purchaser informed in all respects of the status and
details (including amendments or proposed amendments) of any such takeover
proposal or inquiry.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. [INTENTIONALLY DELETED]
SECTION 5.2. Accounting and Tax Matters. No party shall take or fail to
take any action that (without regard to any action taken, not taken or agreed to
be taken or not taken by any other party or any of its affiliates) that would
prevent Purchaser or Sellers from accounting for the business combination to be
effected by the Merger as a "pooling of interests" transaction and merger which
is tax free pursuant to Section 368 of the Code.
SECTION 5.3. Access to Information. (a) The Company shall, upon
reasonable notice from Purchaser, afford to Purchaser, and to Purchaser's
officers, employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel, records and all other information concerning
its business, properties and personnel as Purchaser may reasonably request.
(b) Purchaser shall, upon reasonable notice from the Company,
afford to the Company, and to Company's officers, employees, accountants,
counsel, financial advisors and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel, records and all
other information concerning its business, properties and personnel as Company
may reasonably request.
(c) Each of the Company and Purchaser may make copies of
documents provided to them pursuant this Section 5.3 at their own expense. The
parties shall, and shall cause their respective officers, employees,
accountants, counsel, financial advisors and other representatives to, hold any
such information which is nonpublic in confidence. The Purchaser agrees that
unless and until the transactions contemplated hereby have been consummated, the
Purchaser, including its representatives, will hold in strict confidence all
data and information obtained from the Company and the Sellers in connection
with the transactions contemplated hereby, except any of the same which (i) was,
is now, or becomes generally available to the public (but not as a result of a
breach of any duty of confidentiality by which the Purchaser is bound); (ii) was
known to the Purchaser prior to its disclosure, or (iii) is disclosed to the
Purchaser by a third party not subject to any duty of confidentiality owed to
the Company or the Sellers prior to its disclosure. The Purchaser will use such
data and information solely for the specific purpose of evaluating the
transactions contemplated hereby. The Company and each of the Sellers agrees
that unless and until the transactions contemplated hereby have been
consummated, the Company and the Sellers, including their representatives, will
hold in strict confidence all data and information obtained from the Purchaser
in connection
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with the transactions contemplated hereby, except any of the same which (i) was,
is now, or becomes generally available to the public (but not as a result of a
breach of any duty of confidentiality by which the Company and each of the
Sellers are bound); (ii) was known to the Company or the Sellers prior to its
disclosure, or (iii) is disclosed to the Company or the Sellers by a third party
not subject to any duty of confidentiality owed to the Purchaser prior to its
disclosure. The Company and each of the Sellers will use such data and
information solely for the specific purpose of evaluating the transactions
contemplated hereby. If this Agreement is terminated, the party that obtained
such data, information and other written material (including all copies thereof)
in connection with contemplating the Merger shall promptly return such data,
information and other written material to the party that provided it and
thereafter will make no further use whatsoever of any of such data, information
or other written material or information derived therefrom.
SECTION 5.4. Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all other things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
other necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
other reasonable steps as may be necessary to avoid an action or proceeding by
any Governmental Entity, (ii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity or reversed, and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.
SECTION 5.5. Public Announcements. Purchaser and the Company will
consult with each other before issuing, and give each other the opportunity to
review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation except as may be required by applicable law
or court process. The parties agree that the initial press release to be issued
with respect to the transactions contemplated by this Agreement shall be in the
form heretofore agreed to by the parties.
SECTION 5.6. Affiliates. Prior to the Closing Date, the Company shall
deliver to Purchaser Schedule 5.6, which identifies all persons who are, at the
Closing Date, "affiliates" of the Company for purposes of qualifying the Merger
for "pooling of interests" accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
SECTION 5.7. Employment Agreements. The Company shall use its
reasonable efforts to cause the Employment Agreements to be executed by those
persons whose names are set forth on Exhibit "B."
SECTION 5.8. Employee Restricted Stock Plan. [INTENTIONALLY DELETED].
....SECTION 5.9. Expenses. Each of the Purchaser, the Company and the
Sellers shall pay all of its and their respective costs and expenses, including
legal and accounting fees, in connection with its and their execution and
performance of, and compliance with, this Agreement, it being understood that
the Company will pay the fees of the Company and the Sellers up to a maximum of
$30,000 and the Sellers shall pay all fees in excess thereof without
reimbursement from the Company. To the extent that fees are incurred by the
Sellers which (i) are not in excess of the limitation set forth in the preceding
sentence, the Purchaser shall promptly pay or reimburse any Seller for such
expenses paid by him upon presentation of proof of payment thereof.
SECTION 5.10. Restrictions on Transfer of Purchaser Common Stock.
(a) Transfer of Purchaser Common Stock. Until the fourth
anniversary of this Agreement, no Seller shall Transfer any interest in any
shares of Purchaser Common Stock received pursuant to this Agreement, except
pursuant to (i) a Public Sale or a Sale of the Company ("Exempt Transfers") or
(ii) the provisions of this Section 5.10; provided that in no event shall any
Transfer pursuant to this clause (ii) be made for any consideration
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other than cash payable upon consummation of such Transfer. No Seller may
consummate any Transfer permitted by clause (ii) of the preceding sentence until
60 days after the Sale Notice has been given to the Purchaser, the Investors and
the Other Executives, unless the parties to the Transfer have been finally
determined pursuant to this Section 5.10 prior to the expiration of such 60-day
period. (The date of the first to occur of such events is referred to herein as
the "Authorization Date").
(b) First Refusal Rights. The Purchaser may elect to purchase all
(but not less than all) of the shares of the Purchaser Common Stock to be
transferred by the Seller upon the same terms and conditions as those set forth
in the Sale Notice by delivering a written notice of such election to the
Seller, the Investors and the Other Executives within 20 days after the Sale
Notice has been given to the Company. If the Purchaser has not elected to
purchase all of the shares to be transferred, each Investor and each Other
Executive may elect to purchase all or any portion of the shares to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to the Seller within 40 days
after the Sale Notice has been given to the Investors and each Other Executive.
If the Investors and the Other Executives elect to purchase an aggregate number
of shares greater than the number of such shares specified in the Sale Notice,
such number of shares shall be allocated among the Investors pro rata based upon
the number of shares of Common Stock of the Purchaser (including the Underlying
Common Stock) owned by each such Investor and Other Executive (but in no event
shall the pro rata share of any Investor or Other Executive result in such
Investor or Other Executive acquiring a number of shares in excess of the number
of such shares requested by such Investor or Other Executive). If neither the
Company nor, in the aggregate, the Investors and the Other Executives elect to
purchase all of the shares specified in the Sale Notice, the Seller may transfer
the shares specified in the Sale Notice, subject to the provisions of subsection
(c) below, at a price and on terms no more favorable to the transferee(s)
thereof than specified in the Sale Notice during the 60-day period immediately
following the Authorization Date. Any shares not transferred within such 60-day
period will be subject to the provisions of this subsection (b) upon subsequent
transfer. The Purchaser may pay the purchase price for such shares by
offsetting amounts outstanding under any bona fide debts owed by Seller to the
Purchaser with the balance, if any, by check or wire transfer of funds.
(c) Participation Rights. If neither the Purchaser nor, in the
aggregate, the Investors and Other Executives have elected to purchaser all of
the shares specified in the Sale Notice pursuant to subsection (b) above, each
Investor and Other Executive may elect to participate in the contemplated
Transfer by delivering written notice to the Seller and the Company within 50
days after receipt by such Investor or Other Executive of the Sale Notice. If
any Investor or Other Executive has elected to participate in such sale, the
Seller and such Investor or Other Executive will be entitled to sell in the
contemplated sale, at the same price and on the same terms, a number of shares
of the Purchaser's equity securities equal to the product of (i) the quotient
determined by dividing the percentage of the Underlying Common Stock held by
such Person, by the aggregate percentage of the Underlying Common Stock owned by
the Seller and the Investors and the Other Executives participating in such sale
and (ii) the number of shares of equity securities to be sold in the
contemplated sale. Seller will use his best efforts to obtain the agreement of
the prospective transferee(s) to the participation of each Investor and Other
Executive desiring to participate in the contemplated Transfer and will not
transfer any shares to the prospective transferee(s) if such transferee(s)
refuses to allow the participation of such Investor and Other Executive.
(d) Certain Permitted Transfers. The restrictions contained in this
Section 5.10 will not apply with respect to (i) transfers of shares pursuant to
applicable laws of descent and distribution or (ii) transfer of shares among
Seller's Family Group; provided that such restrictions will continue to be
applicable to the shares after any such transfer and the transferees have agreed
in writing to be bound by the provisions of this Agreement. In addition,
following the completion of an underwritten Public Offering, Seller, in his sole
discretion, may pledge any of his shares of Purchaser Common Stock as collateral
for a loan so long as the pledgee of such stock and the Seller enter in a pledge
agreement in form and substance reasonably satisfactory to the Purchaser,
pursuant to which pledgee, among other things, agrees that pledgee may only sell
such shares in a Public Sale.
(e) Termination of Restrictions. The restrictions on the Transfer of
shares set forth in this Section 5.10 will continue with respect to each such
share until the date on which such share has been transferred in a transaction
permitted by this Section 5.10 (except in a transaction contemplated by
subsection (d)); provided that in any event such restrictions will terminate on
a Sale of the Company.
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(f) Legend. The certificates representing the Purchaser Common Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE WERE ORIGINALLY ISSUED AS OF
_______ __, 1997, HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN AN
AGREEMENT AND PLAN OF MERGER DATED AS OF
______ __, 1997 AMONG ANSWERTHINK CONSULTING
GROUP, INC., RELATIONAL TECHNOLOGIES, INC.
AND THE THEN SHAREHOLDERS OF RELATIONAL
TECHNOLOGIES, INC. A COPY OF SUCH AGREEMENT
MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
PRINCIPAL PLACE OF BUSINESS OF ANSWERTHINK
CONSULTING GROUP, INC. WITHOUT CHARGE."
SECTION 5.11. Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Purchaser and the Sellers for
certain tax matters following the Effective Date:
(a) Tax Periods Ending on or Before the Effective Date. Purchaser
shall prepare or cause to be prepared at its expense and file or cause to be
filed all tax returns for the Company for all periods ending on or prior to the
Effective Date which are filed after the Effective Date. The Purchaser shall
permit the Sellers' Agent to review and comment on each such tax return
described in the preceding sentence prior to filing. Each of the Sellers will
jointly and severally reimburse Purchaser for the amount of all taxes relating
to any taxable period ending on or prior to the Effective Date, regardless of
the time for filing the tax returns for such taxable period (but only to the
extent such taxes exceed an amount equal to $50,000 plus the reserve for tax
liability (rather than any reserve for deferred taxes established to reflect
timing differences between book and tax income) shown on the face of the
Financial Statements). Such payments shall be made within five (5) business days
of payment by the Purchaser of such taxes, and shall be paid by each of the
Sellers on a pro rata basis. In the event a refund is provided for such taxable
period, such refund shall be paid to each of the Sellers on a pro rata basis.
(b) Tax Period Beginning Before and Ending After the Effective Date.
The Purchaser shall prepare or cause to be prepared at its expense and file or
cause to be filed any tax returns of the Company for tax periods which begin
before the Effective Date and end after the Effective Date. Each of the Sellers
will jointly and severally reimburse Purchaser for that portion of the taxes
with respect to any such period which relates to the portion of such taxable
period ending on the Effective Date (but only to the extent such taxes exceed an
amount equal to $50,000 plus the reserve for tax liability (rather than any
reserve for deferred taxes established to reflect timing differences between
book and tax income) shown on the face of the Financial Statements). Such
payment shall be made within five (5) days of the date on which such taxes are
paid by the Purchaser, and shall be paid by each of the Sellers on a pro rata
basis. In the event a refund is provided for such taxable period, such refund
shall be paid to each of the Sellers on a pro rata basis. For purposes of this
Section, in the case of any taxes that are imposed on a periodic basis and are
payable for a taxable period that includes (but does not end on) the Effective
Date, the portion of such tax which relates to the portion of such taxable
period ending on the Effective Date shall (x) in the case of any taxes other
than taxes based upon or related to income, be deemed to be the amount of such
tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in such taxable period ending on the Effective Date
and the denominator of which is the number of days in the entire taxable period,
and
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(y) in the case of any tax based upon or related to income, be deemed equal to
the amount which would be payable if the relevant taxable period ended on the
Effective Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company.
(c) Cooperation on Tax Matters.
(i) The Purchaser, the Company, and each of the Sellers
shall cooperate fully, as and to the extent reasonably requested by other party,
in connection with the filing of tax returns pursuant to this Section 5.11 and
any audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Purchaser, the Company and each of the
Sellers agree (x) to retain all books and records with respect to tax matters
pertinent to the Company relating to any taxable period beginning before the
Effective Date until the expiration of the statute of limitations (and, to the
extent notified by the Purchaser or the Sellers' Agent, any extensions thereof)
of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (y) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Purchaser or
the Sellers, as the case may be, shall allow the other party to take possession
of such books and records.
(ii) The Purchaser, the Company and each of the Sellers
further agree, upon request, to use their best efforts to obtain any certificate
or other document from any government authority or any other person as may be
necessary to mitigate, reduce or eliminate any tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(d) Tax Sharing Agreements. All tax-sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Effective Date and, after the Effective Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Expenses. The Sellers will pay all expenses (including, but
not limited to, fees and expenses of legal counsel, accountants and other
consultants) incurred in connection with the provisions of this Section 5.11,
including, but not limited to, the preparation of all tax returns for periods
ending on or before the Effective date.
(f) Relation to Section 8.1. The provisions of this Section shall
be in addition to the provisions of Section 8.1; provided, however, that payment
by Sellers shall only be required once and further provided that any amounts
which Sellers would be required to pay under this Section but for the amount
being less than $50,000 shall be included when determining whether amounts are
payable under Section 8.1.
SECTION 5.12. Indemnification Waiver Each of the Sellers hereby agrees
that he will not make any claim for indemnification against the Purchaser, by
reason of the fact that Seller was a director, officer, employee or agent of the
Company (whether such claim is for expenses, judgments, fines, amounts paid in
settlement or otherwise, and whether such claim is pursuant to charter
documents, by-laws, statute or otherwise) with respect to any claim, action,
suit or proceeding brought by the Purchaser or any other person against such
Seller (whether such claim, action, suit or proceeding is pursuant to this
Agreement, applicable laws or otherwise).
SECTION 5.13. Shareholders' Agreement. Prior to the Effective Date,
each of the Sellers shall become parties to the Shareholders' Agreement made as
of April 23, 1997, among the Purchaser, Golder, Thoma, Cressey, Rauner Fund V,
L.P., MG Capital Partners II, L.P., Gator Associates, Ltd. and Tara Ventures,
Ltd.
SECTION 5.14. Bonus Plans. Any Benefit Plan or other arrangement
whereby compensation is owing or payable to any of the employees of the Company,
including the compensation set forth in Schedule 3.1(i) hereof, shall terminate
as of the date of Closing and the Purchaser shall not assume any obligations or
liabilities with respect
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ARTICLE VI
Conditions Precedent
SECTION 6.1. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been approved by
the affirmative vote of the holders of all of the outstanding shares of Company
Common Stock and each such holder shall have waived any dissenters' rights or
rights of approval.
(b) No Injunctions or Restraints; Illegality. None of the parties
hereto shall be subject to any statute, rule, regulation, decree, ruling,
injunction or other order issued by any Governmental Entity of competent
jurisdiction which prohibits, restrains, enjoins or restricts the consummation
of the transactions contemplated by this Agreement.
SECTION 6.2. Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the Merger are further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company set forth in this Agreement that are not so qualified shall be true
and correct in all respects, in each case as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and Purchaser shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Purchaser shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) No Material Adverse Change. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change in the
business, properties, assets, financial condition or results of operations of
the Company, taken as a whole.
SECTION 6.3. Conditions to Obligations of the Company. The obligation
of the Company and the Sellers to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Purchaser set forth in this Agreement that are not so qualified shall be true
and correct in all respects, in each case as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and the Company shall have
received a certificate signed on behalf of Purchaser by the chief executive
officer and the chief financial officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser. Purchaser shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Purchaser by the chief executive
officer and the chief financial officer of Purchaser to such effect.
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(c) Value of Assets. The fair market value of the assets of the
Company as of the Closing Date is not less than the fair market value of the sum
of (i) the liabilities of the Company and (ii) any other liabilities to which
the assets of the Company are subject, each determined as of such date.
(d) No Material Adverse Change. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change in the
business, properties, assets, financial condition or results of operations of
the Purchaser, taken as a whole.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time:
(a) by mutual written consent of Purchaser and the Company;
(b) by either Purchaser or the Company:
(i) if the Merger shall not have been consummated on or before
August 5, 1997, unless the failure to consummate the Merger is the result of a
breach of this Agreement by the party seeking to terminate this Agreement;
provided, however, that the passage of such period shall be tolled for any part
thereof during which any party shall be subject to a nonfinal order, decree,
ruling or action restraining, enjoining or otherwise prohibiting the
consummation of the Merger; or
(ii) if any Governmental Entity of competent jurisdiction shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
(c) by Purchaser:
(i) if the representations and warranties of Sellers and the
Company set forth in this Agreement that are qualified as to materiality shall
not be true in all material respects or the representations and warranties that
are not so qualified shall not be true in all respects as at any date prior to
Closing, or if any of the conditions specified in Section 6.2 hereof shall have
been waived by Purchaser; or
(ii) if each of the Sellers do not approve the Merger and waive
all dissenter's rights (the "Approval") prior to the Closing Date; and
(d) by Company and the Sellers if the representations and warranties
of Purchaser contained in this Agreement that are qualified as to materiality
shall not be true and correct in all material respects or the representations
and warranties that are not so qualified shall not be true in all respects as at
any date prior to Closing, or Purchaser shall have breached its covenants
contained in this Agreement in any material respect or if any of the conditions
specified in Section 6.3 hereof shall not have been fulfilled by the time
required and shall not have been waived by Sellers.
SECTION 7.2. Effect of Termination. In the event of termination of
this Agreement by either the Company or Purchaser as provided in Section 7.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Purchaser or the Company, other than as
provided in this Agreement, or except to the extent that such termination
results from the breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.3. Amendment. This Agreement may be amended by the parties
hereto at any time before or after any required approval of matters presented in
connection the Merger by the shareholders of the Company, provided, however,
that after any such approval, there shall be made no amendment that by law
requires further
22
<PAGE>
approval by such shareholders without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
SECTION 7.4. Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the provisions of Section 7.3, waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Survival of Terms; Indemnification.
(a) Survival. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing Date
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
(other than the indemnification provisions set forth in this Article VIII, which
shall survive as provided below) set forth in this Agreement shall survive and
continue until all obligations set forth therein shall have been performed and
satisfied; and (b) all representations and warranties, and the agreements of the
Company, Sellers and the Purchaser to indemnify each other set forth in this
Article VIII, shall survive and continue for, and all claims with respect
thereto shall be made prior to the end of, one year from the Closing Date,
except for (i) the representations and warranties set forth in Section 3.1(b)
hereof shall survive without limitation, (ii) claims for misrepresentations or
breaches of warranty relating to Section 3.1(k) (Taxes) may be asserted until 60
days after the running of the applicable statute of limitations with respect to
the taxable period to which the particular claims relate and (iii)
representations, warranties and indemnities for which an indemnification claim
shall be pending as of the end of the applicable period referred to above, in
which event such indemnities shall survive with respect to such claim until the
final disposition thereof.
(b) Indemnification by Sellers. The Sellers agree to, and shall,
indemnify the Purchaser, its respective officers, directors, employees,
shareholders, representatives and agents and hold each of them harmless at all
times after the date of this Agreement, against and in respect of any and all
Damages resulting from, or in respect of, any of the following (provided,
however, that Sellers shall not be liable hereunder unless the cumulative total
of Damages exceeds $50,000, net of insurance proceeds or other indemnity or
contribution and net of any tax benefit arising therefrom and then only to the
extent of such excess):
(i) Any misrepresentation, breach of warranty, or non-
fulfillment of any obligation on the part of the Company or the Sellers under
this Agreement, any document relating hereto or thereto or contained in any
exhibit to this Agreement or from any misrepresentation in or omission from any
certificate, schedule, other agreement or instrument by the Sellers or the
Company hereunder.
(ii) Any claim by a stockholder or former stockholder of the
Company or any other person seeking to assert: (A) ownership or rights to
ownership of any shares of capital stock of the Company; (B) any rights of a
stockholder (other than the right to receive the Merger Consideration in
accordance with the terms of this Agreement) including any option, preemptive
rights or rights to receive notice or to vote; (C) any rights under the
Company's charter, bylaws or other constituent documents; or (D) any claim that
his shares of capital stock were not repurchased by the Company.
(iii) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any action, suit,
proceeding or claim incident to any of the foregoing.
23
<PAGE>
(c) Indemnification by the Purchaser. The Purchaser agrees to, and
shall, indemnify the Company, and its officers, directors, employees,
shareholders, representatives and agents and the Sellers and hold each of them
harmless at all times after the date of this Agreement, against and in respect
of any and all Damages resulting from, or in respect of, any of the following
(provided, however, that Purchaser shall not be liable hereunder unless the
cumulative total of Damages exceeds $50,000 and then only to the extent of such
excess):
(i) Any misrepresentation, breach of warranty or non-fulfillment
of any obligation on the part of the Purchaser under this Agreement, any
document relating hereto or thereto or contained in any exhibit to this
Agreement or from any misrepresentation in or omission from any certificate,
schedule, other agreement or instrument by the Purchaser hereunder.
(ii) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any action, suit,
proceeding or claim incident to any of the foregoing.
(d) Limitation on Indemnification Amount. In the event that a claim
for indemnification is made by Purchaser against any of the Sellers, the amount
for which such Seller shall be liable based on such claim shall be limited to
the lessor of (i) the Fair Market Value of the Merger Consideration received by
such Seller on the date that Seller becomes obligated to make payment with
respect to such claim, and (ii) $7,000,000.00 multiplied by the percentage of
the Merger Consideration received by Seller from Purchaser. In the event that a
claim for indemnification is made by Sellers against Purchaser, the amount for
which Purchaser shall be liable based on such claim shall be limited to the Fair
Market Value of the Merger Consideration received by Purchaser from such Seller.
In no event shall any of the parties to this Agreement provide indemnification
in an amount in excess of the Fair Market Value of the Merger Consideration
received by such party. Any liability pursuant to this Section 8.1 may be
satisfied by a Seller by delivering shares of Purchaser Common Stock, the number
of shares thereof to be determined based upon the Fair Market Value as
calculated from the date that Seller becomes obligated to make payment with
respect to such claim.
(e) Third-Party Claims.
(i) Except as otherwise provided in this Agreement, the
following procedures shall be applicable with respect to indemnification for
third-party claims. Within ten days after receipt by the party seeking
indemnification hereunder (hereinafter referred to as the "Indemnitee") of
notice of the commencement of any (a) tax audit or proceeding for the assessment
of tax by any taxing authority or any other proceeding which may result in the
imposition of a tax liability or obligation or (b) any action or the assertion
of any claim, liability or obligation by a third party (whether by legal process
or otherwise), against which claim, liability or obligation the other party to
this Agreement (hereinafter the "Indemnitor") is, or may be, required under this
Agreement to indemnify such Indemnitee, the Indemnitee will, if a claim thereon
is to be, or may be, made against the Indemnitor, notify the Indemnitor in
writing of the commencement or assertion thereof and give the Indemnitor a copy
of such claim, process and all legal pleadings; provided, however, that the
failure to give such notice shall not impair the right to indemnification to the
extent such failure has not prejudiced the Indemnitor. The Indemnitor shall have
the right to participate in the defense of such action with counsel of reputable
standing. The Indemnitor shall have the right to assume the defense of such
action unless such action (i) may likely result in injunctions or other
equitable remedies in respect of the Indemnitee or its business; (ii) may result
in liabilities which, taken with other then existing claims under this Article
VIII, would not be fully indemnified hereunder; or (iii) may likely have a
substantial adverse impact on the business or financial condition of the
Indemnitee after the Closing Date (including an effect on the tax liabilities,
earnings or ongoing business relationships of the Indemnitee) or (vi) is for an
alleged amount of less than $5,000. The Indemnitor and the Indemnitee shall
cooperate in the defense of such claims. In the case that the Indemnitor shall
assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the Indemnitee shall make available to the
Indemnitor all relevant records and take such other action and sign such
documents as are reasonable necessary to defend such audit, assessment or other
proceeding in a timely manner. If the Indemnitee shall be required by judgment
or a settlement agreement to pay any amount in respect of any obligation or
liability against which the Indemnitor has agreed to indemnify the Indemnitee
under this Agreement, the Indemnitor shall promptly reimburse the Indemnitee in
an amount equal to the amount of such payment plus all reasonable expenses
(including legal fees and expenses) incurred by such Indemnitee in connection
with such obligation or liability subject to this Article VIII. No Indemnitor,
in the defense of any such claim, shall, except with the consent of the
Indemnitee, consent to entry of any judgment or enter into any settlement which
does
24
<PAGE>
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all liability with respect to
such claim. In the event that the Indemnitor does not accept the defense of any
matter for which it is entitled to assume such defense as above provided, the
Indemnitee shall have the full right to defend against any such claim, and shall
be entitled to settle or agree to pay in full such claim or demand, in its sole
discretion. With respect to any matter as to which the Indemnitor is not
entitled to assume the defense pursuant to the terms of this paragraph, the
Indemnitee shall not enter into any settlement for which an indemnification
claim will be made hereunder without the approval of the Indemnitor, which will
not be unreasonably withheld.
(ii) Prior to paying or settling any claim against which an
Indemnitor is, or may be, obligated under this Agreement to indemnify an
Indemnitee, the Indemnitee must first supply the Indemnitor with a copy of a
final court judgment or decree holding the Indemnitee liable on such claim or
failing such judgment or decree, must first receive the written approval of the
terms and conditions of such settlement from the Indemnitor. An Indemnitor or
Indemnitee shall have the right to settle any claim against it, subject to the
prior written approval of the other, which approval shall not be unreasonably
withheld.
(iii) An Indemnitee shall have the right to employ its own counsel
in any case, but the fees and expenses of such counsel shall be at the expense
of the Indemnitee unless (a) the employment of such counsel shall have been
authorized in writing by the Indemnitor in connection with the defense of such
action or claim, (b) the Indemnitor shall not have employed counsel in the
defense of such action or claim, or (c) such Indemnitee shall have reasonably
concluded that there may be defenses available to it which are contrary to, or
inconsistent with, those available to the Indemnitor, in any of which events
such fees and expenses of not more than one additional counsel for the
indemnified parties shall be borne by the Indemnitor.
(f) Exclusive Remedy. Other than Purchaser's right to specific
enforcement and injunctive relief for any breach of this Agreement, the remedies
provided in this Section 8.1 shall be exclusive and shall preclude assertion by
any party of any other rights or the seeking of any other remedies for any
breach of this Agreement.
SECTION 8.2. Notices. Except as otherwise provided in Section 4.2(e),
all notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Purchaser, to
AnswerThink Consulting Group, Inc.
1401 Brickell Avenue
Suite 440
Miami, Florida 33131
Attention:Ted A. Fernandez, Chief Executive Officer and President
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Paul Berkowitz, Esq.
(b) if to the Company, to:
Scott Smith, Sellers' Agent
6075 Atlantic Boulevard
Suite G-1
Norcross, Georgia 30071
25
<PAGE>
with a copy to:
Schreeder, Wheeler & Flint
The Candler Building
Sixteenth Floor
Atlanta, Georgia 30303-1845
Attention: Edward H. Brown, Esq.
SECTION 8.3. Definitions. For purposes of this Agreement:
(a) "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person for purposes hereof, "control"
means the power to vote or direct the voting of sufficient securities or other
interests to elect a majority of the directors or to control the management of
such person;
(b) "Affiliate" means, in the case of a natural person, one or more
members of a group comprised of such person and such person's parents or
grandparents, children or grandchildren, siblings or any spouse of any of the
foregoing;
(c) "Benefit Plan" shall have the meaning set forth in Section 3.1(j);
(d) "Commonly Controlled Entity" shall have the meaning set forth in
Section 3.1(i)(i);
(e) "Employment Agreement" shall have the meaning set forth in Section
2.2(a)(iii);
(f) "Family Group" means, with respect to any Seller, such Seller's
spouse and descendants (whether natural or adopted), any trust solely for the
benefit of Seller and/or Seller's spouse and/or descendants and any retirement
plan for the Seller.
(g) "Fair Market Value" of each share of common stock constituting
Merger Consideration means the average of the closing prices of the sales of
such common stock on all securities exchanges on which such common stock may at
the time be listed, or, if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such common stock is not so
listed, the average of the representative bid and asked prices listed in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such common
stock is not quoted in the NASDAQ System, of the average of the highest bid and
lowest asked prices on all such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Market Value is being determined and the 20
consecutive business days prior to such day. If at any time such common stock
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the Fair Market Value will be the fair value of such
common stock determined in good faith by the Purchaser's Board of Directors. If
the recipient of the Merger Consideration subject to such determination (the
"Recipient") reasonably disagrees with such determination, the Board of
Directors and the Recipient will negotiate in good faith to agree on such Fair
Market Value. If such agreement is not reached within 30 days after the Board
of Directors made a determination of the Fair Market Value, Fair Market Value
shall be determined by an appraiser jointly selected by the Board of Directors
and the Recipient, which appraiser shall submit to both parties a report within
30 days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser, each party shall submit the names of four
nationally recognized investment banking firms, and each party shall be entitled
to strike to names from the other party's list of firms, and the appraiser shall
be selected by lot from the remaining four investment banking firms. The
expenses of such appraiser shall be borne by the Recipient unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Purchaser. The determination of such appraiser shall be final and binding upon
all parties.
(h) "GAAP" means generally acceptable accounting principles;
(i) "Government Entities" shall have the meaning set forth in Section
3.1(c)(ii);
26
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(j) "Improvements" shall have the meaning set forth in Section
3.1(o)(ii);
(k) "Investors" mean Golder, Thoma, Cressey, Rauner Fund V, L.P., MG
Capital Partners II, L.P., Tara Ventures, Ltd. and Gator Associates, Ltd. and
each of their successors and assigns.
(l) "knowledge" of any person means actual knowledge of the directors
and executive officers of such person;
(m) "Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction on transfer or
otherwise, or interest of another person of any kind or nature;
(n) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Purchaser, any change or effect that is
materially adverse to the business, properties, assets, financial condition or
results of operations of such party;
(o) "Other Executives" means Ted A. Fernandez, Allan R. Frank and
Ulysses S. Knotts, III.
(p) "Pension Plan" shall have the meaning set forth in Section
3.1(i)(i);
(q) "Permits" shall have the meaning set forth in Section 3.1(h)(i);
(r) "Permitted Liens" means (i) statutory Liens not yet delinquent,
(ii) such imperfections or irregularities of title, Liens, easements, charges or
encumbrances as do not materially detract from or interfere with the present use
of the properties or assets subject thereto or affected thereby, otherwise
impair present business operations at such properties, or do not detract from
the value of such properties and assets, taken as a whole, (iii) Liens reflected
in the Financial Statements or the notes thereto, (iv) the rights of customers
of the Company with respect to inventory or work in progress under orders or
contracts entered into by the Company in the ordinary course of business, (v)
mechanics', carriers', workers', repairmen's, warehousemen's, or other similar
Liens arising in the ordinary course of business in respect of obligations not
overdue or which are being contested in good faith and covered by a bond in an
amount at least equal to the amount of the Lien, and (vi) deposits or pledges to
secure workmen's compensation, unemployment insurance, old age benefits or other
social security obligations in connection with, or to secure the performance of,
bids, tenders, trade contracts not for the payment of money or leases, or to
secure statutory obligations or surety or appeal bonds or other pledges or
deposits for purposes of like nature in the ordinary course of business. All
properties used in the Company's business operations as of the Financial
Statement Date are reflected in the Financial Statements in accordance with and
to the extent required by GAAP;
(s) "person" means an individual corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(t) "Proprietary Rights" shall have the meaning set forth in Section
3.1(p)(i);
(u) "Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Purchaser's Common
Stock approved by the board of directors of the Purchaser;
(v) "Public Sale" means any sale pursuant to a registered public
offering under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer or market
maker.
(w) "Sale of the Company" means any transaction or series of
transactions pursuant to which any person(s) or entity(ies) other than an
Investor and its affiliates in the aggregate acquire(s) (i) capital stock of the
Purchaser possessing the voting power (other than voting rights accruing only in
the event of a default, breach or event of noncompliance) to elect a majority of
the Purchaser's board of directors (whether by merger, consolidation,
reorganization, combination, sale or transfer of the Purchaser's capital stock,
shareholder or voting agreement, proxy, power of attorney or otherwise) or (ii)
all or substantially all of the Purchaser's assets determined on a consolidated
basis.
27
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(x) "Software" shall have the meaning set forth in Section
3.1(p)(iii);
(y) "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person;
(z) "Transfer" means to sell, transfer, assign, pledge or otherwise
dispose of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law); and
(aa) "Underlying Common Stock" means, at any time, the sum of (i) the
number of shares of Common Stock of the Purchaser outstanding as of such time
plus (ii) the number of shares of Common Stock of the Company issuable upon the
exercise or conversion of the Class A Convertible Preferred Stock of the
Purchaser at such time.
SECTION 8.4. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signet by each of
the parties and delivered to the other parties.
SECTION 8.6. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the Exhibits and Schedules thereto (a) constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement, and (b) is not intended to confer upon any person other than the
parties any rights or remedies.
SECTION 8.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.8. Assignment. Neither this Agreement or any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
SECTION 8.9. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Florida or in Florida state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Florida or
any Florida state court in the event any dispute arises out of this Agreement or
the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court sitting in the State of Florida or a
Florida state court.
28
<PAGE>
IN WITNESS WHEREOF, the Purchaser, the Company and each of the Sellers have
caused this Agreement to be signed personally or by their respective officers
hereunto duly authorized, all as of the date first written above.
ANSWERTHINK CONSULTING GROUP, INC.
By:/s/ Ted A. Fernandez
-----------------------------------------------
Name: Ted A. Fernandez
Title: Chief Executive Officer and President
RELATIONAL TECHNOLOGIES, INC.
By:/s/ Scott N. Smith
-----------------------------------------------
Name: Scott N. Smith
Title: Chief Executive Officer
SELLERS
/s/ Marvin Botnick
--------------------------------------------------
Marvin Botnick
/s/ Scott N. Smith, Pursuant to Power of Attorney
--------------------------------------------------
John Dean
/s/ James L. Grebe
--------------------------------------------------
Jim Grebe
/s/ Fred R. Herbert
--------------------------------------------------
Fred Herbert
/s/ Robert E. Jordan
--------------------------------------------------
Robert Jordan
/s/ Scott N. Smith, Pursuant to Power of Attorney
--------------------------------------------------
John Shlesinger
/s/ Scott N. Smith
--------------------------------------------------
Scott Smith
/s/ Louis B. Todd, III
--------------------------------------------------
Louis Todd
SELLERS AGENT
/s/ Scott N. Smith
--------------------------------------------------
Scott Smith
29
<PAGE>
The Exhibits and Schedules to this Agreement and Plan of Merger are not included
with this Registration Statement on Form S-1. AnswerThink will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
<PAGE>
Exhibit 10.8
- - --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ANSWERTHINK CONSULTING GROUP, INC.
AND
GREGORY P. HACKETT
RELATING TO THE ACQUISITION OF
THE HACKETT GROUP, INC.
DATED AS OF OCTOBER 13, 1997
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE OF STOCK..................................................................... 1
1.1 Purchase and Sale...................................................................... 1
1.2 Purchase Price......................................................................... 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER........................................ 4
2.1 Corporate Organization, Etc............................................................ 4
2.2 Subsidiaries........................................................................... 4
2.3 Stock Record Books..................................................................... 5
2.4 Corporate Minute Books................................................................. 5
2.5 Title to Shares........................................................................ 5
2.6 Authorization, Etc..................................................................... 5
2.7 No Violation........................................................................... 5
2.8 Financial Statements................................................................... 6
2.9 Employees.............................................................................. 7
2.10 Absence of Certain Changes............................................................ 7
2.11 Contracts............................................................................. 7
2.12 True and Complete Copies.............................................................. 9
2.13 Title and Related Matters............................................................. 9
2.14 Litigation............................................................................10
2.15 Tax Matters...........................................................................10
2.16 Compliance with Law and Applicable Government Regulations.............................11
2.17 Pension and Other Benefit Plans.......................................................11
2.18 Intellectual Property.................................................................13
2.19 Capital Expenditures and Investments..................................................14
2.20 Dealings with Affiliates..............................................................15
2.21 Insurance.............................................................................15
2.22 Accounts Receivable...................................................................15
2.23 Brokerage.............................................................................15
2.24 Clients...............................................................................15
2.25 Permits...............................................................................16
2.26 Improper and Other Payments...........................................................16
2.27 Disclosure............................................................................16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................................16
3.1 Corporate Organization, Etc............................................................16
3.2 Authorization, Etc.....................................................................17
</TABLE>
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<TABLE>
<S> <C>
3.3 No Violation...........................................................................17
3.4 Brokerage..............................................................................17
3.5 Improper and Other Payments............................................................17
3.6 Investment Representation..............................................................17
3.7 Disclosure.............................................................................18
ARTICLE IV COVENANTS OF THE PURCHASER...........................................................18
4.1 Corporation's Employees................................................................18
4.2 Operation of Business..................................................................18
ARTICLE V OTHER COVENANTS AND AGREEMENTS........................................................19
5.1 Agreement to Defend....................................................................19
5.2 Deliveries After Closing...............................................................19
5.3 Public Announcements...................................................................19
5.4 Tax Returns, Payments and Elections....................................................20
5.5 Financial Information..................................................................21
5.6 Bonus Payments.........................................................................21
5.7 Key Man Insurance......................................................................21
5.8 Use of Hackett Name....................................................................21
5.9 Employment Agreements with Non-Senior Executives.......................................21
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER.......................................22
6.1 Representations and Warranties; Performance............................................22
6.2 Consents and Approvals.................................................................22
6.3 Opinion of the Corporation's Counsel...................................................22
6.4 No Proceeding or Litigation............................................................22
6.5 Accounting Matters.....................................................................22
6.6 Proceedings and Documents..............................................................22
6.7 Certificates of Good Standing..........................................................23
6.8 Resignations...........................................................................23
6.9 Creditor Consents......................................................................23
6.10 Shareholders' Agreement...............................................................23
6.11 Employment Agreements.................................................................23
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE SELLER.........................................23
7.1 Representations and Warranties; Performance............................................23
7.2 Consents and Approvals.................................................................24
7.3 No Proceeding or Litigation............................................................24
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
7.4 Opinion of the Purchaser's Counsel.....................................................24
7.5 Certificate of Good Standing...........................................................24
7.6 Employment Agreements..................................................................24
ARTICLE VIII CLOSING............................................................................24
ARTICLE IX SURVIVAL OF TERMS; INDEMNIFICATION...................................................24
9.1 Survival...............................................................................24
9.2 Indemnification by Seller..............................................................25
9.3 Indemnification by the Purchaser.......................................................25
9.4 Third-Party Claims.....................................................................26
9.5 Indemnification Limits.................................................................27
9.6 Offset.................................................................................27
ARTICLE X MISCELLANEOUS PROVISIONS..............................................................27
10.1 Amendment and Modification............................................................27
10.2 Waiver of Compliance; Consents........................................................27
10.3 Certain Definitions...................................................................28
10.4 Notices...............................................................................33
10.5 Assignment............................................................................35
10.6 Construction..........................................................................35
10.7 Governing Law.........................................................................35
10.8 Arbitration...........................................................................35
10.9 Counterparts..........................................................................36
10.10 Headings.............................................................................36
10.11 Entire Agreement.....................................................................36
10.12 Binding Effect.......................................................................37
10.13 Delays or Omissions..................................................................37
10.14 Severability.........................................................................37
10.15 Expenses.............................................................................37
</TABLE>
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT, dated as of the 13th day of October, 1997 by and
between AnswerThink Consulting Group, a Florida corporation (the "Purchaser"),
---------
and Gregory P. Hackett (the "Seller"), relating to the acquisition of The
------
Hackett Group, Inc., an ohio corporation (the "Corporation"). Terms used herein
-----------
and not otherwise defined shall have the meanings set forth in Section 10.3
hereof.
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, Purchaser desires to purchase from the seller, and the Seller
desires to Sell to the purchaser, all of the 100 shares of Common Stock, no par
value, which are issued and outstanding of the Corporation (collectively, the
"Shares");
------
NOW, THEREFORE, in consideration of the representations and warranties,
covenants and agreements, and subject to the conditions contained herein, the
Seller, and the Purchaser, hereby agree as follows:
ARTICLE I
PURCHASE OF STOCK
1.1 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, the Seller hereby sells to the Purchaser, and the Purchaser hereby
purchases from the Seller, all of the Shares.
1.2 Purchase Price. In consideration for the conveyance of the Shares
--------------
and in reliance on the representations and warranties, covenants and agreements
of the Seller contained herein and the documents contemplated hereby, the
Purchaser shall pay to the Seller the aggregate purchase price (the "Purchase
--------
Price") of Eleven Million Six Hundred Seventy Thousand Dollars ($11,670,000).
- - -----
(a) The Purchase Price shall be payable by delivery to the Seller at
Closing of (i) Six Million Five Hundred Twenty-Seven Thousand Dollars
($6,527,000) by wire transfer to Seller's account number 2005890490 at Key Bank
(Cleveland, Ohio, Routing Number 041001039) and (ii) a non-negotiable promissory
note substantially in the form attached hereto as Exhibit 1.2(a) (the "Note").
----
Principal payments of the Note shall be on the dates and in the amounts set
forth below:
<PAGE>
<TABLE>
<CAPTION>
PAYMENT DATE AMOUNT
------- ---- ------
<S> <C> <C>
I March 31, 1998 $3,750,000
II March 31, 1999 $ 497,000
III March 31, 2000 $ 896,000
</TABLE>
Notwithstanding the foregoing, the Purchaser shall not be required to make
any portion of the March 31, 1998 payment if the Tier I Conditions have not been
fully met.
The full amount of the March 31, 1999 payment shall be made if the Tier II
Conditions have been fully met. In the event that Pre Tax Profit for the year
ended December 31, 1998 is less than the full Tier II requirement, but is more
than the result obtained by subtracting from $2,887,000 the amount, if any, by
which Pre Tax Profit for 1997 exceeded $2,887,000 or, if Pre Tax Profit for 1997
was less than $2,887,000, adding such shortfall to $2,887,000, the Seller shall
receive such portion of the March 31, 1999 payment which is equal to the result
obtained by multiplying $497,000 by a fraction, the numerator of which shall be
the result obtained by adding to Pre Tax Profit for 1998 the amount, if any, by
which Pre Tax Profit for 1997 exceeded $2,887,000 or, if Pre Tax Profit for 1997
was less than $2,887,000, subtracting such shortfall from Pre Tax Profit for
1998, and the denominator of which is $5,641,000. The full amount of the Tier
III payment shall be made if the Tier III Conditions have been fully met. In
the event the Tier III Conditions are not fully met, such portion of the March
31, 2000 payment shall be made as shall equal the result obtained by multiplying
$896,000 by a fraction the numerator of which shall be the Downstream Technology
Contracts and the denominator of which shall be $24,000,000.
Interest on the unpaid principal balance of the Note shall accrue at the
rate of eight percent (8%) per annum and shall be payable together with each
payment of principal (as determined above). Payments not made when due shall
bear interest at the rate of fifteen percent (15%) per annum.
(b) Notwithstanding anything in (a) above, in the event the Seller
terminates his employment with the Corporation without Good Reason or the
Corporation terminates his employment for Cause on a date which is prior to the
date which is four (4) years from the Closing Date, the Seller shall return to
the Purchaser (and Purchaser shall not be obligated to pay if Seller has not yet
received) that portion of the Purchase Price in accordance with the following
schedule:
2
<PAGE>
<TABLE>
<CAPTION>
MONTHS ELAPSED FROM CLOSING UNTIL PURCHASE PRICE
TERMINATION OF EMPLOYMENT RETURNED
--------------------------------- --------------
<S> <C>
Less than 24 100%
More than 24 but less than 36 50%
More than 36 but less than 48 25%
More than 48 -0-
</TABLE>
(c) Notwithstanding anything to the contrary set forth in (a) or (b)
above, the Seller shall not be required to return to the Purchaser any component
of the Purchase Price if employment is terminated within four years from the
date of this Agreement for the following reasons: (i) the Seller shall die or
become Disabled (as defined in his Employment Agreement with the Corporation),
(ii) the Seller shall be terminated from employment by the Corporation without
Cause; or (iii) the Seller shall terminate his employment with the Corporation
for Good Reason (as defined in his Employment Agreement with the Corporation).
(d) Payments of bonuses (the "Payments") as set forth in (a) above
shall be made based upon the books and records of the Corporation which shall be
subject to review by the Purchaser. The Seller shall cause all books and
records of the Corporation to be kept in accordance with GAAP consistently
applied for periods after January 1, 1996, and without giving effect to the
transactions contemplated herein. Promptly after the end of each of the
Corporation's 1997 and 1998 fiscal years, but in any event no later than 30 days
after each such fiscal year end, the Seller shall cause the Corporation to
present to the Purchaser the books and records of the Corporation "closed" with
respect to such period, together with the Corporation's calculation of Pre Tax
Profit and/or Downstream Technology Contracts. The Seller shall cause the
Corporation to allow the Purchaser and its representatives full and complete
access to all work papers, books and records and all additional information used
in preparing the Corporation's calculation of Pre Tax Profit and/or Downstream
Technology Contracts and shall make the Seller (or his successor) reasonably
available to discuss with the Purchaser and its representatives such papers,
books, records and calculations. The Corporation's calculation of Pre Tax
Profit and/or Downstream Technology Contracts, when delivered by the Corporation
to the Purchaser, shall be deemed final, conclusive and binding on the parties
and will be deemed to be Pre Tax Profit and/or Downstream Technology Contracts
calculations upon which the Payments shall be based, unless the Purchaser
notifies Seller, within 20 business days after receipt of the Corporation's
books and records and calculations of Pre Tax Profit and/or Downstream
Technology Contracts of its disagreement therewith. The Purchaser and Seller
shall negotiate in good faith to resolve any differences. If they reach
agreement on the amount of Pre Tax Profit and/or Downstream Technology Contracts
after review and discussion of the Corporation's books and records, such agreed
upon amount shall govern the determination of the Payments. In the event they
cannot resolve their differences within 5 days, the items and amounts in dispute
shall be submitted to the auditing firm of Arthur Andersen LLP (the "Resolution
Accountants") for resolution within 20 days of submission of any such dispute to
the Resolution Accountants. The sole function of the Resolution Accountants
shall be to select as
3
<PAGE>
most accurately reflecting the Corporation's Pre Tax Profits and/or Downstream
Technology Contracts, without adjustment or alteration, the calculations of such
amounts by the Corporation and the Purchaser, and the determination by such
independent auditing firm shall be binding and conclusive upon the parties. If
the Resolution Accountants select the calculations of the Corporation, the
Purchaser shall pay the fees and expenses of the Resolution Accountants; if the
Resolution Accountants select the calculations of the Purchaser, the Seller
shall pay the fees and expenses of the Resolution Accountants. Except as set
forth in the next sentence, all payments required to be made upon the
satisfaction of the Tiers I, II and III requirements shall be made on the first
to occur of (i) the payment date set forth in (c) above, or (ii) 20 business
days after the Purchaser's receipt of the Corporation's books and records and
calculations of Pre Tax Profit and/or Downstream Technology Contracts. If
applicable, payment will be made within three days after the Resolution
Accountants have selected either the Purchaser's or Seller's calculations of Pre
Tax Profit and/or Downstream Technology Contracts.
(e) In the event that the Tier III Conditions are met prior to the
applicable date set forth in Exhibit A hereto, the March 30, 2000 payment of the
applicable portion of the Purchase Price shall be accelerated to the date that
the Purchaser has completed its review of the reports of the Corporation
evidencing such compliance, unless there is a dispute as to whether the
Corporation is in compliance, in which case the dispute mechanism set forth in
(d) above shall be invoked to arrive at a conclusion as to the correct Tier III
payment to be made, if any.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as of the date hereof:
2.1 Corporate Organization, Etc. The Corporation is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Ohio with full corporate power and authority to carry on its business as it is
now being conducted and proposed to be conducted, and to own, operate and lease
its properties and assets. The Corporation is duly qualified or licensed to do
business and is in corporate and Tax good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, the
proposed conduct of its business or ownership or lease of its properties, or the
transactions contemplated by this Agreement, require it to be so qualified or
licensed except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. Such jurisdictions are set forth in Schedule
--------
2.1(a) hereto. True, complete and correct copies of the Corporation's Articles
- - ------
of Incorporation and Code of Regulations as presently in effect are set forth in
Schedule 2.1(b) hereto.
- - ---------------
2.2 Subsidiaries. The Corporation has no Subsidiaries.
------------
4
<PAGE>
2.3 Stock Record Books. The stock record books of the Corporation which
------------------
have been delivered to the Purchaser for inspection prior to the date hereof are
complete and correct in all material respects. The authorized, issued and
outstanding capital stock of the Corporation is as set forth in Schedule 2.3
------------
hereto. There are no shares of capital stock of the Corporation held in the
treasury of the Corporation and no shares of capital stock of the Corporation
are currently reserved for issuance for any purpose or upon the occurrence of
any event or condition.
2.4 Corporate Minute Books. The corporate minute books of the Corporation
----------------------
which have been made available to the Purchaser for inspection are complete and
correct in all material respects and contain all of the proceedings of the
shareholders and directors of the Corporation. A true and complete list of the
incumbent directors and officers of the Corporation is set forth in Schedule 2.4
------------
hereto. The books and records of the Corporation accurately reflect in all
material respects the assets, liabilities, business, financial condition and
results of operations of the Corporation and have been maintained in accordance
with normal business and bookkeeping practices.
2.5 Title to Shares. All of the outstanding shares of the capital stock of
---------------
the Corporation are owned by the Seller, have been duly authorized and validly
issued and are fully paid and nonassessable, are free of all Liens and
Contracts, and have been issued in compliance with all applicable securities
laws. There is no outstanding Contract with the Corporation or any other Person
to purchase, redeem or otherwise acquire any outstanding shares of the capital
stock of the Corporation, or securities or obligations of any kind convertible
into any shares of the capital stock of the Corporation. The Corporation has not
redeemed any securities in violation of any Contract or Regulation. The Seller
is the sole owner of and has full right, power and authority to sell and vote
the Shares. Upon payment of the Purchase Price to the Seller at the Closing, the
Seller will convey good and marketable title to the Shares, free and clear of
all Liens, Contracts or other limitations whatsoever. The assignments,
endorsements, stock powers and other instruments of transfer delivered by the
Seller to the Purchaser at the Closing will be sufficient to transfer the
Seller's entire interest, legal and beneficial, in the Shares to the Purchaser.
2.6 Authorization, Etc. This Agreement constitutes the legal, valid and
-------------------
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms.
2.7 No Violation. Except as set forth in Schedule 2.7 hereto, the
------------ ------------
execution, delivery and performance by the Corporation and the Seller of this
Agreement, and all other agreements contemplated hereby, and the fulfillment of
and compliance with the respective terms hereof and thereof by the Corporation
and the Seller, do not and will not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) constitute a default or event of
default under (with due notice, lapse of time or both), (c) result in the
creation of any Lien upon the Corporation's capital stock or assets pursuant to,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent, approval,
exemption or other action by, notice to, or filing with any Authority pursuant
to,
5
<PAGE>
Articles of Incorporation or Code of Regulations of the Corporation or any
applicable Regulation, any Order or any Contract to which the Corporation, the
Seller or their respective properties or the Shares are subject. Each of the
Seller and the Corporation has complied with all applicable Regulations and
Orders in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
2.8 Financial Statements.
--------------------
(a) Attached as Schedule 2.8(a) hereto are Statements of Income and
---------------
Shareholder's Equity for the years ended December 31, 1994, 1995 and 1996, the
four months ended April 30, 1997 and Balance Sheets as at each of such dates and
Statements of Cash Flows for the year ended December 31, 1996, and for the four
months ended April 30, 1997. The Balance Sheets, Statements of Income and
Shareholder's Equity and Statements of Cash Flows and the Notes thereto for the
year ended December 31, 1996, and for the four months ended April 30, 1997
fairly present the financial condition, assets and liabilities of the
Corporation at their respective dates and results of operations for the periods
therein referred to, all in accordance with GAAP. The Balance Sheets and
Statements of Income and Shareholder's Equity and Statements of Cash Flows at
April 30, 1997 and the notes thereto are herein collectively referred to as the
"Financial Statements." The Financial Statements and the Statements of Income
--------------------
and Shareholder's Equity and Statements of Cash Flows for the year ended
December 31, 1996 and the Balance Sheet as at such date have been audited by
Wesley, Mills & Company, the independent certified public accountants for the
Corporation.
(b) Attached as Schedule 2.8(b) are a Statement of Income and
---------------
Shareholder's Equity and Statement of Cash Flows for the seven months ended July
31, 1997 and a Balance Sheet as at such date (the "Interim Financial
-----------------
Statements"). The Interim Financial Statements are (i) correct and complete in
- - ----------
accordance with the books and records of the Corporation, (ii) fairly present
the financial condition, assets and liabilities of the Corporation as at such
dates and the results of operations and cash flows for the period covered
thereby and (iii) have been prepared in accordance with GAAP consistently
applied, except that the Interim Statements do not contain footnotes and except
for normal year-end adjustments, none of which individually or in the aggregate
would have a Material Adverse Effect on the balance sheet of the Corporation as
of July 31, 1997 or the Statement of Income for the Corporation for the seven-
month period ended July 31, 1997.
(c) Except as set forth in Schedule 2.8(c) hereto, the Corporation
---------------
does not have any Indebtedness, obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, known to the Corporation,
whether due or to become due) arising out of transactions entered into at or
prior to the date hereof, or any state of facts existing at or prior to the date
hereof, other than: (i) liabilities set forth in the Financial Statements
(including any notes thereto), or (ii) liabilities and obligations which have
arisen after the Financial Statement Date in the ordinary course of business
(none of which is a liability resulting from breach of Contract, breach of
warranty, tort, infringement or Claim).
6
<PAGE>
2.9 Employees. Schedule 2.9 hereto sets forth a list of all officers,
--------- ------------
directors and key employees of the Corporation, together with a description of
the rate and basis for their total compensation. The Corporation is in
compliance with all applicable Regulations or Orders affecting employment and
employment practices of the Corporation, including terms and conditions of
employment and wages and hours, except where its failure to comply with such
Regulations and Orders would not have a Material Adverse Effect. The Corporation
has no collective bargaining agreements and, since January 1, 1995, there have
been no strikes, work stoppages nor any demands for collective bargaining by any
union or labor organization. There is no dispute or controversy with any union
or other organization of the Corporation's employees and no arbitration
proceedings pending or to the best knowledge of the Seller threatened involving
a dispute or controversy affecting the Corporation. The Corporation does not
have any liability to any of its employees, officers or directors other than for
the payment of employee salaries to be paid in the ordinary course of business
and which accrue after the date hereof.
2.10 Absence of Certain Changes. Since the Financial Statement Date, there
--------------------------
has not been (a) any Material Adverse Change; (b) any damage, destruction or
loss, whether covered by insurance or not, having a Material Adverse Effect,
with regard to the Corporation's property and business; (c) any declaration,
setting aside or payment of any dividend or distribution (whether in cash, stock
or property) in respect of the Corporation's capital stock, or any redemption or
other acquisition of such stock by the Corporation except for the cash
distribution to the Seller of $456,000; (d) any increase (including as a result
of the transactions contemplated hereby) in the compensation payable to or to
become payable by the Corporation to its officers or employees or any adoption
of or increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such officers or employees or
any Affiliate of the Corporation except for the payment of bonuses to employees
of the Corporation in an amount not to exceed $1,600,000; (e) a commission
payment to the Falls River Group of $622,000 in connection with the transaction
contemplated by this Agreement; (f) any entry into any Material Contract (as
defined hereafter) not in the ordinary course of business, including without
limitation, any borrowing or capital expenditure; (g) any borrowings or capital
expenditures; or (h) any change by the Corporation in accounting methods or
principles.
2.11 Contracts.
---------
(a) Except as set forth in Schedule 2.11 hereto, the Corporation is
-------------
not a party to any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan providing for deferred or other compensation to
employees or any other employee benefit plan, or any Contract with any
labor union;
(ii) Contract relating to loans to officers, directors, or
Affiliates;
(iii) Contract relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a Lien on any asset of the
Corporation;
7
<PAGE>
(iv) Guarantee of any obligation;
(v) Contract under which the Corporation has advanced or
loaned any Person amounts in the aggregate exceeding $10,000;
(vi) Contract under which the Corporation is lessee of or
holds or operates any property, real or personal, owned by any other party,
except for any lease of real or personal property under which the aggregate
annual rental payments do not exceed $20,000;
(vii) Contract pursuant to which the Corporation is lessor of
or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Corporation;
(viii) Contract or group of related Contracts with the same
party or group of affiliated parties the performance of which involves
annual consideration in excess of $10,000;
(ix) assignment, license, indemnification or Contract with
respect to any intangible property (including, without limitation, any
Proprietary Rights);
(x) warranty Contract with respect to its services rendered;
(xi) Contract under which it has granted any Person any
registration rights (including piggyback rights) with respect to any
securities;
(xii) Contract or non-competition provision in any Contract
prohibiting it from freely engaging in any business or competing anywhere
in the world;
(xiii) Contract for the purchase, acquisition or supply of
property and assets, whether for resale or otherwise in excess of $10,000;
(xiv) Contracts with independent agents, brokers, dealers or
distributors;
(xv) employment, consulting, sales, commissions, advertising
or marketing Contracts;
(xvi) Contracts providing for "take or pay" or similar
unconditional purchase or payment obligations;
(xvii) Contracts with Persons with which, directly or
indirectly, the Seller also has a Contract;
8
<PAGE>
(xviii) any other Contract which is material to its operations
and business prospects or involves a consideration in excess of $10,000
annually, excluding any purchase orders in the ordinary course of business;
or
(xix) any Contract where the consent of another is required in
connection with the execution, delivery or performance of this Agreement.
(b) The Corporation has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach of nor in receipt of any claim of default or breach under any
Contract which is identified on Schedule 2.11 hereto; no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of non-compliance under any Material Contract to which
the Corporation is subject (including without limitation all performance bonds,
warranty obligations or otherwise where the same would have a Material Adverse
Effect); the Corporation does not have any present expectation or intention of
not fully performing all such obligations; the Seller does not have any
knowledge of any breach or anticipated breach by the other parties to any such
Material Contract to which the Corporation is a party.
2.12 True and Complete Copies. The Corporation has delivered or made
------------------------
available to the Purchaser true and complete copies of all the Contracts and
documents listed in the schedules to this Agreement.
2.13 Title and Related Matters.
-------------------------
(a) The Corporation owns no real property. Except as set forth in
Schedule 2.13(a) hereto, the Corporation has good and marketable title to all
- - ----------------
personal property and other assets reflected in the Financial Statements or
acquired after the Financial Statement Date, free and clear of all Liens or
Contracts of sale or lease other than Permitted Liens. All properties used in
the Corporation's business operations as of the Financial Statement Date are
reflected in the Financial Statements and are reflected therein in accordance
with and to the extent required by GAAP, except as to those assets which are
leased. Schedule 2.13(b) hereto sets forth a complete and accurate list of all
----------------
such leased assets which have annual rental payments in excess of $10,000
(including the expiration date of such lease, the name of the lessor, the annual
rental payment and whether a consent is required from the lessor to consummate
the transactions contemplated hereby).
(i) All of the Corporation's leases are in full force and
effect, and valid and enforceable in accordance with their respective
terms. The Corporation has not received any notice of any, and there exists
no event of default or event which constitutes or would constitute (with
notice or lapse of time or both) a default by the Corporation or any other
Person under any lease .
(ii) All rent and other amounts due and payable with respect to
the Corporation's leases have been paid through the date of this Agreement.
9
<PAGE>
(iii) All lessors under the Corporation's real property leases
have consented (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement without requiring material
modification in the rights or obligations thereunder.
(iv) The Corporation has received no written notice that the
landlord with respect to any real property lease would refuse to renew such
lease upon expiration of the period thereof upon substantially the same
terms, except for rent increases consistent with past experience or market
rentals.
(b) There has not been since the Financial Statement Date any sale,
lease, or any other disposition or distribution by the Corporation of any of its
assets or properties except transactions in the ordinary and regular course of
business consistent with prior practice. After the Closing, the Purchaser will
own, or have the unrestricted right to use all properties and assets that are
currently used in connection with the Corporation's business and as contemplated
by this Agreement, subject to Permitted Liens.
2.14 Litigation. Except as set forth in Schedule 2.14 hereto, there is no
---------- -------------
Claim pending or, to the knowledge of the Seller, threatened against the
Corporation or the Seller which, if adversely determined, would have a Material
Adverse Effect on the Corporation or the Seller, nor is there any Order
outstanding against the Corporation or any Seller having, or which, insofar as
can be reasonably foreseen, in the future may have, a Material Adverse Effect on
the Corporation or the Seller.
2.15 Tax Matters.
-----------
(a) The Corporation filed an election to be taxed under Subchapter S
of the Code and under analogous provisions of the income tax law of the State of
Ohio that was effective April 8, 1992. The foregoing elections were made in
compliance with the Code and State law and the Corporation has been an "S
Corporation" within the meaning of Code Section 1361(a)(i) for federal income
tax purposes (and under analogous provisions of State law) for the entire period
since such date. The Corporation is not and will not be subject to any tax
under Code Section 1374 after giving effect to the transactions contemplated
hereby.
(b) The Corporation has duly and timely filed its Tax Returns with the
appropriate Authority and has duly, completely and correctly reported all income
and all other amounts and information required to be reported thereon. The
Corporation has duly and timely paid all Taxes, including all installments on
account of Taxes for the current year, that are due and payable by it and the
Corporation has established reserves that are reflected on the Financial
Statements that are adequate for the payment by the Corporation of all Taxes
that are not yet due and payable and that relate to periods ending on or prior
to the Closing Date.
(c) The Corporation has not requested, or entered into any agreement
or other arrangement or executed any waiver providing for, any extension of time
within which (i) to file
10
<PAGE>
any Tax Return covering any Taxes for which the Corporation is or may be liable;
(ii) to file any elections, designations or similar things relating to Taxes for
which the Corporation is or may be liable; (iii) the Corporation is required to
pay or remit any Taxes or amounts on account of Taxes; or (iv) any Authority may
assess or collect Taxes for which the Corporation is or may be liable.
(d) There are no actions, suits, proceedings, investigations, audits
or claims now pending or, to the knowledge of the Corporation or any Seller,
threatened, against the Corporation in respect of any Taxes and there are no
matters under discussion, audit or appeal with any Authority relating to Taxes.
(e) The Corporation has duly and timely withheld from any amount paid
or credited by it to or for the account or benefit of any person, including,
without limitation, any of its employees, officers and directors and any non-
resident person, the amount of all Taxes and other deductions required by any
applicable law, rule or regulation to be withheld from any such amount and has
duly and timely remitted the same to the appropriate Authority.
(f) The Corporation has not filed an election under Section 341(f) of
the Code that is applicable to the Corporation or any of its assets. The
Corporation has not made any payments, is obligated to make any payments, or is
a party to any agreement that under any circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G. The
Corporation has not been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). The Corporation is not a party to
any tax allocation or sharing agreement or tax benefit transfer agreement. The
Corporation (or any predecessor of the Corporation), has never been a member of
an affiliated group that elected to file or was required to file consolidated
returns for federal income tax purposes or consolidated, combined or unitary tax
returns for state or local income tax purposes.
2.16 Compliance with Law and Applicable Government Regulations. The
---------------------------------------------------------
Corporation is in compliance with regard to its operations, practices, real
property, plants, structures, machinery, equipment and other property, and all
other aspects of its business, with all applicable Regulations and Orders,
including, but not limited to, all Regulations relating to the safe conduct of
business, environmental protection, quality and labeling, antitrust, Taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupational safety except when the failure to be in
such compliance would not have a Material Adverse Effect. There are no Claims
pending, or, to the Seller's knowledge, threatened, nor has the Corporation
received any written notice, regarding any violations of any Regulations and
Orders enforced by any Authority claiming jurisdiction over the Corporation
including any requirement of OSHA or any pollution and environmental control
agency (including air and water).
2.17 Pension and Other Benefit Plans. (a) Except as disclosed on
-------------------------------
Schedule 2.17, the Corporation does not currently have, has not since the date
- - -------------
of its incorporation had and is under
11
<PAGE>
no obligation to provide at any time in the future any Pension/Benefit Plans for
any of its officers, directors or employees, and does not have any obligations
or liabilities (either absolute or contingent) in respect of any such
Pension/Benefit Plans.
(b) Current and complete copies of all written Pension/Benefit Plans
or, where oral, written summaries of the material terms thereof, have been
provided or made available to the Purchaser together with current and complete
copies of all documents relating to the Pension/Benefit Plans, including,
without limitation, as applicable, (i) all documents establishing, creating or
amending any Pension/Benefit Plan; (ii) all trust agreements, funding
agreements, insurance contracts and investment management agreements; (iii) all
financial statements and accounting statements and reports, and investment
reports for each of the last [three] years and the [three] most recent actuarial
reports; (iv) all reports, returns, filings and material correspondence with any
regulatory authority in the last [three] years; and (v) all booklets, summaries
or manuals prepared for or circulated to, and written communications of a
general nature to employees concerning any Pension/Benefit Plan.
(c) Each Pension/Benefit Plan is, and has been, established,
registered, qualified, administered and invested, in compliance, in all material
respects, with (i) the terms thereof and (ii) all applicable laws; and the
Corporation has not received, in the last three years, any oral or written
notice from any person questioning or challenging such compliance (other that in
respect of any claim related solely to that person), and neither the Corporation
nor the Seller has knowledge of any such notice from any person questioning or
challenging such compliance beyond the last three years.
(d) All obligations under the Pension/Benefit Plans (whether pursuant
to the terms thereof or applicable Law) have been satisfied, and there are no
outstanding defaults or violations thereunder by the Corporation nor does the
Corporation have any knowledge of any default or violation by any other party to
any Pension/Benefit Plan.
(e) There have been no amendments, modifications or restatements of
any Pension Benefit Plan made, or any improvements in benefits promised, under
the Pension/Benefit Plans since the Financial Statement Date.
(f) All contributions or premiums required to be paid to or in respect
of each Pension/Benefit Plan have been paid in a timely fashion in accordance
with the terms thereof and all applicable law, and no Taxes, penalties or fees
or owing or eligible under any Pension/Benefit Plan.
(g) There is no proceeding, action, suit or claim (other than routine
claims for benefits) pending or threatened involving any Pension/Benefit Plan or
its assets, and, to the Seller's knowledge, no facts exist which could
reasonably be expected to give rise to any such proceeding, action, suit or
claim (other than routine claims for benefits).
12
<PAGE>
(h) To the Seller's knowledge, no event has occurred respecting any
Pension/Benefit Plan which would entitle any person (without the consent of the
Corporation) to windup or terminate any Pension/Benefit Plan, in whole or in
part, or which could, reasonably be expected to adversely affect the tax status
thereof.
(i) There are no going concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies respecting any of the
Pension/Benefit Plans.
(j) No material changes have occurred in respect of any
Pension/Benefit Plan since the date of the most recent financial, accounting or
actuarial report, as applicable, issued in connection with any Pension/Benefit
Plan, which could reasonably be expected to adversely affect the relevant report
(including rendering it misleading in any material respect).
(k) The Corporation has not received, or applied for, any payment of
surplus out of any Pension/Benefit Plan.
(l) The Corporation has not taken any contribution holidays under any
Pension/Benefit Plan.
(m) There have been no improper withdrawals or transfers of assets
from any Pension/Benefit Plan.
(n) All employee data necessary to administer each Pension/Benefit
Plan is in the possession of the Corporation and is complete, correct and in a
form which is sufficient for the proper administration of the Pension/Benefit
Plans, and none of the Pension/Benefit Plans, other than the pension plans or
any group registered retirement savings plan or supplemental pension or
retirement plan, provide benefits to retired employees.
(o) None of the Pension/Benefit Plans require or permit a retroactive
increase in premiums or payments, and the level of insurance reserves, if any,
under any insured Pension/Benefit Plan is reasonable and sufficient to provide
for all incurred but unreported claims.
2.18 Intellectual Property.
---------------------
(a) Schedule 2.18(a) hereto sets forth a complete and accurate list
----------------
of all of the Corporation's Proprietary Rights, to the extent described in
clauses (i) through (viii) of the definition of "Proprietary Rights" in Section
10.3 hereof. The Corporation has delivered to the Purchaser correct and complete
copies of all Proprietary Rights (that are in written form) as amended to date
and has made available to the Purchaser correct and complete copies of all other
written documentation evidencing ownership of, and any Claims relating to, each
such item. The Corporation has taken all reasonable measures to protect the
proprietary nature of each Proprietary Right, and to maintain in confidence all
trade secrets and confidential information that it owns or uses.
13
<PAGE>
(b) Except as set forth on Schedule 2.18(b) hereto, to the knowledge
of the Seller, (i) no other Person has any rights to any of the Proprietary
Rights owned or used by the Corporation, (ii) no other Person is infringing,
violating or misappropriating any such Proprietary Right that the Corporation
owns or uses, and (iii) no Proprietary Right is subject to any Outstanding Order
or Claim.
(c) Internal Software Applications.
------------------------------
(i) Internally Developed Software. The current software
-----------------------------
applications used by the Corporation in the operation of its business, to
the extent such software has been designed or developed by the Corporation
or by consultants on the Corporation's behalf, is set forth and described
on Schedule 2,18(c) (the "Internally Developed Software"), is original and
-----------------------------
the Corporation has complete rights to and ownership of such Software. To
Seller's knowledge, no part of any such Internally Developed Software is an
imitation or copy of, or infringes upon, the software of any other Person
or violates or infringes upon any common law or statutory rights of any
other person, including, without limitation, rights relating to defamation,
contractual rights, copyrights, trade secrets, and rights of privacy or
publicity. The Corporation has not sold, assigned, licensed, distributed
or in any other way disposed of or encumbered the Internally Developed
Software.
(ii) Licensed Software. Software, to the extent it is licensed
-----------------
from any third party licensor or constitutes "off-the-shelf" software
("Third Party Software"), is held or used by the Corporation lawfully and
--------------------
legitimately.
(iii) No Errors; Nonconformity. To the knowledge of the Seller,
------------------------
the Internally Developed Software is free from any software defect or
programming or documentation error, operates and runs in a reasonable and
efficient business manner, conforms to the specifications thereof, and, the
applications related to such Internally Developed Software can be recreated
from their associated source code.
(iv) No Bugs or Viruses. The Corporation has not knowingly
------------------
altered any Internally Developed Software, or supporting software which may
damage the integrity of the data stored in electronic, optical or magnetic
form.
(v) Documentation. The Corporation has furnished or made
-------------
available to purchaser all documentation relating to the use, maintenance
and operation of the Internally Developed Software, all of which, to the
knowledge of the Corporation, is true and accurate.
2.19 Capital Expenditures and Investments. Except as set forth on
------------------------------------
Schedule 2.19, the Corporation has no outstanding Contracts for capital
- - -------------
expenditures. Schedule 2.19 includes a schedule of all monies disbursed on
-------------
account of capital expenditures and investments made by the Corporation since
the Financial Statement Date.
14
<PAGE>
2.20 Dealings with Affiliates. Schedule 2.20 sets forth a complete
------------------------ -------------
and accurate list, including the parties, of all oral or written Contracts to
which the Corporation is, will be or has been a party, at any time from December
31, 1996 to the Closing Date, and to which any one or more Affiliates of the
Seller is also a party. Since the Financial Statement Date, the Corporation has
not made any payments, loaned any funds or property or made any credit
arrangement with the Seller, an Affiliate or employee of the Corporation, except
for the payment of employee salaries, bonus payments as referred to in Section
2.10(d) herein and director compensation in the ordinary course of business
consistent with prior practices and as contemplated hereby.
2.21 Insurance. The Corporation currently has Policies in full force
---------
and effect which provide for coverages that are usual and customary as to amount
and scope in the business of the Corporation. All of the Policies are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the date hereof have been paid or accrued therefor, and no notice
of cancellation or termination has been received with respect to any Policy.
Schedule 2.21 hereto sets forth a complete and accurate summary of all Policies,
- - -------------
including name of insurer, the types, dates and amounts of coverage, and any
material coverage exclusion. To the knowledge of the Seller, the Corporation
has not breached or otherwise failed to perform in any respect its obligations
under any of the Policies nor has the Corporation received any adverse notice or
communication from any of the insurers party to the Policies with respect to any
such alleged breach or failure in connection with any of the Policies. To the
Seller's knowledge, all Policies are sufficient for compliance with all
Regulations and all Contracts to which the Corporation is subject; are to the
Seller's knowledge, valid, outstanding, collectible and enforceable policies;
and will not in any way be affected by, or terminate or lapse by reason of, the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. The Corporation has never been refused any insurance with
respect to its assets or operations, nor has coverage ever been limited by any
insurance carrier to which the Corporation has applied for any Policy or with
which it has carried a Policy.
2.22 Accounts Receivable. The accounts receivable of the Corporation
-------------------
reflected in the Financial Statements and such accounts receivable as are
reflected on the books of the Corporation on the date hereof are, to the
Seller's knowledge, good and collectible, except to the extent reserved against
thereon (which reserves have been determined based upon actual prior experience
and are consistent with prior practices). All such accounts receivable (except
to the extent so reserved against) are valid, genuine and subsisting, arise out
of bona fide sales and deliveries of goods, performance of services or other
business transactions.
2.23 Brokerage. Except as set forth in Schedule 2.23, there are no
--------- -------------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Corporation.
2.24 Clients. No completed client contract or commitment to perform
-------
services will result in a loss to the Corporation upon completion of
performance. No client of the Corporation
15
<PAGE>
has advised the Corporation in writing within the past year that it will stop,
or decrease the rate of, contracting for Services from the Corporation. Schedule
--------
2.24 sets forth a list of each client that accounted for more than 5% of the
- - ----
consolidated revenues of the Corporation during the last full fiscal year and
the interim period through the Financial Statement Date and the amount of
revenues accounted for by such client during each such period. To the Seller's
knowledge, the consummation of the transactions contemplated hereby will not
have a Material Adverse Effect on the Corporation's relationship with any client
listed in Schedule 2.24.
-------------
2.25 Permits. The Permits listed in Schedule 2.25 are the only
------- -------------
Permits that are required for the Corporation to conduct its business as
presently conducted, except for those the absence of which would not have a
Material Adverse Effect. Each such Permit is in full force and effect and no
suspension or cancellation of any such Permit is threatened and there is no
basis for believing that such Permit will not be renewable upon expiration.
2.26 Improper and Other Payments. Except as set forth in Schedule
--------------------------- --------
2.26 hereto, to the knowledge of the Seller (a) neither the Corporation, any
- - ----
director, officer, employee thereof, nor any agent or representative of the
Corporation nor any Person acting on behalf of any of them, has made, paid or
received any unlawful bribes, kickbacks or other similar payments to or from any
Person or Authority, (b) no contributions have been made, directly or
indirectly, to a domestic for foreign political party or candidate, (c) no
improper foreign payment (as defined in the U.S. Foreign Corrupt Practices Act)
has been made, and (d) the internal accounting controls of the Corporation are
adequate to detect any of the foregoing under current circumstances.
2.27 Disclosure. No representation or warranty by the Seller with
----------
respect to the Seller or the Corporation in this Agreement, and no exhibit,
statement, certificate or schedule furnished or to be furnished to Purchaser
pursuant hereto, or in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as of the date hereof:
3.1 Corporate Organization, Etc. The Purchaser is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the State of
Florida with full corporate power and authority to carry on its business as it
is now being conducted and to own, operate and lease its properties and assets.
The Purchaser is duly qualified or licensed to do business and is in corporate
and Tax good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, or the execution of, and
performance of the transactions contemplated by, this Agreement, require it to
be so qualified or licensed except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. Such
16
<PAGE>
jurisdictions are set forth in Schedule 3.1(a) hereto. True, complete and
---------------
correct copies of the Purchaser's charter and bylaws as presently in effect are
set forth in Schedule 3.1(b) hereto.
---------------
3.2 Authorization, Etc. The Purchaser has full corporate power and
------------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of the Purchaser has duly
authorized the execution, delivery and performance of this Agreement and
consummate the transactions contemplated hereby, and no other corporate
proceedings on the part of the Purchaser is necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement constitutes
the legal, valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms.
3.3 No Violation. Except as set forth in Schedule 3.3(a) hereto, the
------------ ---------------
execution, delivery and performance by the Purchaser of this Agreement, and all
other agreements contemplated hereby, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Purchaser, do not and will not
(a) conflict with or result in a breach of the terms, conditions or provisions
of, (b) result in a violation of, or (c) require any authorization, consent,
approval, exemption or other action by, or notice to, or filing with any court,
Authority or other Person pursuant to, the charter or bylaws of the Purchaser or
any applicable Regulation or Order to which the Purchaser or its properties are
subject, or any Contract to which the Purchaser is a party or by which it is
bound, including, but not limited to, that certain Confidential Settlement
Agreement (the "Settlement Agreement") among KPMG Peat Marwick LLP ("KPMG"),
--------------------
Purchaser and certain present and former officers and employees of the Purchaser
. The Purchaser has complied in all respects with all applicable Regulations,
Orders, and Contracts in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby. To Purchaser's
knowledge, except with respect to those entities on Schedule 3.3(b), the
Settlement Agreement will not have a Material Adverse Effect on the operation of
the Corporation's Non-Benchmark Business after the Closing Date.
3.4 Brokerage. Except as set forth in Schedule 3.4, there are no
--------- ------------
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding on the Purchaser.
3.5 Improper and Other Payments. Except as set forth on Schedule 3.5
--------------------------- ------------
hereto (a) neither the Purchaser, any director, officer, employee thereof, nor
any agent or representative of the Purchaser nor any Person acting on behalf of
any of them, has made, paid or received any unlawful bribes, kickbacks or other
similar payments to or from any Person or Authority, (b) no contributions have
been made, directly or indirectly, to a domestic or foreign political party or
candidate, (c) no improper foreign payment (as defined in the U.S. Foreign
Corrupt Practices Act) has been made and (d) the internal accounting controls of
the Purchaser are adequate to detect any of the foregoing under current
circumstances.
3.6 Investment Representation. In connection with the purchase and
-------------------------
sale of the Shares hereunder, the Purchaser represents and warrants to the
Seller that:
17
<PAGE>
(a) The Shares to be acquired by the Purchaser pursuant to this
Agreement are being acquired for the Purchaser's own account and not with a view
to, or intention of, distribution thereof in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any applicable state securities
--------------
laws, and the Shares will not be disposed of in contravention of the Securities
Act or any applicable state securities laws.
(b) The Purchaser is an accredited investor for purposes of applicable
United States federal and state securities laws and regulations and is able to
evaluate the risks and benefits of the investment in the Shares.
3.7 Disclosure. No representation or warranty by the Purchaser with
----------
respect to the Purchaser in this Agreement and no exhibit, statement,
certificate or schedule furnished or to be furnished to Seller pursuant hereto,
or in connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading.
ARTICLE IV
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Seller that:
4.1 Corporation's Employees. The Purchaser will cause the Corporation
-----------------------
to enter into Employment Agreements, substantially in the forms attached hereto
as Exhibits 4.1(a), 4.1(b), 4.1(c), and 4.1(d), with the Seller and the other
employees of the Corporation with respect to when Seller delivers Employment
Agreements pursuant to Sections 5.9 and 6.11 hereof.
4.2 Operation of Business. The Purchaser will operate the Corporation
---------------------
as a separate corporate entity through at least December 31, 1998, and shall
conduct its business diligently and in good faith, consistent with past
management practices; shall maintain all of its properties in customary repair,
order and condition, reasonable wear and tear excepted and property disposed of
in the ordinary course of business; shall use reasonable efforts to maintain
(except for expiration due to lapse of time) all leases and Contracts in effect
without change except as expressly provided herein; shall comply in all respects
with the provisions of all Regulations and Orders applicable to the Corporation
and the conduct of its business, except when failure to so comply would not have
a Material Adverse Effect on the Corporation; shall not cancel, release, waive
or compromise any debt, Claim or right in its favor having a value in excess of
$5,000 other than in connection with cancellations for credit in the ordinary
course of business; shall not alter the rate or basis of compensation of any of
its officers, directors or employees other than in the ordinary course of
business. In addition, the Corporation will continue to account for its
operations and report its financial condition consistent with its practices
since January 1, 1996 in accordance with GAAP. In the event that the Seller is
employed by the Purchaser or the Corporation, the Seller shall use his best
efforts to cause the standards set forth in this Section 4.2
-----------
18
<PAGE>
to be met. The Purchaser shall fund all capital expenditures deemed reasonable
and necessary by Seller for the conduct of the Corporation's business on a
"stand alone" basis, substantially as conducted prior to the Closing, such
capital expenditures not to exceed $1,000,000 through December 1, 1998. In
addition, the Purchaser will permit the Corporation to retain its current legal,
accounting and other professional support and information management systems and
providers ("Systems") related to the operation of the Corporation's business
through the completion of the Transition Period (as hereinafter defined). Upon
Closing, the parties will cooperate to transition from the Corporation's Systems
to those of the Purchaser. The Transition Period is defined as the period
commencing upon Closing and ending when the Purchaser's Systems, in the
reasonable discretion of Seller, are reasonably comparable to the Corporation's
Systems prior to Closing, not later, however, than December 31, 1998.
Notwithstanding the foregoing, the Purchaser will permit the Corporation, for a
period subsequent to the Transition Period until Seller's receipt of all
portions of the Purchase Price to which Seller is entitled hereunder, to retain
its own accounting and legal support for the purpose of monitoring (i) the
determination of Pre-Tax Profit and Downstream Technology Contracts, and (ii)
the Purchaser's and Seller's compliance with their respective obligations under
this Agreement and the Employment Agreements provided for by Section 4.1 hereof.
The Purchaser acknowledges and agrees that the Seller, Elizabeth Brumbaugh, and
David Axson shall be and are hereby made express third party beneficiaries of
this Section 4.2.
-----------
ARTICLE V
OTHER COVENANTS AND AGREEMENTS
The parties further agree as follows:
5.1 Agreement to Defend. In the event any action, suit, proceeding or
-------------------
investigation of the nature specified in Section 6.5 or Section 7.3 hereof is
----------- -----------
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto at their own cost and expense unless entitled to indemnification as
provided in this Agreement.
5.2 Deliveries After Closing. From time to time after the Closing, at
------------------------
the Purchaser's request and without expense to the Corporation and without
further consideration from the Purchaser or the Corporation, the Seller shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as the Purchaser reasonably may require to convey, transfer to
and vest in the Purchaser and to put the Purchaser in possession of any rights
or property to be sold, conveyed, transferred and delivered hereunder.
5.3 Public Announcements. None of the Seller, the Corporation or the
--------------------
Purchaser nor any Affiliate or representative of any of the foregoing, shall
disclose any of the terms of this
19
<PAGE>
Agreement to any third party without the prior written consent of the other
parties. The form, content and timing of all press releases, public
announcements or publicity statements with respect to this Agreement and
transactions contemplated hereby shall be subject to the prior approval of both
the Seller and the Purchaser, which approval shall not be unreasonably withheld.
5.4 Tax Returns, Payments and Elections.
-----------------------------------
(a) The Seller will include the income of the Corporation on the
Seller's Tax Returns for all periods through and including the Closing Date and
pay any Taxes (attributable to such income and any other Taxes that arise as a
result of the transactions contemplated hereby). The income of the Corporation
will be apportioned to the period up to and including the Closing Date and the
period after the Closing Date by closing the books of the Corporation as of the
end of the Closing Date.
(b) For all periods ending on or before the Closing Date, the Seller
will timely prepare and file or cause to be prepared and filed all Tax Returns,
after taking into account any applicable filing extensions, that are or were
required to be filed with respect to the Corporation pursuant to applicable
Regulations.
(c) The Purchaser agrees to indemnify the Seller for any additional
tax owed by the Seller (including tax owed by the Seller due to this
indemnification payment) resulting from any disposition of assets not in the
ordinary course of business of the Corporation occurring on the Closing Date
after the Purchaser's purchase of the Shares. The Purchaser and the Seller
agree to report all transactions not in the ordinary course of business
occurring on the Closing Date after the Purchaser's purchase of the Shares on
the Purchaser's tax returns. The Purchaser will, and the Purchaser will cause
the Corporation to, maintain all books and records of the Corporation relating
to the Taxes and Tax Returns of the Seller and the Corporation for so long as
the Seller may have any responsibility or liability therefor. The Seller will
maintain all books and records in his possession which relate to the Taxes and
Tax Returns of the Corporation for so long as the Purchaser may have any
responsibility or liability therefor.
(d) If any Claim is threatened or brought against the Purchaser or the
Corporation relating to Taxes for any period through and including the Closing
Date it shall give notice to the Seller of the commencement of such Claim,
whereupon the Seller shall be entitled, upon notice to the Person from whom
notice was received, to assume exclusive control of the defense and settlement
of such matter. Notwithstanding anything to the contrary expressed herein, the
Seller will not settle or otherwise resolve any issue which may affect the
liability for Taxes of the Purchaser and the Corporation for any period
subsequent to the Closing with respect to which the Purchaser and the
Corporation have any responsibility for payments thereof, without the
Purchaser's consent, which consent shall not be unreasonably withheld.
(e) The Purchaser and the Seller will join in making an election under
Section 338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign tax law)
20
<PAGE>
with respect to the purchase and sale of the Shares. The parties agree that (i)
the Purchase Price specified in Section 1.2 and the liabilities of the Seller
(plus other relevant items) will be allocated to the assets of the Corporation
for Tax purposes as follows: (i) first, among the tangible assets acquired in
accordance with their fair market value, which the parties agree is the net book
value thereof on the Closing Date; and (ii) next, to "Section 197 intangibles"
(as defined in Section 197 of the Code) other than to a covenant not to compete,
which the parties agree has been adequately provided for under the terms of
Seller's Employment Agreement with the Corporation. The Purchaser and the Seller
will file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
5.5 Financial Information. The Seller understands that Purchaser or
---------------------
one of its affiliates may file a registration statement (the "Registration
------------
Statement") with the Securities and Exchange Commission, which Registration
- - ---------
Statement might be required to include financial statements of the Corporation
prepared in accordance with Regulation S-X of the Securities Act of 1933, as
amended (the "S-X Financials"). Accordingly, the Seller shall furnish to
--------------
Purchaser any information or documents requested by Purchaser constituting, or
necessary or desirable for the completion of, the S-X Financials, and the Seller
agrees, following the Closing, to execute any necessary management
representation letters to permit Purchaser's or one of its affiliate's
independent accountants to issue unqualified reports with respect to the S-X
Financial Statements to be included in the Registration Statement and any
amendments thereto.
5.6 Bonus Payments. Total bonus payments paid to employees by the
--------------
Corporation during and with respect to performance in fiscal year 1997 shall not
exceed $194,000 paid to such employees in the ordinary course of the
Corporation's business, the $1.6 million payment referred to in Section 2.10(d)
herein plus an additional amount, paid after July 31, 1997 not to exceed
$100,000.
5.7 Key Man Insurance. The Purchaser shall, for a period commencing on
-----------------
the date of this Agreement and ending not sooner than March 31, 2000, maintain
and pay for key man life and disability insurance policies ("Key Man Insurance")
on the Seller and the Senior Executives and the Purchaser's Executive Officers,
naming the Purchaser as the sole beneficiary, in an amount not less than $5
million with respect to Seller and $2 million with respect to each of the Senior
Executives.
5.8 Use of Hackett Name. Seller agrees that he shall not use in any
-------------------
manner at any time after the date hereof the name "Hackett" in connection with
the naming or marketing of a business entity that competes, directly, or
indirectly with the Purchaser or the Corporation, without the express written
consent of the Purchaser.
5.9 Employment Agreements with non-Senior Executives. Seller shall cause
------------------------------------------------
at least seventy percent (70%) of the Corporation's employees (other than the
Corporation's Senior Executives) to enter into Employment Agreements in
substantially the form attached hereto as Exhibit 4.1(d) within twenty (20) days
of the Closing. As long as Purchaser enters into such agreements, Purchaser
shall be deemed to have complied with Section 4.1 hereof.
21
<PAGE>
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall be
subject to the satisfaction, on or before the date hereof, of each of the
following conditions unless waived in writing by the Purchaser:
6.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Seller contained in Article II and elsewhere in this
----------
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Corporation or the Seller, to the Purchaser,
shall be true and correct. The Corporation and the Seller shall have performed
and complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them prior to the Closing Date.
The Seller and the president of the Corporation shall have delivered to the
Purchaser a certificate (which shall be addressed to the Purchaser and its
lenders), dated the date hereof, in the form designated Exhibit 6.1 hereto,
-----------
certifying to the foregoing.
6.2 Consents and Approvals. The Purchaser and the Corporation shall
----------------------
have obtained any and all consents, approvals, Orders, qualifications, licenses,
Permits or other authorizations required by all applicable Regulations, Orders
and Contracts of the Corporation or binding on its properties and assets, with
respect to the execution, delivery and performance of this Agreement, the
financing and consummation of the transactions contemplated herein and the
conduct of the business of the Corporation in the same manner after the date
hereof as before the date hereof.
6.3 Opinion of the Corporation's Counsel. The Purchaser shall have
------------------------------------
received an opinion of the Seller's and the Corporation's counsel, dated the
date hereof, in the form of Exhibit 6.3 hereto.
-----------
6.4 No Proceeding or Litigation. No preliminary or permanent injunction
---------------------------
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
6.5 Accounting Matters. The Purchaser shall have received (a) a
------------------
certificate, dated the date hereof, of the Seller in form and substance
satisfactory to the Purchaser, as to the accuracy of all of the Corporation's
Financial Statements and the Interim Financial Statements.
6.6 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchaser and the
22
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Purchaser's counsel, and the Corporation shall have made available to the
Purchaser for examination the originals or true, complete and correct copies of
all records and documents relating to the business and affairs of the
Corporation which the Purchaser may reasonably request in connection with said
transaction.
6.7 Certificates of Good Standing. The Corporation shall have delivered
-----------------------------
to the Purchaser certificates issued by the appropriate governmental authorities
evidencing the good standing, with respect to the conduct of business, of the
Corporation as of a date not more than fifteen (15) days prior to the date
hereof as a corporation organized under the laws of the State of Ohio.
6.8 Resignations. The Seller shall have resigned as the sole director
------------
of the Corporation.
6.9 Creditor Consents. The creditors set forth in Schedule 6.9 hereto
----------------- ------------
shall have agreed in writing with the Corporation as to the amounts owed in
order for such creditors to have been paid in full and to release all Liens in
favor of such creditors. The creditors set forth in Schedule 6.9 shall provide
------------
at Closing such UCC termination statements, releases of mortgages and other
releases of Liens as shall be required by the Purchaser and its lenders.
6.10 Shareholders' Agreement. The Seller shall, at the Closing, become
-----------------------
a party to the Shareholders' Agreement among the Purchaser and the Investors
made as of April 23, 1997.
6.11 Employment Agreements. The Seller shall have caused each of the
---------------------
Corporation's Senior Executives to enter into Employment Agreements in
substantially the forms attached hereto as Exhibits 4.1(a), 4.1(b), and 4.1(c).
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Each and every obligation of the Seller under this Agreement shall be
subject to the satisfaction, on or before the date hereof, of each of the
following conditions unless waived in writing by the Corporation, and the
Seller:
7.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Purchaser contained in Article III and elsewhere in this
-----------
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Purchaser to the Seller, shall be true and
correct. The Purchaser shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed and complied
with by it prior to the date hereof. The president of the Purchaser shall have
delivered to the Seller a certificate, dated the date hereof, in the form
designated Exhibit 7.1 hereto, certifying to the foregoing.
-----------
23
<PAGE>
7.2 Consents and Approvals. The Purchaser and the Corporation shall have
----------------------
obtained any and all consents, approvals, orders, qualifications, licenses,
permits or other authorizations required by all applicable Regulations, Orders
or Contracts of the Corporation or binding on its properties and assets, with
respect to the execution, delivery and performance of the Agreement, the
financing and consummation of the transactions contemplated herein and the
conduct of the business of the Corporation in the same manner after the date
hereof as before the date hereof, except when the failure to so comply would not
have a Material Adverse Effect on the Corporation.
7.3 No Proceeding or Litigation. No preliminary or permanent injunction
---------------------------
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
7.4 Opinion of the Purchaser's Counsel. The Seller shall have received
----------------------------------
an opinion of the Purchaser's counsel, dated the date hereof, in the form of
Exhibit 7.4 hereto.
7.5 Certificate of Good Standing. The Purchaser shall have delivered
----------------------------
to the Seller a certificate issued by the appropriate government authorities
evidencing the good standing, with respect to the conduct of business, of the
Purchaser as of a date not more than fifteen (15) days prior to the date hereof
as a corporation organized under the laws of the State of Florida.
7.6 Employment Agreements. The Purchaser shall have caused the
---------------------
Corporation to enter into employment agreements with those employees of the
Corporation listed on Schedule 7.6 designated by Seller hereto on terms
satisfactory to such employees, the Corporation and the Purchaser.
ARTICLE VIII
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall be held on the date hereof (the "Closing Date") by facsimile,
------- ------------
telephone, overnight mail or such other methods as the parties may select.
ARTICLE IX
SURVIVAL OF TERMS; INDEMNIFICATION
9.1 Survival. All of the terms and conditions of this Agreement,
--------
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this
24
<PAGE>
Agreement and the Closing Date notwithstanding any investigation heretofore or
hereafter made by or on behalf of any party hereto; provided, however, that (a)
the agreements and covenants (other than the indemnification provisions set
forth in this Article IX, which shall survive as provided below) set forth in
----------
this Agreement shall survive and continue until all obligations set forth
therein shall have been performed and satisfied; and (b) all representations and
warranties, and the agreements of the Seller and the Purchaser to indemnify each
other set forth in this Article IX, shall survive and continue for, and all
----------
claims with respect thereto shall be made prior to the end of, three years from
the Closing Date, except for (i) the representations and warranties set forth in
Sections 2.5 and 2.15 and the covenants contained herein which shall survive
until, and all claims with respect thereto shall be made, within sixty days
after the expiration of the applicable statute of limitations, and (ii)
representations, warranties and indemnities for which an indemnification claim
shall be pending as of the end of the applicable period referred to above, in
which event such indemnities shall survive with respect to such claim until the
final disposition thereof.
9.2 Indemnification by Seller. The Seller agrees to, and shall, indemnify
-------------------------
the Purchaser and its subsidiaries and the Corporation and their respective
officers, directors, employees, shareholders, representatives and agents and
hold each of them harmless at all times after the date of this Agreement,
against and in respect of any and all damage, loss, deficiency, liability,
obligation, commitment, cost or expense (including the fees and expenses of
counsel) resulting from, or in respect of, any of the following (an "Adverse
Consequence"):
(a) Any misrepresentation, breach of warranty, or non-fulfillment of
any obligation on the part of the Corporation, or the Seller under this
Agreement, any document relating hereto or thereto or contained in any exhibit
to this Agreement or from any misrepresentation in or omission from any
certificate, schedule, other agreement or instrument by the Seller or the
Corporation hereunder.
(b) All demands, assessments, judgments, costs and reasonable legal
and other expenses arising from, or in connection with, any action, suit,
proceeding or Claim incident to any of the foregoing.
9.3 Indemnification by the Purchaser. The Purchaser agrees to, and shall,
--------------------------------
indemnify the Seller and hold him harmless at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any of the following:
(a) Any misrepresentation, breach of warranty or non-fulfillment of
any obligation on the part of the Purchaser under this Agreement, any document
relating hereto or thereto or contained in any exhibit to this Agreement or from
any misrepresentation in or omission from any certificate, schedule, other
agreement or instrument by the Purchaser delivered on or prior to the date
hereof.
25
<PAGE>
(b) Additional taxes relating to the recharacterization by any
Authority of the transactions contemplated by this Agreement (with respect to
any portion of the Purchase Price), with the result that such transactions are
deemed to have generated ordinary income (rather than capital gains) for
purposes of federal or state income tax treatment.
(c) All demands, assessments, judgments, costs and reasonable legal
and other expenses arising from, or in connection with, any action, suit,
proceeding or Claim incident to any of the foregoing.
9.4 Third-Party Claims.
------------------
(a) Except as otherwise provided in this Agreement, the following
procedures shall be applicable with respect to indemnification for third-party
Claims. Promptly after receipt by the party seeking indemnification hereunder
(hereinafter referred to as the "Indemnitee") of notice of the commencement of
----------
any (i) Tax audit or proceeding for the assessment of Tax by any Taxing
Authority or any other proceeding likely to result in the imposition of a Tax
liability or obligation or (ii) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other party to this
Agreement (hereinafter the "Indemnitor") is, or may be, required under this
----------
Agreement to indemnify such Indemnitee, the Indemnitee will, if a Claim thereon
is to be, or may be, made against the Indemnitor, notify the Indemnitor in
writing of the commencement or assertion thereof and give the Indemnitor a copy
of such Claim, process and all legal pleadings. The Indemnitor shall have the
right to participate in the defense of such action with counsel of reputable
standing. The Indemnitor shall have the right to assume the defense of such
action unless such action (i) may result in injunctions or other equitable
remedies in respect of the Indemnitee or its business; (ii) may result in
liabilities which, taken with other than existing Claims under this Article IX,
----------
would not be fully indemnified hereunder; (iii) may have an adverse impact on
the business or financial condition of the Indemnitee after the Closing Date
(including an effect on the tax liabilities, earnings or ongoing business
relationships of the Indemnitee) or (iv) is for an alleged amount of less than
$25,000. The Indemnitor and the Indemnitee shall cooperate in the defense of
such Claims. In the case that the Indemnitor shall assume or participate in the
defense of such audit, assessment or other proceeding as provided herein, the
Indemnitee shall make available to the Indemnitor all relevant records and take
such other action and sign such documents as are reasonably necessary to defend
such audit, assessment or other proceeding in a timely manner. If the
Indemnitee shall be required by judgment or a settlement agreement to pay any
amount in respect of any obligation or liability against which the Indemnitor
has agreed to indemnify the Indemnitee under this Agreement, the Indemnitor
shall promptly reimburse the Indemnitee in an amount equal to the amount of such
payment plus all reasonable expenses (including legal fees and expenses)
incurred by such Indemnitee in connection with such obligation or liability
subject to this Article IX. No Indemnitor, in the defense of any such Claim,
----------
shall, except with the consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnitee of a
release
26
<PAGE>
from all liability with respect to such Claim. In the event that the Indemnitor
does not accept the defense of any matter for which it is entitled to assume
such defense as above provided, the Indemnitee shall have the full right to
defend against any such Claim, and shall be entitled to settle or agree to pay
in full such claim or demand, in its sole discretion. With respect to any matter
as to which the Indemnitor is not entitled to assume the defense pursuant to the
terms of this paragraph, the Indemnitee shall not enter into any settlement for
which an indemnification claim will be made hereunder without the approval of
the Indemnitor, which will not be unreasonably withheld.
(b) An Indemnitee shall have the right to employ its own counsel in any
case, but the fees and expenses of such counsel shall be at the expense of the
Indemnitee unless (i) the employment of such counsel shall have been authorized
in writing by the Indemnitor in connection with the defense of such action or
claim; (ii) the Indemnitor shall not have employed counsel in the defense of
such action or claim; or (iii) such Indemnitee shall have reasonably concluded
that there may be defenses available to it which are contrary to, or
inconsistent with, those available to the Indemnitor, in any of which events
such fees and expenses of not more than one additional counsel for the
indemnified parties shall be borne by the Indemnitor.
9.5 Indemnification Limits. Notwithstanding the foregoing provisions
----------------------
of this Article IX, Seller's aggregate obligation to the Purchaser for
indemnification hereunder shall not exceed Three Million Two Hundred Thousand
Dollars ($3,200,000). In addition, neither the Purchaser nor the Seller shall
be entitled to indemnification hereunder from the Seller until the aggregate of
all Claims for which such party seeks indemnification equals or exceeds One
Hundred Thousand Dollars ($100,000), in which case the Indemnitor shall be
responsible for the entire amount of all such Claims.
9.6 Offset. Notwithstanding anything contained herein to the contrary,
------
the Adverse Consequences which Purchaser suffers, sustains or becomes subject to
and is entitled to indemnification from Seller pursuant to this Section 9 may,
at the option of Purchaser, be satisfied by setting off all or any portion of
such Adverse Consequences against any amounts which such Purchaser owes to any
Seller or any of Seller's affiliates at such time.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended,
--------------------------
modified and supplemented only by written agreement of the parties hereto, at
any time prior to the Closing Date with respect to any of the terms contained
herein.
10.2 Waiver of Compliance; Consents. Any failure of any party hereto
------------------------------
to comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
27
<PAGE>
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
10.3 Certain Definitions.
-------------------
"AFFILIATE" means, with regard to any Person, any Person that,
---------
directly or indirectly, controls, is controlled by, or is under common control
with such Person.
"AUTHORITY" means any governmental, regulatory or administrative body,
---------
agency, commission, board, arbitrator or authority, any court or judicial
authority, any public, private or industry regulatory authority, whether
international, national or local.
"BENCHMARK BUSINESS" means the Corporation's business that consists of
------------------
comparing similar processes among organizations, companies and industries to
identify best practices and to set improvement targets.
"CAUSE" means Cause as defined in the Employment Agreement of even
-----
date herewith between Seller and the Corporation.
"CLAIM" means any action, claim, lawsuit, demand, suit, inquiry,
-----
hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, appeals or other dispute, whether civil, criminal, administrative
or otherwise.
"CLOSING" shall have the meaning set forth in Section 8.1.
------- -----------
"CLOSING DATE" shall have the meaning set forth in Section 8.1.
------------ -----------
"CODE" means the Internal Revenue Code of 1986, as amended.
----
"CONTRACT" means any agreement, contract, commitment, instrument or
--------
other binding arrangement or understanding, whether written or oral.
"DOWNSTREAM TECHNOLOGY CONTRACTS" refers to service contracts entered
-------------------------------
into by the Purchaser evidenced by a signed engagement letter from the customer
and that are the result of a lead generated by an employee in the Corporation,
other than leads related to the entities listed on Schedule 3.3(b) hereto
(unless the Settlement Agreement is neither observed nor enforced with respect
to such leads). These contracts must provide for services limited to the
following areas: package integration limited to Oracle and PeopleSoft, knowledge
management systems, intranet and extranet solutions, sales and field force
automation, network integration, millenium consulting services, or such other
services as the Purchaser may provide.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates, approvals,
--------------------
licenses and other authorizations relating to or required by Environmental Law
and necessary or desirable for the Corporation's business.
"FINANCIAL STATEMENTS" shall have the meaning as set forth in Section
-------------------- -------
2.9.
- - ---
28
<PAGE>
"FINANCIAL STATEMENT DATE" shall mean April 30, 1997.
------------------------
"GAAP" means United States generally accepted accounting principles,
----
consistently applied, as in existence at the date hereof.
"GOOD REASON" means Good Reason as defined in the Employment Agreement
-----------
of even date herewith between the Seller and the Corporation.
"GROUP" means two or more Persons or entities (or a combination
-----
thereof) acting as a partnership, limited partnership, syndicate or other form
for any of the purposes contemplated in such section.
"GUARANTEE" means any guarantee or other contingent liability (other
---------
than any endorsement for collection or deposit in the ordinary course of
business), direct or indirect with respect to any obligations of another Person,
through an agreement or otherwise, including, without limitation, (a) any
endorsement or discount with recourse or undertaking substantially equivalent to
or having economic effect similar to a guarantee in respect of any such
obligations and (b) any Contract (i) to purchase, or to advance or supply funds
for the payment or purchase of, any such obligations, (ii) to purchase, sell or
lease property, products, materials or supplies, or transportation or services,
in respect of enabling such other Person to pay any such obligation or to assure
the owner thereof against loss regardless of the delivery or non-delivery of the
property, products, materials or supplies or transportation or services or (iii)
to make any loan, advance or capital contribution to or other investment in, or
to otherwise provide funds to or for, such other Person in respect of enabling
such Person to satisfy an obligation (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum equity, working
capital or other balance sheet condition in respect of any such obligation.
"INDEBTEDNESS" with respect to any Person means any obligation of such
------------
Person for borrowed money, but in any event shall include (a) any obligation or
liabilities incurred for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary course
of business, (whether or not such Person has assumed or become liable for the
payment of such obligation) (whether accrued, absolute, contingent, unliquidated
or otherwise, known or unknown, whether due or to become due), (b) the face
amount of all letters of credit issued for the account of such Person and all
drafts drawn thereunder, (c) obligations incurred for all or any part of the
purchase price of property or other assets or for the cost of property or other
assets constructed or of improvements thereto, other than accounts payable
included in current liabilities and incurred in respect of property purchased in
the ordinary course of business (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by Liens, (d)
capitalized lease obligations, and (e) all Guarantees of such Person.
"INDEMNITEE" shall have the meaning set forth in Section 9.4.
---------- -----------
"INDEMNITOR" shall have the meaning set forth in Section 9.4.
---------- -----------
29
<PAGE>
"INVESTORS" mean Golder, Thoma, Cressey, Rauner Fund V, L.P., MG
---------
Capital Partners II, L.P., Tara Ventures, Ltd. and Gator Associates, Ltd. and
each of their successors and assigns.
"LIEN" means any security interest, lien, mortgage, pledge,
----
hypothecation, encumbrance, Claim, easement, restriction on transfer or
otherwise, or interest of another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" means any developments or changes which
-----------------------
would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any condition, change or effect that,
-----------------------
individually or when taken together with all other conditions, changes or
effects is, or could reasonably be, or is reasonably likely to be materially
adverse to the Corporation's business, operations, properties, assets and/or
condition (financial or otherwise).
"OPTION" means any subscription, option, warrant, right, security,
------
Contract, commitment, understanding, outstanding or stock appreciation, phantom
stock option, profit participation or arrangement by which (i) with respect the
Corporation, the Corporation is bound to issue any additional shares of its
capital stock or rights pursuant to which any Person has a right to purchase
shares of the Corporation's capital stock or (ii) with respect to Seller, Seller
is bound to sell or allow another Person to vote, encumber or control the
disposition of any shares of the Corporation's capital stock or rights pursuant
to which any Person has a right to purchase, vote, encumber or control the
disposition of shares of the Corporation's capital stock from Seller.
"ORDER" means any decree, order, judgment, injunction, rule, lien,
-----
voting right, consent of or by an Authority.
"PENSION/BENEFIT PLANS" means all plans, arrangements, agreements,
---------------------
programs, policies or practices, whether oral or written, formal or informal,
funded or unfunded, to which the Corporation is a party to or bound by or under
which the Corporation has any liability or contingent liability, relating to:
(a) retirement savings or pensions, including, without limitation, any
defined benefit pension plan, defined contribution pension plan, group
registered retirement saving plan, or supplemental pension or retirement plan;
or
(b) any bonus, profit sharing, deferred compensation, incentive
compensation, hospitalization, health, dental, disability, unemployment
insurance, vacation pay, severance pay or other benefit plan with respect to any
of its employees or former employees, individuals working on contract with it or
other individuals providing services to it of a kind normally provided by
employees, and all statutory plans which the Corporation is required to comply
with, including, without limitation, workers' compensation and unemployment
insurance legislation;
30
<PAGE>
"PERMITS" means all permits, licenses, registrations, certificates,
-------
orders or approvals from any Authority or other Person (including without
limitation those relating to the occupancy or use of owned or leased real
property) issued to or held by the Corporation.
"PERMITTED LIENS" means (i) statutory Liens not yet delinquent, (ii)
---------------
such imperfections or irregularities of title, Liens, easements, charges or
encumbrances as do not materially detract from or interfere with the present use
of the properties or assets subject thereto or affected thereby, otherwise
impair present business operations at such properties, or do not detract from
the value of such properties and assets, taken as a whole, (iii) Liens reflected
in the Financial Statements or the notes thereto, (iv) the rights of customers
of the Corporation with respect to inventory or work in progress under orders or
contracts entered into by the Corporation in the ordinary course of business,
(v) mechanics', carriers', workers', repairmen's, warehousemen's, or other
similar Liens arising in the ordinary course of business in respect of
obligations not overdue or which are being contested in good faith and covered
by a bond in an amount at least equal to the amount of the Lien, and (vi)
deposits or pledges to secure workmen's compensation, unemployment insurance,
old age benefits or other social security obligations in connection with, or to
secure the performance of, bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations or surety or appeal bonds or
other pledges or deposits for purposes of like nature in the ordinary course of
business.
"PERSON" means any corporation, partnership, joint venture,
------
organization, entity, Authority or natural person.
"POLICIES" means all Contracts that insure (i) the Corporation's or
--------
any of its Subsidiaries properties, plant and equipment for loss or damage, and
(ii) the Corporation or any of its Subsidiaries or their officers, directors,
employees or agents against any liabilities, losses or damages (or lost profits)
for any reason or purpose.
"PRE TAX PROFIT" means the "Revenues" of the Corporation less the
--------------
"Expenses" of the Corporation determined in accordance with GAAP, consistently
applied.
(a) For the purposes of determining "Revenues" of the Corporation, the
same shall include all projects generated, contracted and recorded in the
financial statements of the Corporation, as well as functional transformation
projects contracted and billed by the Purchaser where an employee of the
Corporation generated the lead or assisted in the sale related to such lead for
the project. The Revenues of the Corporation shall also include (i) time
incurred, on a per hour usage basis (based on a maximum 8-hour day and 40-hour
week), by any employee of the Corporation utilized by the Purchaser on projects
where the Revenues from such project are not paid to the Corporation but are
paid to and recorded in the financial statements of the Purchaser, at three
times the rates set forth in Schedule 10.3 hereto, (ii) any proceeds derived
from the Key Man Insurance, (iii) the amount of any proceeds that would be
derived from the Key Man Insurance, whether or not such Key Man Insurance is
actually purchased by the Purchaser, and (iv) lost revenues related to the
Corporation's withdrawal from any current,
31
<PAGE>
ongoing engagement due to observation or enforcement of the terms of the
Settlement Agreement.
(b) For the purposes of determining "Expenses" of the Corporation, the same
shall include the actual cost of services expenses of the Purchaser for the
functional transformation projects referred to in (a) above which are contracted
and billed by the Purchaser. The expenses of the Corporation shall also include
(i) a charge from the Purchaser, on a per hour basis (based on a maximum 8-hour
day and 40-hour week), in an amount equal to the rates set forth in Schedule
10.3 ("Cost of Service), to the extent that the Corporation utilizes the
services of an employee of the Purchaser who is not an employee of the
Corporation , (ii) costs associated with Corporation's Systems and (iii)
estimated cost of service expenses applicable to lost revenues referred to in
(a)(iv) of the preceding paragraph. "Expenses" shall not include (x) the cash
bonuses referred to in Section 2.10(d) herein, and (y) the cash bonuses and
restricted stock awards payable to Seller and the Corporation's other employees
pursuant to Section 1(b) of their respective employment agreements with the
Corporation (and the payroll taxes related to either (x) or (y)), and (z) any
intercompany or similar direct or allocate charge from Purchaser, unless agreed
to in writing between the Purchaser and Seller.
"PROPRIETARY RIGHTS" means all (i) patents, patent applications,
------------------
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, reexamination, utility, model, certificate of invention and
design patents, patent applications, registrations and applications for
registrations, (ii) trademarks, service marks, trade dress, logos, trade names
and corporate names and registrations and applications for registration thereof,
(iii) copyrights and registrations and applications for registration thereof,
(iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) other proprietary rights relating to any of the foregoing and (vii) copies
and tangible embodiments thereof.
"REGULATION" means any rule, law, code, statute, regulation,
----------
ordinance, requirement, announcement or other binding action of or by an
Authority.
"SELLER" shall have the meaning set forth in the preamble.
------
"SENIOR EXECUTIVES" shall mean those employees of the Corporation
-----------------
designated as such on Schedule 2.9.
"SHARES" shall have the meaning set forth in the preamble.
------
"SUBSIDIARY" means any Person in which the Corporation has (i) an
----------
ownership interest or (ii) advanced funds or provided financial accommodations
that are, in either case, secured by an ownership interest in or an Option to
acquire an ownership interest in such Person.
32
<PAGE>
"TAX RETURNS" includes, without limitation, all returns, reports,
-----------
declarations, elections, notices, filings, information returns and statements
filed in respect of Taxes.
"TAXES" includes, without limitation, all taxes, duties, fees,
-----
premiums, assessments, imposts, levies and other charges of any kind whatsoever
imposed by any Authority, together with all interest, penalties, fines,
additions to tax or other additional amounts imposed in respect thereof,
including, without limitation, those levied on, or measured by, or referred to
as income, gross receipts, profits, capital transfer, land transfer, sales,
goods and services, use, value-added, excise, stamp, withholding, business,
franchising, property, payroll, employment, health, social services, education
and social security taxes, all surtaxes, all customs duties and import and
export taxes, all license, franchise and registration fees and all unemployment
insurance and health insurance.
"TAXING AUTHORITIES" means any federal, state or local authority in
------------------
the United States which has the right to impose Taxes on the Corporation or the
Seller.
"TIER I", "TIER II", "TIER III" CONDITIONS shall have the meanings set
------ ------- -------- ----------
forth on Exhibit A.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise
--------
dispose of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10.4 Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, by Federal Express, United Parcel
Service or other recognized overnight courier or sent by telefax:
(a) If to the Corporation or the Seller, to:
The Hackett Group, Inc.
1742 Georgetown Road
Hudson, Ohio 44236
Attn: Gregory P. Hackett
Telephone: 330-656-3110
Telefax: 330-463-5471
33
<PAGE>
with copies to:
Calfee Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attn: Scott Wilson
Telephone: 216-622-8200
Telefax: 216-241-0816
and:
Falls River Group
3620 Walnut Hills Road
Suite 214
Cleveland, Ohio 44122
Attn: Kerry Dustin
Telephone: 216-831-1440
Telefax: 216-831-8804
or to such other person or address as the Corporation shall furnish by
notice to the Purchaser in writing.
(b) If to the Purchaser, to:
AnswerThink Consulting Group, Inc.
1401 Brickell Avenue
Suite 440
Miami, Florida 33131
Attn: Ted A. Fernandez, President
Telephone: 305-375-8005
Telefax: 305-379-8810
with copies to:
Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Paul Berkowitz, Esq.
Telephone: 305-579-0685
Telefax: 305-579-0717
34
<PAGE>
or to such other person or address as either party shall furnish by notice
to the other in writing.
10.5 Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
10.6 Construction. Where specific language is used to clarify by
------------
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against
either party hereto. Whenever required by the context, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa. The parties hereto intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party
hereto has breached any representation, warranty, or covenant contained herein
in any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which such party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty or covenant.
10.7 Governing Law. The Agreement shall be governed by the laws of the
-------------
State of Florida as to all matters, including but not limited to matters of
validity, construction, effect and performance.
10.8 Arbitration. Subject to the dispute resolution mechanism provided
-----------
for in Section 1.2(d) hereof, all disputes and controversies of every kind and
nature between the parties hereto arising out of or in connection with this
Agreement as to the construction, validity, interpretation or meaning,
performance, non-performance, enforcement, operation or breach shall be
submitted to final and binding arbitration pursuant to the following procedures:
(i) After a dispute or controversy arises, either party may,
in a written notice delivered to the other party, demand such arbitration.
Such notice shall designate the name of the arbitrator appointed by such
party demanding arbitration, together with a statement of the matter in
controversy;
(ii) Within thirty (30) days after receipt of such demand, the
other party shall, in a written notice delivered to the other party, name
such party's arbitrator. If such party fails to name an arbitrator, then
the second arbitrator shall be named by the American Arbitration
Association, located in New York City, New York (the "AAA"). The two
arbitrators so selected shall name a third arbitrator within thirty (30)
days, or in
35
<PAGE>
lieu of such agreement on a third arbitrator by the two arbitrators so
appointed, the third arbitrator shall be appointed by the AAA;
(iii) Each party shall bear its own arbitration costs and
expenses. The arbitration hearing shall be held in New York City, New York
at a location designated by a majority of the arbitrators. The then
prevailing rules of the AAA shall be incorporated by reference at such
hearing, and the substantive laws of the State of Florida (excluding
conflict of law provisions) shall apply;
(iv) The arbitration hearing shall be concluded within ten (10)
business days unless otherwise ordered by the arbitrators and the award
thereon shall be made as soon as practicable after the close of the
submission of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in any court of competent jurisdiction, including, without
limitation, the United States District Court for the Southern District of
Florida and the United States District Court for the Northern District of
Ohio; and, for the purposes of this Section 17.4, each of the parties
hereto do hereby irrevocably submit to the jurisdiction of any of the
foregoing courts; and
(v) The parties stipulate that the provisions of this Section
10.8 shall be a complete defense to any suit, action or proceeding
instituted in any federal, state or local court or before any
administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination or
expiration of this Agreement.
Unless otherwise required to be disclosed by applicable federal or state
securities laws or pursuant to an order of any court of competent jurisdiction,
neither any party hereto nor the arbitrators may disclose the existence or
results of any arbitration hereunder without the prior written consent of all
the other parties hereto; nor will any party hereto disclose to any third party
any confidential information disclosed by any other party hereto in the course
of an arbitration hereunder without the prior written consent of such other
party.
10.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.11 Entire Agreement. This Agreement, including the schedules and
----------------
exhibits hereto and the documents, certificates and instruments referred to
herein or related hereto, embodies the
36
<PAGE>
entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
10.12 Binding Effect. This Agreement shall not be construed so as to
--------------
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
10.13 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
10.14 Severability. Unless otherwise provided herein, if any provision of
------------
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.15 Expenses. Except as otherwise provided herein, the Purchaser shall
--------
bear all expenses, including without limitation, legal and accounting fees and
expenses related to services rendered by Calfee, Halter & Griswold, LLP and
Wesley, Mills & Company, and out-of-pocket expenses with respect to this
Agreement and the transactions contemplated hereby, such amount not to exceed
$110,000 in the aggregate
* * *
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Stock Purchase Agreement as of the date first written above.
THE PURCHASER
ANSWERTHINK CONSULTING GROUP, INC.
By:/s/ Ted A. Fernandez
--------------------------------
Ted A. Fernandez, President
THE SELLER
/s/ Gregory P. Hackett
-----------------------------------
Gregory P. Hackett, President
38
<PAGE>
EXHIBIT A
TIER I CONDITIONS
Minimum of $2,887,000 in Pre Tax Profit for the year ended December 31,
1997.
TIER II CONDITIONS
Minimum of $5,641,000 in Pre Tax Profit for the year ended December 31,
1998, reduced by an amount by which Pre Tax Profit for the year ended December
31, 1997 exceeded $2,887,000, or increased by an amount by which Pre Tax Profits
for the year ended December 31, 1997 were less than $2,887,000.
TIER III CONDITIONS
Minimum of $24,000,000 in Downstream Technology Contracts provided to
Purchaser prior to January 1, 1999, plus Follow-on Work related to Downstream
Technology Contracts. Follow-on Work means work contracted no later than
December 31, 1999, and related to Downstream Technology Contracts in existence
prior to January 1, 1999. The Corporation shall receive a credit equal to 25%
of the contract value (as determined below), excluding reimbursable out-of-
pocket expenses, for projects where Purchaser is unsuccessful in obtaining any
portion of the work under either of the following conditions: (a) Corporation
includes and introduces Purchaser's technology integration professional into
Corporation's consulting assignments; Purchaser is required to provide such
technology integration professionals for such purpose, or (b) an employee of the
Corporation generates a lead for Purchaser unrelated to a consulting project
being conducted by the Corporation, and the Purchaser participates in a Request
for Proposal. The definition of contract value is the contracted value of the
work where Purchaser is engaged or the contracted value of the work if awarded
to another systems integrator or integrators. If the value of such other system
integrator's or integrators' contract cannot be reasonably established, then the
value of the contract related to such systems integration work will be deemed to
be that value established from the business case estimate developed by the
Corporation's consultants, based on prior similar experience, less any work
performed by client's systems staff. If the work is awarded to other system
integrators, and the nature of the work is outside the service areas identified
within the definition of Downstream Technology Contracts in Section 10.3 hereof,
the contract value for such work shall be deemed to have zero value.
<PAGE>
Exhibit 10.9
AMENDMENT NO. 1
to
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ANSWERTHINK CONSULTING GROUP, INC.
AND
GREGORY P. HACKETT
WHEREAS, AnswerThink Consulting Group, Inc. ("Purchaser") and Gregory
P. Hackett ("Seller") are parties to that certain Stock Purchase Agreement dated
October 13, 1997 (the "Agreement");
WHEREAS, Purchaser and Seller wish to amend the Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the representations and
warranties, covenants and agreements contained in the Agreement and herein,
Purchaser and Seller hereby agree as follows:
1. Defined Terms - Capitalized terms used herein and not otherwise defined are
-------------
used as defined in the Agreement.
2. Changes to Section 1.2 -
----------------------
. The table appearing in Section 1.2(a) is replaced with the following
table:
<TABLE>
<CAPTION>
PAYMENT DATE AMOUNT
------- ---- ------
<S> <C> <C>
I *JANUARY 15, 1999 $3,750,000
II MARCH 31, 1999 $ 497,000
III MARCH 31, 2000 $ 896,000
</TABLE>
*THIS PAYMENT SHALL BE ACCELERATED TO THE DATE UPON WHICH PURCHASER
RECEIVES THE PROCEEDS OF ANY PUBLIC OFFERING OF ITS COMMON STOCK.
. Delete, in Section 1.2(a) beginning with "Notwithstanding the
foregoing," through "the denominator of which shall be $24,000,000."
. The last paragraph of Section 1.2(a) should be amended to read in its
entirety as follows:
"Interest on the unpaid principal balance of Payment I under the Note shall
accrue during the period commencing on the Closing through and including
January 22, 1998 at the rate of eight percent (8%) per annum and thereafter
at the rate of twelve percent (12%) and shall be payable together with
Payment I. Interest on Payments II
<PAGE>
and III Payments shall accrue during the period commencing on the Closing
at the rate of eight percent (8%) per annum and shall be payable together
with Payments II and III, respectively. Interest on any Payments not made
when due shall accrue until paid at the rate of fifteen percent (15%) per
annum."
3. Section 1.2(b) - Delete.
--------------
4. Section 1.2(c) - Delete.
--------------
5. Section 1.2(d) - Delete.
---------------
6. Section 1.2(e) - Delete.
--------------
7. Changes to Section 4.2 - Delete "(i) the determination of Pre Tax Profit
---------------------
and Downstream Technology Contracts, and"
8. Changes to Section 5.3 - Add to the end of the first sentence ", except as
----------------------
may be otherwise required in connection with filings by the Purchaser with
the Securities and Exchange Commission."
9. Section 5.7 - Delete.
-----------
10. New Section 5.10 - "5.10 Bank Accounts. Each of Ted A. Fernandez, Jack
---------------- -------------
Brennan and Luis San Miguel shall be added as signatories on all bank
accounts maintained by or on behalf of the Corporation after the Closing."
11. Changes to Section 10.3
-----------------------
. Definition of "Downstream Technology Contracts" - Delete.
. Definition of "Pre Tax Profit" - Delete.
. Definition of "Tier I, Tier II, Tier III Conditions" - Delete.
12. Exhibit A - Delete
---------
13. Remaining Provisions - In all other respects, the Agreement remains
--------------------
unchanged.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 1 to be effective March 12, 1998.
By:/s/ Gregory P. Hackett
----------------------
Gregory P. Hackett
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
--------------------
Ted A. Fernandez, President
3
<PAGE>
Exhibit 10.10
________________________________________________________________________________
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ANSWERTHINK CONSULTING GROUP, INC.
AND
THE SHAREHOLDERS OF
DELPHI PARTNERS, INC.
RELATING TO THE ACQUISITION OF
DELPHI PARTNERS, INC.
DATED AS OF NOVEMBER 12, 1997
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE OF STOCK.................................................. 1
1.1 Purchase and Sale................................................... 1
1.2 Purchase Price...................................................... 1
1.3 Release of the Corporation.......................................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
CORPORATION AND THE SELLERS............................................. 4
2.1 Corporate Organization, Etc......................................... 4
2.2 Subsidiaries........................................................ 4
2.3 Stock Record Books.................................................. 4
2.4 Corporate Minute Books.............................................. 5
2.5 Title to Stock...................................................... 5
2.6 Authorization, Etc.................................................. 5
2.7 Options and Rights.................................................. 5
2.8 No Violation........................................................ 5
2.9 Financial Statements................................................ 6
2.10 Employees.......................................................... 7
2.11 Absence of Certain Changes......................................... 7
2.12 Contracts.......................................................... 8
2.13 True and Complete Copies........................................... 9
2.14 Title and Related Matters.......................................... 9
2.15 Litigation.........................................................10
2.16 Tax Matters........................................................10
2.17 Compliance with Law and Applicable Government Regulations..........11
2.18 Pension and Other Benefit Plans....................................12
2.19 Intellectual Property..............................................13
2.20 Customer Warranties................................................14
2.21 Environmental Matters..............................................14
2.22 Capital Expenditures and Investments...............................15
2.23 Dealings with Affiliates...........................................15
2.24 Insurance..........................................................15
2.25 Accounts Receivable; Inventories...................................15
2.26 Brokerage..........................................................16
2.27 Customers..........................................................16
2.28 Permits............................................................16
2.29 Improper and Other Payments........................................16
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
2.30 Disclosure....................................................... 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER............................................................. 17
3.1 Corporate Organization, Etc....................................... 17
3.2 Authorization, Etc................................................ 17
3.3 No Violation...................................................... 17
3.4 Investment Intent................................................. 18
3.5 Financial Statements.............................................. 18
3.6 Financing and Liquidity........................................... 18
3.7 Litigation........................................................ 18
ARTICLE IV COVENANTS AND AGREEMENTS OF THE PARTIES......................... 18
4.1 Operation of Business............................................. 18
4.2 Agreement to Defend............................................... 19
4.3 No Termination of Seller's Obligations by Subsequent Incapacity,
Dissolution, Etc................................................. 19
4.4 Deliveries After Closing.......................................... 19
4.5 Public Announcements.............................................. 19
4.6 Section 338(h)(10) Election....................................... 19
4.7 Financial Information............................................. 20
4.8 Bonuses for FY 1997............................................... 20
4.9 Tax Return for Period Prior to Closing............................ 21
ARTICLE V CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER................... 21
5.1 Representations and Warranties; Performance....................... 21
5.2 Consents and Approvals............................................ 21
5.3 Opinion of the Corporation's Counsel.............................. 21
5.4 No Proceeding or Litigation....................................... 21
5.5 Secretary's Certificate........................................... 22
5.6 Certificates of Good Standing..................................... 22
5.7 Resignations...................................................... 22
5.8 Creditor Consents................................................. 22
5.9 Employment Agreements............................................. 22
5.10 Shareholders' Notes.............................................. 22
5.11 Shareholders' Agreement.......................................... 22
5.12 CoreStates Credit Facility....................................... 22
5.13 Restrictive Covenant Agreements.................................. 22
5.14 Debt Forgiveness Arrangement..................................... 23
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE SELLERS................... 23
6.1 Representations and Warranties; Performance...................... 23
6.2 Consents and Approvals........................................... 23
6.3 No Proceeding or Litigation...................................... 23
ARTICLE VII CLOSING....................................................... 24
ARTICLE VIII SURVIVAL OF TERMS; INDEMNIFICATION........................... 24
8.1 Survival......................................................... 24
8.2 Indemnification by Sellers....................................... 24
8.3 Indemnification by the Purchaser................................. 26
8.4 Third-Party Claims............................................... 26
8.5 Setoff........................................................... 27
ARTICLE IX MISCELLANEOUS PROVISIONS....................................... 28
9.1 Amendment and Modification....................................... 28
9.2 Waiver of Compliance; Consents................................... 28
9.3 Certain Definitions.............................................. 28
9.4 Notices.......................................................... 35
9.5 Assignment....................................................... 36
9.6 Governing Law.................................................... 36
9.7 Counterparts..................................................... 36
9.8 Headings......................................................... 36
9.9 Entire Agreement................................................. 36
9.10 Consent to Jurisdiction; Service of Process..................... 37
9.11 Waiver of Jury Trial............................................ 37
9.12 Injunctive Relief............................................... 37
9.13 Delays or Omissions............................................. 37
9.14 Severability.................................................... 38
9.15 Expenses........................................................ 38
9.16 Certain Taxes................................................... 38
9.17 Binding Effect; No Third Party Beneficiaries.................... 38
9.18 Construction.................................................... 38
9.19 Sellers' Representative......................................... 39
</TABLE>
-iii-
<PAGE>
SCHEDULES AND EXHIBITS
----------------------
<TABLE>
<CAPTION>
Schedules Responsibility
- - --------- --------------
("Sellers" or "Purchaser")
<S> <C>
Schedule 1.1 Sellers; Stock Certificates S
Schedule 2.1 Foreign Qualifications of Corporation S
Schedule 2.3 Stock Record Books, Stockholders - Capital Stock S
Schedule 2.4 Minute Books, Officers and Directors S
Schedule 2.8 Violations, Notices and Consents S
Schedule 2.9(a) Balance Sheet S
Schedule 2.9(b) Statement of Operations
Schedule 2.9(c) Indebtedness S
Schedule 2.10(a) Employee Matters S
Schedule 2.10(b) Employee Liabilities
Schedule 2.11 Changes since Financial Statement Date S
Schedule 2.12(a) Contracts S
Schedule 2.12(b) Contracts Requiring Consents S
Schedule 2.12(b) Performance of Obligations S
Schedule 2.14(a) Title Matters S
Schedule 2.14(b) Leases S
Schedule 2.15 Litigation S
Schedule 2.18 ERISA Matters S
Schedule 2.19(a) Material Proprietary Rights S
Schedule 2.19(b) Proprietary Rights Owned by Others S
Schedule 2.19(c) Software Applications S
Schedule 2.20 Warranties S
Schedule 2.21 Environmental Matters S
Schedule 2.22 Capital Expenditures S
Schedule 2.23 Affiliated Transactions S
Schedule 2.24 Insurance and Claims S
Schedule 2.27(a) Customers Providing Notice S
Schedule 2.27(b) Significant Customers and Suppliers S
Schedule 2.28 Permits S
Schedule 2.29 Improper and Other Payments S
Schedule 3.1 Foreign Qualifications of Purchaser P
Schedule 3.3 Violations and Consents P
Schedule 3.5(a) Financial Statements P
Schedule 3.5(b) GAAP Exceptions P
Schedule 3.7 Litigation P
Schedule 4.8 Bonus Plans for 1997 S
Schedule 5.8 Creditors Giving Consents S
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Exhibits
- - --------
<S> <C>
Exhibit 1.2(e) Form of Shareholder Note P
Exhibit 2.1 Charter and Bylaws of Corporation S
Exhibit 2.9(a) Financial Statements S
Exhibit 2.9(b) Interim Financial Statements S
Exhibit 3.1 Purchaser's Charter and Bylaws P
Exhibit 5.1 Form of Officer's Certificate - Corporation P
Exhibit 5.3 Form of Opinion of Shareholders' Counsel P
Exhibit 5.5 Form of Secretary's Certificate P
Exhibit 5.9 Form of Employment Agreement P
Exhibit 5.13 Restricted Stock Agreement P
</TABLE>
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. AnswerThink will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
-v-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of the 12th day of
---------
November, 1997 by and among AnswerThink Consulting Group, a Florida corporation
(the "Purchaser"), Delphi Partners, inc., a New Jersey corporation (the
---------
"Corporation"), and the persons listed on Schedule 1.1 hereto (each a "Seller"
----------- ------------ ------
and collectively, the "Sellers"), relating to the acquisition of one hundred
-------
percent (100%) of the capital stock of the Corporation. Terms used in this
Agreement and not otherwise defined have the meanings set forth in Section 9.3
-----------
hereof.
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Purchaser desires to purchase from the Sellers, and the
Sellers desire to sell to the Purchaser, all of the outstanding shares of
capital stock of the Corporation (collectively, the "Shares");
------
NOW, THEREFORE, in consideration of the representations and warranties,
covenants and agreements, and subject to the conditions contained herein, the
Sellers, jointly and severally, together with the Purchaser, intending legally
to be bound, hereby agree as follows:
ARTICLE I
PURCHASE OF STOCK
1.1 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, each of the Sellers hereby sells, and the Purchaser hereby purchases
from each of the Sellers, all of the Shares owned by such Seller. The number of
Shares which are the subject of this Agreement and the stock certificates
evidencing the Shares are set forth on Schedule 1.1 hereto. The liability of
------------
the Sellers hereunder is several and not joint, and no Seller shall have any
liability to the Purchaser by reason of the failure of any other Seller to
perform his or her obligations under this Agreement.
1.2 Purchase Price. In consideration for the conveyance of the Shares
--------------
and in reliance on the representations and warranties, covenants and agreements
of the Sellers contained herein and the documents contemplated hereby, the
Purchaser shall pay to the Sellers the aggregate purchase price (the "Purchase
--------
Price") of up to Nine Million Nine Hundred and Six Thousand Dollars
- - -----
($9,906,000), subject to the conditions and payable as set forth below:
<PAGE>
(a) The Purchase Price shall be payable by delivery to the Sellers'
Representative (i) at Closing, Seven Million Five Hundred Thousand Dollars
($7,500,000), which amount shall be reduced by Ninety-Four Thousand Dollars
($94,000) to reflect excess distributions made by the Corporation to the Sellers
during 1997, in cashier's check or by wire transfer, at the option of the
Sellers, and (ii) on the date set forth in Section 1.2 (c) below, subject
-----------
to the requirements set forth in Sections 1.2(b) and (c) below, the sums of One
---------------
Million Dollars ($1,000,000) (the "Tier 1 Amount") and One Million Five Hundred
-------------
Thousand Dollars ($1,500,000) (the "Tier 2 Amount") (such sums referred to
-------------
together hereinafter as the "Earnouts").
--------
(b) The Earnouts shall be adjusted as follows:
(i) In the event that Pre Tax Profits for the fiscal year of
the Corporation ending December 31, 1998 ("PTP98"), shall be not greater
-----
than Two Million Dollars ($2,000,000), then no payment shall be made of
either the Tier 1 Amount or the Tier 2 Amount.
(ii) In the event that PTP98 shall be greater than Two Million
Dollars ($2,000,000) and not greater than Three Million Forty-six Thousand
Dollars ($3,046,000), then the Tier 1 Amount shall be the product of (A)
0.956 and (B) the amount by which PTP98 exceeds Two Million Dollars
($2,000,000), and no payment shall be made of the Tier 2 Amount.
(iii) In the event that PTP98 shall be greater than Three
Million Forty-six Thousand Dollars ($3,046,000) and not greater than Five
Million Dollars ($5,000,000), then the Sellers shall be entitled to receive
the Tier 1 Amount and the Tier 2 Amount shall be the product of (A) 0.768
and (B) the amount by which PTP98 exceeds Three Million Forty-six Thousand
Dollars.
(iv) In the event that PTP98 shall be equal to or greater than
Five Million Dollars ($5,000,000), then the Sellers shall be entitled to
receive the Tier 1 Amount and the Tier 2 Amount.
(v) The Earnouts shall be paid with simple interest, which
shall accrue at the rate of eight percent (8%) per annum from the Closing
Date to the date on which the Earnouts and such interest are paid.
(c) On or before March 31, 1999, the Purchaser shall deliver to the
Sellers' Representative the Purchaser's calculation of the Earnouts, accompanied
by an income statement for the fiscal year ending December 31, 1998, supporting
such calculation (together, the "Report"). In the event that the Sellers'
------
Representative shall give written notice to the Purchaser within thirty (30)
days after receiving such Report that the Sellers' Representative objects to the
Purchaser's determination of the Earnouts, the Purchaser and the Sellers'
Representative shall engage (and each, the Purchaser and the Sellers, shall pay
one-half (1/2) of the expense of such
-2-
<PAGE>
engagement) a "Big Six" accounting firm that is mutually acceptable to the
Purchaser and the Sellers' Representative to determine PTP98 and the Earnouts.
Prior to engaging such accounting firm, the Purchaser and the Sellers'
Representative shall endeavor through negotiations during a period not to exceed
thirty (30) days to resolve the disputes over the calculation of the Earnout. In
the absence of fraud, the determination of such "Big Six" accounting firm shall
be final and binding on all parties. All books and records of the Corporation
shall be kept, and the Report shall be prepared, except as otherwise
specifically provided herein, in accordance with GAAP, applied consistently with
the accounting principles that were applied in preparation of the Financial
Statements, for periods both prior to and after the Closing. Subject to the
setoff provision set forth in Section 8.5 hereof, all payments of the Earnouts
(including the interest accrued thereupon) shall be made not later than 15 days
after the final determination of the Earnouts; provided, however, that the
undisputed portion of the Earnouts shall be paid to the Sellers' Representative
prior to such final determination.
(d) The Purchase Price shall be divided among the Sellers, as
indicated on Schedule 1.1. All amounts constituting the Purchase Price shall be
------------
paid to the Sellers' Representative provided for in Section 9.19 hereof for
------------
distribution by the Sellers' Representative among the various Sellers, as
reflected on Schedule 1.1. All payments by the Purchaser to the Sellers'
------------
Representative pursuant to this Agreement shall be deemed payment to all of the
Sellers and shall discharge fully the obligation of the Purchaser to all of the
Sellers with respect to such amount paid.
(e) At the Closing, the Purchaser shall cause the Corporation to
issue to each of Robin M. Potter ("Potter") and Beth E. Stanley ("Stanley") a
-------
Promissory Note, in the principal amount of $150,000 (collectively the
"Shareholder Notes"), in exchange for the Corporation's Promissory Note held by
- - ------------------
such person in like principal amount prior to the Closing. The Shareholder
Notes shall be in the form of Exhibit 1.2(e) hereto, shall bear interest at a
--------------
rate of 6% per annum, shall be payable on March 31, 1999, provided the holder of
the Shareholder Note shall not have resigned her employment (excluding
resignation due to death or disability) or been terminated for Cause (as defined
in Exhibit 5.9 hereto) prior to March 31, 1999.
-----------
1.3 Release of the Corporation.
--------------------------
(a) Effective upon the Closing (except (x) as provided in paragraph
(b) below, (y) for the payment of accrued but unpaid employee salaries or
unreimbursed reasonable business expenses in the ordinary course of business, or
(z) as set forth on Schedule 2.10(b)), each Seller hereby irrevocably waives,
-----------------
releases and discharges forever the Corporation from any and all (i) liabilities
of the Corporation to such Seller with respect to any agreements, borrowings,
commitments or otherwise, in effect prior to the Closing Date and (ii) Contracts
entered into prior to the date hereof with such Seller, whether in his or her
capacity as a Seller hereunder, a shareholder, director, officer or employee of
the Corporation or otherwise, including in respect of rights of contribution or
indemnification, in each case whether arising hereunder or under any other
Contract or otherwise at law or equity, provided, however, that no Seller
releases any rights to indemnification by the Corporation for actions or
omissions taken by such Seller while
-3-
<PAGE>
employed by the Corporation to the extent that the amount of such
indemnification liability can be recovered by the Corporation under its
insurance policies, and each Seller hereby covenants and agrees that he or she
will not seek to recover any amounts in connection therewith or thereunder from
the Corporation.
(b) Subject to Section 8.5 hereof, nothing in this Section 1.3
releases the Corporation from its obligations to repay the Shareholder Notes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION AND THE SELLERS
The Corporation represents and warrants, and each Seller, severally and not
jointly, represents and warrants to the Purchaser as of the date hereof that:
2.1 Corporate Organization, Etc. The Corporation is a corporation
---------------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and proposed to be conducted, and
to own, operate and lease its properties and assets. The Corporation is duly
qualified or licensed to do business and is in corporate good standing in every
jurisdiction in which the conduct of its business, the ownership or lease of its
properties or ownership or lease of its properties, or the transactions
contemplated by this Agreement, require it to be so qualified or licensed,
except where the failure so to be qualified or in good standing would not have a
Material Adverse Effect. Such jurisdictions are set forth on Schedule 2.1
------------
hereto. True, complete and correct copies of the Corporation's charter and
bylaws as presently in effect are attached hereto as Exhibit 2.1.
-----------
2.2 Subsidiaries. The Corporation has no Subsidiaries.
------------
2.3 Stock Record Books. The stock record books of the Corporation which
------------------
have been delivered to the Purchaser for inspection prior to the date hereof are
complete and correct in all material respects. The authorized, issued and
outstanding capital stock of the Corporation is as set forth on Schedule 2.3
------------
hereto. There are no shares of capital stock of the Corporation held in the
treasury of the Corporation and no shares of capital stock of the Corporation
are currently reserved for issuance for any purpose or upon the occurrence of
any event or condition. The Sellers own 100% of the issued and outstanding
capital stock of the Corporation.
2.4 Corporate Minute Books. The corporate minute books of the Corporation
----------------------
which have been made available to the Purchaser for inspection are complete and
correct in all material respects and contain all of the proceedings of the
shareholders and directors of the Corporation. A true and complete list of the
incumbent directors and officers of the Corporation is set forth in Schedule 2.4
------------
hereto.
-4-
<PAGE>
2.5 Title to Stock. All of the outstanding shares of the capital stock of
--------------
the Corporation shown as being owned by a Seller on Schedule 1.1 are owned by
------------
that Seller free of all Liens and Contracts, other than the Shareholders'
Agreement among the Sellers dated June 28, 1997, which Shareholders' Agreement
will be terminated prior to the Closing (the "Shareholders' Agreement"). There
-----------------------
is no outstanding Contract with the Corporation or any other Person to purchase,
redeem or otherwise acquire any outstanding shares of the capital stock of the
Corporation, or securities or obligations of any kind convertible into any
shares of the capital stock of the Corporation. All of the outstanding shares of
the capital stock of the Corporation are duly authorized, validly issued, fully
paid and non-assessable, and have been issued in compliance with all applicable
securities laws. The Corporation has not redeemed any securities in violation of
any Contract or Regulation. Upon payment of the Purchase Price to such Seller at
the Closing, such Seller will convey good and marketable title to the Shares
owned by such Seller, free and clear of all Liens, Contracts or other
limitations whatsoever. The assignments, endorsements, stock powers and other
instruments of transfer delivered by such Seller to the Purchaser at the Closing
will be sufficient to transfer the Seller's entire interest, legal and
beneficial, in the Shares owned by such Seller to the Purchaser.
2.6 Authorization, Etc. Such Seller is the sole owner of and has full
-------------------
right, power and authority to sell the Shares (including the right to vote such
Shares) set forth opposite such Seller's name on Schedule 1.1 hereto, except as
------------
otherwise provided in the Shareholders' Agreement, which will be terminated
prior to the time of Closing. This Agreement is a valid and binding agreement,
enforceable against such Seller in accordance with its terms.
2.7 Options and Rights. At the Closing Date there shall be no outstanding
------------------
Options with respect to the Corporation's outstanding capital stock. There are
no existing Contracts or Options between such Seller on the one hand, and any
other Person, on the other hand, regarding the Shares owned by such Seller,
other than the Shareholders' Agreement, which will be terminated prior to the
time of Closing.
2.8 No Violation. Except as set forth in Schedule 2.8 hereto, the
------------ ------------
execution, delivery and performance by the Corporation and the Sellers of this
Agreement, and all other agreements contemplated hereby, and the fulfillment of
and compliance with the respective terms hereof and thereof by the Corporation
and such Seller, do not and will not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) constitute a default or event of
default under (with due notice, lapse of time or both), (c) result in the
creation of any Lien upon the Corporation's capital stock or assets pursuant to,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent, approval,
exemption or other action by, notice to, or filing with any Authority pursuant
to, the charter or bylaws of the Corporation or any applicable Regulation, any
Order or any Contract to which the Corporation, such Seller or their respective
properties or the Shares owned by such Seller are subject. Each of such Seller
and the Corporation has complied with all applicable Regulations and Orders in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
-5-
<PAGE>
2.9 Financial Statements.
--------------------
(a) Attached as Exhibit 2.9(a) hereto are the year-end Balance Sheets
--------------
and Statements of Income and Retained Earnings and Cash Flow of the Corporation
at the end of and for each of the years 1996 and 1995. Except as disclosed on
Schedule 2.9(a), such Balance Sheets and the notes thereto fairly present in all
- - ---------------
material respects the financial position of the Corporation as at the respective
dates thereof, and such Statements of Income and Retained Earnings and Cash Flow
and the notes thereto fairly present the results of operations for the periods
therein referred to, all in accordance with GAAP in all material respects
(except as stated therein or in the notes thereto). The Balance Sheet as at
December 31, 1996, and Statements of Income and Retained Earnings and Cash Flow
for the year then ended and the notes thereto are herein collectively referred
to as the "Financial Statements" and December 31, 1996 is herein referred to as
--------------------
the "Financial Statement Date." The Financial Statements have been audited by
------------------------
Ross, Anglim, Angelini, Valla & Krawitz, LLP, the independent certified public
accountants for the Corporation.
(b) Attached as Exhibit 2.9(b) are a Statement of Income and Retained
--------------
Earnings and Statement of Cash Flows for the eight months ended August 22, 1997
and a Balance Sheet as at such date (the "Interim Financial Statements").
----------------------------
Except as disclosed on Schedule 2.9(b), the Interim Financial Statements (i)
---------------
fairly present in all material respects the financial condition of the
Corporation as at such date and the results of operations and cash flows for the
period covered thereby and (ii) have been prepared in accordance with GAAP
consistently applied, except that the Interim Statements do not contain
footnotes and except for normal year-end adjustments, none of which individually
or in the aggregate would have a Material Adverse Effect on the Balance Sheet of
the Corporation as at August 22, 1997 or the Statement of Income and Retained
Earnings for the Corporation for the eight-month period ended August 22, 1997.
(c) Except as set forth on Schedule 2.9(c) hereto, the Corporation
---------------
does not have any Indebtedness, obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, known or unknown to the
Corporation, whether due or to become due) arising out of transactions entered
into at or prior to the date hereof, or any state of facts existing at or prior
to the date hereof, other than: (i) liabilities set forth in the Financial
Statements or Interim Financial Statements (including any notes thereto), or
(ii) liabilities and obligations which have arisen after the Financial Statement
Date in the ordinary course of business (none of which is a liability resulting
from breach of Contract, breach of warranty, tort and none of which would have a
Material Adverse Effect), (iii) indebtedness of the Corporation to CoreStates
Bank, N.A. incurred under the Corporation's Master Leasing Agreement with
CoreStates dated June 25, 1997 (the "CoreStates Leasing Agreement"); or (iv)
----------------------------
indebtedness to be exchanged for the Shareholder Notes.
2.10 Employees. Schedule 2.10(a) hereto sets forth a list of all
--------- ----------------
officers, directors and key employees of the Corporation, together with a
description of the rate and basis for their total compensation. The Corporation
is in compliance with all applicable Regulations or Orders affecting employment
and employment practices of the Corporation, including terms and
-6-
<PAGE>
conditions of employment and wages and hours, except where the failure so to
comply would not have a Material Adverse Effect. The Corporation has no
collective bargaining agreements and, since January 1, 1995, there have been no
strikes, work stoppages nor any demands for collective bargaining by any union
or labor organization. There is no dispute or controversy with any union or
other organization of the Corporation's employees and no arbitration proceedings
pending or, to the best knowledge of the Corporation and the Sellers, threatened
involving a dispute or controversy affecting the Corporation. Other than as
disclosed on Schedule 2.10(b), at the Closing the Corporation will not have any
----------------
liability to any of its employees, officers or directors other than for the
payment of accrued but unpaid employee salaries or unreimbursed reasonable
business expenses to such Persons in the ordinary course of business, other than
payments under the Shareholder Notes. No employee that has executed and
delivered a Restrictive Covenant Agreement has notified the Corporation or
Potter or Stanley of his or her intention to terminate his or her employment as
a result of the transactions contemplated by this Agreement.
2.11 Absence of Certain Changes. Except as set forth on Schedule 2.11
-------------------------- -------------
hereto, since the Financial Statement Date, there has not been (a) any Material
Adverse Change; (b) any damage, destruction or loss, whether covered by
insurance or not, having a Material Adverse Effect, with regard to the
Corporation's property and business; (c) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, stock or property) in
respect of the Corporation's capital stock, or any redemption or other
acquisition of such stock by the Corporation, except as referred to in the last
sentence of this Section 2.11; (d) any increase in the compensation payable to
or to become payable by the Corporation to its officers or employees or any
adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officers or
employees or any Affiliate of the Corporation, other than in the ordinary course
of business and consistent with past practices; (e) any entry into any material
Contract not in the ordinary course of business; (f) any borrowing other than
the CoreStates Leasing Agreement or borrowings evidenced by the Corporation's
Promissory Notes described in Section 1.2(e); or (g) any change by the
Corporation in accounting methods or principles. Since December 31, 1996, there
have been no distributions to the Corporation's shareholders other than (i) 1996
bonuses reflected on the Financial Statements and ordinary employment
compensation; (ii) a cash distribution to Potter and Stanley in June 1997 of
$330,000 ($300,000 of which was immediately loaned to the Corporation), and
(iii) cash distributions to the Sellers of not more than $317,000 made
throughout the year 1997 for income taxes on the Corporation's 1997 income
earned through the Closing Date.
2.12 Contracts.
---------
(a) Except as set forth on Schedule 2.12(a) hereto, and except for
----------------
the Shareholders' Agreement and the CoreStates Leasing Agreement, the
Corporation is not a party to any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan providing for deferred or other compensation to
employees or any other
-7-
<PAGE>
employee benefit plan (other than as set forth in Schedule 2.12(a) hereto),
----------------
or any Contract with any labor union;
(ii) Contract relating to loans to officers, directors, or
Affiliates;
(iii) Contract relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a Lien on any asset of the
Corporation;
(iv) Guarantee of any obligation;
(v) Contract under which the Corporation has advanced or
loaned any Person amounts in the aggregate exceeding $10,000;
(vi) Contract under which the Corporation is lessee of or holds
or operates any property, real or personal, owned by any other party,
except for any lease of real or personal property under which the aggregate
annual rental payments do not exceed $20,000;
(vii) Contract pursuant to which the Corporation is lessor of or
permits any third party to hold or operate any property, real or personal,
owned or controlled by the Corporation;
(viii) Contract or group of related Contracts with the same party
or group of affiliated parties the performance of which involves annual
consideration in excess of $10,000;
(ix) assignment, license, indemnification or Contract with
respect to any intangible property (including, without limitation, any
Proprietary Rights);
(x) Contract under which it has granted any Person any
registration rights (including piggyback rights) with respect to any
securities;
(xi) Contract or non-competition provision in any Contract
prohibiting it from freely engaging in any business or competing anywhere
in the world;
(xii) Contracts with independent agents, brokers, dealers or
distributors;
(xiii) employment, bonus, consulting, sales, commissions,
advertising or marketing Contracts;
(xiv) Contracts with Persons with which, directly or indirectly,
any Seller also has a Contract; or
(xv) any other Contract which is material to its operations and
business prospects or involves a consideration in excess of $10,000
annually, excluding any purchase orders in the ordinary course of business.
-8-
<PAGE>
(b) Except as set forth on Schedule 2.12(b) hereto, as of the
----------------
Closing Date, no consent of any party to any Contract is required in connection
with the execution, delivery or performance of this Agreement.
(c) Except as disclosed on Schedule 2.12(c), (i) the Corporation has
----------------
performed in all material respects all obligations required to be performed by
it and is not in default in any respect under or in breach of nor in receipt of
any claim of default or breach under any Contract to which the Corporation is
subject and where any such breach or default would have a Material Adverse
Effect (including without limitation all performance bonds, warranty obligations
or otherwise); (ii) no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of non-
compliance under any material Contract to which the Corporation is subject and
where any such breach or default would have a Material Adverse Effect (including
without limitation all performance bonds, warranty obligations or otherwise);
and (iii) the Corporation does not have any present expectation or intention of
not fully performing all such obligations; the Corporation and the Sellers do
not have any knowledge of any breach or anticipated breach by the other parties
to any such Contract to which it is a party.
2.13 True and Complete Copies. The Corporation has delivered to the
------------------------
Purchaser true and complete copies of all the Contracts and documents listed in
the schedules to this Agreement.
2.14 Title and Related Matters.
-------------------------
(a) The Corporation owns no real property. Except as set forth on
Schedule 2.14(a) hereto, and except for liens on the Corporation's assets
- - ----------------
securing the CoreStates Leasing Agreement, which are also listed on Schedule
--------
2.14(a), the Corporation has good and marketable title to all personal property
- - -------
and other assets reflected in the Financial Statements or acquired after the
Financial Statement Date, free and clear of all Liens, except Permitted Liens.
All properties used in the Corporation's business operations as of the Financial
Statement Date are reflected in the Financial Statements in accordance with and
to the extent required by GAAP.
(b) Schedule 2.14(b) hereto sets forth a complete and accurate list
----------------
of all such leased assets which have annual rental payments in excess of $10,000
(including the expiration date of such lease, the name of the lessor, the annual
rental payment and whether a consent is required from the lessor to consummate
the transactions contemplated hereby).
(i) All of the Corporation's leases are in full force and
effect, and valid and enforceable in accordance with their respective
terms. The Corporation has not received any notice of any, and there exists
no event of default or event which constitutes or would constitute (with
notice or lapse of time or both) a default by the Corporation under any
lease.
(ii) All rent and other amounts due and payable with respect to
the Corporation's leases have been paid through the date of this Agreement
and all rent and
-9-
<PAGE>
other amounts due and payable with respect to the Corporation's leases
which are due and payable on or prior to the Closing Date will have been
paid prior to the Closing Date.
(iii) The Corporation has received no written notice that the
landlord with respect to any real property lease would refuse to renew such
lease upon expiration of the period thereof upon substantially the same
terms, except for rent increases consistent with past experience or market
rentals.
(c) There has not been since the Financial Statement Date any sale,
lease, or any other disposition or distribution by the Corporation of any of its
assets or properties, now or hereafter owned by it, except transactions in the
ordinary and regular course of business or as otherwise consented to by the
Purchaser. After the Closing, the Purchaser will own, or have the unrestricted
right to use all properties and assets that are currently used in connection
with the Corporation's business, except as otherwise provided herein or except
for any consents of third parties to the assignment of their contracts, the
receipt of which is waived by the Purchaser prior to Closing, and such
properties and assets represent all of the properties and assets that are
necessary to the operation of the Corporation's business as currently conducted.
2.15 Litigation. Except as set forth on Schedule 2.15 hereto, there is no
---------- -------------
Claim pending or, to the best knowledge of the Corporation and the Sellers,
threatened against the Corporation.
2.16 Tax Matters.
-----------
(a) The Corporation has duly and timely filed its Tax Returns with
the appropriate Authority and has duly, completely and correctly reported all
income and all other amounts and information required to be reported thereon.
(b) The Corporation has duly and timely paid all Taxes, including
all installments on account of Taxes for the current year, that are due and
payable by it and the Corporation has established reserves that are reflected on
the Financial Statements or the Interim Financial Statements that are adequate
for the payment by the Corporation of all Taxes that are not yet due and payable
(and that will not be due and payable by the Closing Date) and that relate to
periods ending on or prior to the Closing Date.
(c) The Corporation has not requested, or entered into any agreement
or other arrangement or executed any waiver providing for, any extension of time
within which (i) to file any Tax Return covering any Taxes for which the
Corporation is or may be liable; (ii) to file any elections, designations or
similar things relating to Taxes for which the Corporation is or may be liable;
(iii) the Corporation is required to pay or remit any Taxes or amounts on
account of Taxes; or (iv) any Authority may assess or collect Taxes for which
the Corporation is or may be liable.
(d) There are no actions, suits, proceedings, investigations, audits
or claims now pending or, to the knowledge of the Corporation or any Seller,
threatened, against the
-10-
<PAGE>
Corporation in respect of any Taxes and there are no matters under discussion,
audit or appeal with any Authority relating to Taxes.
(e) The Corporation has duly and timely withheld from any amount
paid or credited by it to or for the account or benefit of any person,
including, without limitation, any of its employees, officers and directors and
any non-resident person, the amount of all Taxes and other deductions required
by any applicable law, rule or regulation to be withheld from any such amount
and has duly and timely remitted the same to the appropriate Authority.
(f) The Corporation filed an election to be taxed under Subchapter S
of the Code effective for the Corporation's first tax year ending December 31,
1993 and under analogous provisions of the income tax law of the State of New
Jersey that was effective beginning January 1, 1994. The foregoing elections
were made in compliance with the Code and state law and the Corporation has been
an S corporation within the meaning of Code Section 1361(a)(i) for federal
income tax purposes (and under analogous provisions of state law) for the entire
period since such date. The Corporation is not and will not be subject to any
tax under Code Section 1374 after giving effect to the transactions contemplated
hereby.
2.17 Compliance with Law and Applicable Government Regulations. The
---------------------------------------------------------
Corporation is presently in compliance with regard to its operations, practices,
real property, plants, structures, machinery, equipment and other property, and
all other aspects of its business, with all applicable Regulations and Orders,
including, but not limited to, all Regulations relating to quality and labeling,
antitrust, Taxes, consumer protection, equal opportunity, discrimination, fire,
zoning, building and occupational safety, except where the failure to be in such
compliance would not have a Material Adverse Effect. There are no Claims
pending, or threatened, nor has the Corporation received any written notice,
regarding any violations of any Regulations and Orders enforced by any Authority
claiming jurisdiction over the Corporation including any requirement of OSHA or
any pollution and environmental control agency (including air and water). This
warranty excludes environmental matters which are covered by Section 2.21.
2.18 Pension and Other Benefit Plans.
-------------------------------
(a) Except as disclosed on Schedule 2.18, the Corporation does not
-------------
currently have, has not since the date of its incorporation had, and is under no
obligation to provide at any time in the future any Pension/Benefit Plans for
any of its officers, directors or employees, and does not have any obligations
or liabilities (either absolute or contingent) in respect of any such
Pension/Benefit Plans.
(b) Schedule 2.18 sets forth a complete list of all Pension/Benefit
-------------
Plans.
(c) Current and complete copies of all written Pension/Benefit Plans
or, where oral, written summaries of the material terms thereof, have been
provided or made available to the Purchaser together with current and complete
copies of all documents relating to the Pension/Benefit Plans, including,
without limitation, as applicable, (i) all documents establishing, creating or
amending any Pension/Benefit Plan; (ii) all trust agreements, funding
-11-
<PAGE>
agreements, insurance contracts and investment management agreements; (iii) all
financial statements and accounting statements and reports, and investment
reports for each of the last three years and the three most recent actuarial
reports; (iv) all reports, returns, filings and material correspondence with any
regulatory authority in the last three years; and (v) all booklets, summaries or
manuals prepared for or circulated to, and written communications of a general
nature to employees concerning any Pension/Benefit Plan.
(d) All obligations under the Pension/Benefit Plans (whether
pursuant to the terms thereof or applicable Regulations) have been satisfied,
and there are no outstanding defaults or violations thereunder by the
Corporation nor does the Corporation have any knowledge of any default or
violation by any other party to any Pension/Benefit Plan.
(e) All contributions or premiums required to be paid to or in
respect of each Pension/Benefit Plan have been paid in a timely fashion in
accordance with the terms thereof and all applicable Regulations, and no Taxes,
penalties or fees or owing or eligible under any Pension/Benefit Plan.
(f) No material changes have occurred in respect of any
Pension/Benefit Plan since the date of the most recent financial, accounting or
actuarial report, as applicable, issued in connection with any Pension/Benefit
Plan, which could reasonably be expected to adversely affect the relevant report
(including rendering it misleading in any material respect).
(g) All employee data necessary to administer each Pension/Benefit
Plan is in the possession of the Corporation and is complete, correct and in a
form which is sufficient for the proper administration of the Pension/Benefit
Plans, and none of the Pension/Benefit Plans (other than coverage mandated by
applicable law or death benefits or retirement benefits under any pension plan),
provide benefits to retired employees.
(h) None of the Pension/Benefit Plans require or permit a
retroactive increase in premiums or payments, and the level of insurance
reserves, if any, under any insured Pension/Benefit Plan is reasonable and
sufficient to provide for all incurred but unreported claims.
(i) None of the Pension/Benefit Plans has any unfunded liabilities
that are not reflected in the Financial Statements or the books and records of
the Corporation.
(j) Neither the Corporation nor any ERISA Affiliate has violated
Section 4980B of the Code or Section 601 through 608 of ERISA.
2.19 Intellectual Property.
---------------------
(a) Schedule 2.19(a) hereto sets forth a complete and accurate list
of all of the Corporation's Proprietary Rights, excluding software, owned or
used by the Corporation. The Corporation has made available to the Purchaser
correct and complete copies of all written
-12-
<PAGE>
documentation evidencing ownership of, and any Claims relating to, each such
Proprietary Rights.
(b) To the knowledge of the Corporation and the Sellers, (i) no
other Person has any rights to any of the Proprietary Rights owned by the
Corporation except pursuant to agreements or licenses specified in Schedule
--------
2.19(b) hereto, (ii) no other Person is infringing, violating or
- - -------
misappropriating any such Proprietary Right that the Corporation owns or uses,
and (iii) no Proprietary Right is subject to any Outstanding Order or Claim.
(c) Internal Software Applications.
------------------------------
(i) Owned Software. The current software owned by the
--------------
Corporation is described on Schedule 2.19(c) hereto (the "Owned Software").
---------------- --------------
To the best knowledge of the Corporation and the Sellers, no part of any
such Owned Software is an imitation or copy of, or infringes upon, any
common law or statutory rights of any other Person, including, without
limitation, rights relating to defamation, contractual rights, copyrights,
trade secrets, and rights of privacy or publicity. The Corporation has not
sold, assigned, licensed, distributed or in any other way disposed of or
encumbered the Owned Software, except in the ordinary course of its
business.
(ii) Licensed Software. The Corporation uses software owned by
-----------------
third parties in its business (the "Licensed Software"), including software
-----------------
owned by People Soft, Lotus and MicroSoft and as otherwise disclosed on
Schedule 2.19(c). The Corporation and the Sellers make no representation
----------------
and warranty regarding such third party software other than that the
Corporation's computer hardware has legitimately licensed software
installed therein.
(iii) No Errors; Nonconformity. To the knowledge of the
------------------------
Corporation and the Sellers, the Owned Software is free from any
significant software defect or programming or documentation error, operates
and runs in a reasonable and efficient business manner, conforms to the
specifications thereof and the applications can be recreated from their
associated source code.
(iv) No Alterations. The Corporation has not knowingly altered
--------------
the data or any Owned Software or Licensed Software or supporting software
which may, in turn, damage the integrity of the data stored in electronic,
optical or magnetic form.
(v) Documentation. The Corporation has made available to the
-------------
Purchaser all documentation relating to the use, maintenance and operation
of the Owned Software and Licensed Software, all of which, to the knowledge
of the Corporation and the Sellers, is true and accurate.
2.20 Customer Warranties. Except as disclosed on Schedule 2.20, there
------------------- -------------
are no pending, nor to the best knowledge of the Corporation and the Sellers,
threatened, any Claims under or pursuant to any warranty, whether expressed or
implied, on products or services sold
-13-
<PAGE>
prior to the Closing Date by the Corporation which are not disclosed or referred
to in the Financial Statements or the Interim Financial Statements and which are
not fully reserved against.
2.21 Environmental Matters. Except as disclosed in Schedule 2.21 hereto:
--------------------- -------------
(a) neither the Corporation's business nor the operation thereof violates in any
material respect or causes any material liability under any applicable
Environmental Law in effect as of the date hereof or has resulted in a condition
or Occurrence at the Corporation's property which, with notice or the passage of
time or both, would constitute or has resulted in a violation of or cause any
material liability under any Environmental Law in effect at the date hereof; (b)
the Corporation is in possession of all Environmental Permits required under any
applicable Environmental Law in effect at the date hereof for the conduct or
operation of the Corporation's business (or any part thereof), and the
Corporation is in compliance in all material respects with all of the
requirements and limitations included in such Environmental Permits; (c) the
Corporation has not stored or used any pollutants, contaminants or hazardous or
toxic wastes, substances or materials on or at any of its property except for
inventories of chemicals which are used or to be used in the ordinary course of
the Corporation's business (which inventories have been sorted or used in
accordance with all applicable Environmental Permits and all Environmental Laws,
including all so-called "Right to Know" laws); (d) the Corporation has not
received any notice from any Authority or any private Person that the
Corporation's business or its operation at any of its properties is in violation
of or subject to any material liability under any Environmental Law or any
Environmental Permit or that it is responsible (or potentially responsible) for
the cleanup of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any of the Corporation's property, or
at, on or beneath any land adjacent thereto or in connection with any waste or
contamination site; and (e) the Corporation is not the subject of any Federal,
state, local, or private Claim involving a demand for damages or other potential
liability in excess of $50,000, either individually or in the aggregate, with
respect to Environmental Laws or under any common law theories relating to its
operations at or the condition of any property (including underlying
groundwater) owned, leased, or operated by the Corporation.
2.22 Capital Expenditures and Investments. The Corporation has
------------------------------------
outstanding Contracts for capital expenditures and investments as set forth in
Schedule 2.22 hereto which includes a schedule of all monies committed to be
- - -------------
expended on account of capital expenditures as of the Closing Date.
2.23 Dealings with Affiliates. Schedule 2.23 hereto sets forth a complete
------------------------ -------------
and accurate list, including the parties, of all oral or written Contracts to
which the Corporation is, will be or has been a party, at any time from December
31, 1996 to the Closing Date, and to which any one or more Affiliates or Sellers
is also a party. Since December 31, 1996, the Corporation has not made any
payments to, loaned any funds or property to or made any arrangement to extend
credit to any Seller, Affiliate or employee of the Corporation except for the
payment of employee salaries and benefits and director compensation in the
ordinary course of business, except for the distributions to Robin Potter, Beth
Stanley and the Sellers described in Section 2.11, and except
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<PAGE>
for the Corporation's investment banking arrangements with Berwind Financial
Group as described in Section 2.6.
2.24 Insurance. Schedule 2.24 hereto lists each of the Corporation's
--------- -------------
Policies. Copies of all such Policies have been provided to the Purchaser prior
to the Closing Date. All of the Policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid or accrued therefor, and no notice of cancellation
or termination has been received with respect to any Policy. The Corporation
has not breached or otherwise failed to perform in any material respects its
obligations under any of the Policies nor has the Corporation received any
adverse notice or communication from any of the insurers party to the Policies
with respect to any such alleged breach or failure in connection with any of the
Policies. All Policies are sufficient for compliance with (i) all Contracts to
which the Corporation is subject, and (ii) all Regulations to which the
Corporation is subject and that are material to the operation of the business of
the Corporation. All Policies are to the Corporation's and the Sellers'
knowledge valid, outstanding, collectible and enforceable policies. Except as
set forth in Schedule 2.24, all of the Policies remain in full force and effect
-------------
through 30 days after the Closing Date. The Corporation has never been refused
any insurance with respect to its assets or operations, nor has coverage ever
been limited by any insurance carrier to which the Corporation has applied for
any Policy or with which it has carried a Policy.
2.25 Accounts Receivable; Inventories. Not less than ninety-five percent
--------------------------------
(95%) of the accounts receivable of the Corporation reflected on the books of
the Corporation, including the accounts receivable relating to Maimonides
Medical Center and listed on Exhibit 2.9(b) hereto, on the Closing Date are good
and collectible. All such accounts receivable are valid, genuine and subsisting,
arise out of bona fide sales and deliveries of goods, performance of services or
other business transactions and are not subject to defenses, setoffs or
counterclaims.
2.26 Brokerage. Except for the investment banking fees due Berwind
---------
Financial Group which are payable solely by the Sellers, there are no claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Corporation.
2.27 Customers. To the knowledge of Potter and Stanley, no unfilled
---------
client order or commitment obligating the Corporation to perform services will
result in a loss to the Corporation upon completion of performance. Except as
disclosed on Schedule 2.27(a), no client of the Corporation that accounted for
----------------
more than 5% of its revenues during the one month period prior to the date of
this Agreement has advised the Corporation in writing that it will cease, or
decrease the rate of, contracting for services from the Corporation. Schedule
--------
2.27 sets forth a list of each client that accounted for more than 5% of the
- - ----
consolidated revenues of the Corporation during the last full fiscal year and
the amount of revenues accounted for by such client during each such period.
The consummation of the transactions contemplated hereby will not have a
material adverse effect on the Corporation's relationship with any client listed
on Schedule 2.27, other than any material adverse effect on the Corporation's
-------------
relationship with any client listed on Schedule 2.27 occurring as a result of
-------------
the Company being unable to transact business with such
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<PAGE>
customer as a result of that certain non-competition agreement between certain
of Purchaser's executive officers and KPMG Peat Marwick.
2.28 Permits. The Permits listed on Schedule 2.28 are the only Permits
------- -------------
that are required for the Corporation to conduct its business as presently
conducted, except for those the absence of which would not have any Material
Adverse Effect. Each such Permit is in full force and effect and, to the
knowledge of the Corporation and the Sellers, no suspension or cancellation of
any such Permit is threatened and there is no basis for believing that such
Permit will not be renewable upon expiration.
2.29 Improper and Other Payments. Except as set forth on Schedule 2.29
--------------------------- -------------
hereto, (a) neither the Corporation, any director, officer, employee thereof,
nor, to the Corporation's and the Sellers' knowledge, any agent or
representative of the Corporation nor any Person acting on behalf of any of
them, has made, paid or received any unlawful bribes, kickbacks or other similar
payments to or from any Person or Authority, (b) no contributions have been
made, directly or indirectly, to a domestic or foreign political party or
candidate, (c) no improper foreign payment (as defined in the U.S. Foreign
Corrupt Practices Act) has been made, and (d) the internal accounting controls
of the Corporation are believed by the Corporation's management to be adequate
to detect any of the foregoing under current circumstances.
2.30 Disclosure. No representation or warranty by the Corporation or the
----------
Sellers contained in this Agreement and no schedule, exhibit, written statement,
certificate, or document furnished by or on behalf of the Sellers to the
Purchaser in connection with this Agreement or any transaction contemplated
hereby, including but not limited to the Financial Statements, contains, as of
the date on which made or reaffirmed, any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which such
statements were made, not misleading, or necessary in order to provide a
prospective purchaser of the Shares with full information as to the Corporation
and its affairs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows as of the
date hereof:
3.1 Corporate Organization, Etc. The Purchaser is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business and is in corporate and tax good standing in every jurisdiction in
which the conduct of its business, the ownership or lease of its properties, or
the execution of, and performance of the transactions contemplated by, this
Agreement, require it to be so qualified or licensed. Such
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<PAGE>
jurisdictions are set forth in Schedule 3.1 hereto. True, complete and correct
------------
copies of the Purchaser's charter and bylaws as presently in effect are attached
hereto as Exhibit 3.1.
------------
3.2 Authorization, Etc. The Purchaser has full corporate power and
------------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement and to
consummate the transactions contemplated hereby, and no other corporate
proceedings on their part are necessary to authorize this Agreement and the
transactions contemplated hereby and thereby. This Agreement constitutes the
legal, valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms.
3.3 No Violation. Except as set forth in Schedule 3.3 hereto, the
------------ ------------
execution, delivery and performance by the Purchaser of this Agreement, and all
other agreements contemplated hereby, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Purchaser, do not and will not
(a) conflict with or result in a breach of the terms, conditions or provisions
of, (b) result in a violation of, or (c) require any authorization, consent,
approval, exemption or other action by, or notice to, or filing with any court
or Authority pursuant to, the charter or bylaws of the Purchaser or, to the best
knowledge of the Purchaser, any applicable Regulation, Order or any Contract to
which the Purchaser, or its properties are subject. The Purchaser will comply
in all material respects with all applicable Regulations and Orders in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
3.4 Investment Intent. The Purchaser represents and warrants to the
-----------------
Sellers that it is purchasing the Shares for investment purposes and not with a
view to distribution thereof and agrees that it shall not make any sale,
transfer or other disposition of the Shares in violation of any applicable
securities law.
3.5 Financial Statements. The unaudited balance sheet and statement of
--------------------
income of the Purchaser at and for the period ended September 30, 1997, attached
hereto as Schedule 3.5(a), fairly presents in all material respects the
---------------
financial position of the Purchaser at the date thereof and the statement of
income fairly presents the results of operations for the eight-month period
referenced therein, all in accordance with GAAP, except as disclosed on Schedule
--------
3.5(b).
- - ------
3.6 Financing and Liquidity. The Purchaser is a party to a credit
-----------------------
facility with the Bank of Boston pursuant to which the Purchaser may initially
borrow an aggregate principal amount of up to $10 million, such credit facility
is in full force and effect, and there are no defaults under such credit
facility which would have a material adverse effect on the Purchaser taken as a
whole.
3.7 Litigation. Except as set forth on Schedule 3.7 hereto, there is no
---------- ------------
Claim pending or, to the best knowledge of the Purchaser, threatened against the
Purchaser.
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<PAGE>
ARTICLE IV
COVENANTS AND AGREEMENTS OF THE PARTIES
The parties covenant and agree as follows:
4.1 Operation of Business. Through December 31, 1998:
---------------------
(a) the Purchaser shall (i) operate the Corporation as a wholly-
owned subsidiary, or, (ii) in its sole discretion, liquidate the Corporation and
operate the business currently operated by the Corporation as a separate
division of the Purchaser;
(b) the Purchaser shall conduct or cause the Corporation to conduct,
as the case may be, the business currently operated by the Corporation
diligently and in good faith;
(c) except as otherwise provided in Section 4.1(d) of this
Agreement, all business of the Purchaser (including all of its divisions and
other operations) relating to People Soft software shall be conducted by and
through the Corporation, including any businesses acquired by acquisition;
(d) the Purchaser shall not acquire any other business that includes
as a substantial component thereof the servicing of People Soft software
installations without obtaining the prior written approval of Potter, which
approval may be conditioned, in the sole discretion of Potter, upon agreement
between the Purchaser and the Sellers (acting through Potter as their
representative) concerning appropriate changes and adjustments to the method of
computing the Earnouts, as set forth in Section 1.2(b) of this Agreement, to
--------------
reflect the changed circumstances arising as a result of such acquisition;
4.2 Agreement to Defend. In the event any action, suit, proceeding or
-------------------
investigation of the nature specified in Section 5.4 or Section 6.3 hereof is
----------- -----------
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto at their own cost and expense unless entitled to indemnification as
provided in this Agreement.
4.3 No Termination of Sellers' Obligations by Subsequent Incapacity,
----------------------------------------------------------------
Dissolution, Etc. Each Seller specifically agrees that the obligations of such
- - -----------------
Seller hereunder, including, without limitation, obligations pursuant to Article
-------
VIII shall not be terminated by the operation of law or by the death or
- - ----
incapacity of any individual Seller.
4.4 Deliveries After Closing. From time to time after the Closing, at
------------------------
the Purchaser's request and without expense to the Corporation or any Subsidiary
and without further consideration from the Purchaser, the Corporation or any
Subsidiary, the Sellers shall execute and deliver such other instruments of
conveyance and transfer and take such other action as the Purchaser reasonably
may require to convey, transfer to and vest in the Purchaser and to put the
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<PAGE>
Purchaser in possession of any rights or property to be sold, conveyed,
transferred and delivered hereunder.
4.5 Public Announcements. Neither the Sellers, the Corporation nor the
--------------------
Purchaser nor any Affiliate, representative or shareholder of either of such
persons, shall disclose any of the terms of this Agreement to any third party
without the other party's prior written consent. The form, content and timing of
all press releases, public announcements or publicity statements with respect to
this Agreement and transactions contemplated hereby shall be subject to the
prior approval of both the Sellers and the Purchaser, which approval shall not
be unreasonably withheld; provided, however, that either party may withhold such
approval in its sole discretion with respect to any of the foregoing which
discloses any of the financial terms of this transaction. No press releases,
public announcements or publicity statements shall be released by either party
without such prior mutual agreement.
4.6 Section 338(h)(10) Election.
---------------------------
(a) Each of the Sellers and the Purchaser shall make (i) an election
under Code Section 338(h)(10), (ii) if required to achieve a basis step-up, an
election under Code Section 338(g) and (iii) an election under any corresponding
provisions of state, local or foreign law (collectively the "Section 338(h)(10)
------------------
Election") with respect to the purchase and sale of the common stock of the
- - --------
Corporation. The Purchaser has prepared and shall be responsible for timely
filing the forms used to make the Section 338(h)(10) Election, and which forms
have been provided to the Sellers previously. At the time of filing of the
Purchaser's Section 338(h)(10) Election, each Seller shall sign all federal and
state forms used to make the Section 338(h)(10) Election that require their
signatures.
(b) Each Seller hereby represents and warrants that she has provided
to the Purchaser all information (including Tax elections made by or on behalf
of the Corporation) that the Purchaser has requested in connection with its
filing of the Section 338(h)(10) Election and that such information provided to
the Purchaser is true and complete in all respects.
(c) The Purchase Price shall be allocated, apportioned and adjusted
among the assets, as shall be determined by Purchaser, in the manner specified
in accordance with Section 1060 of the Code. Each of the parties hereto agrees
to prepare and file all tax returns (including Form 8594) in a manner consistent
with such allocation and to report this transaction for Federal and state income
tax purposes in accordance with such allocation of the Purchase Price and shall
use their reasonable efforts to sustain such allocation in any subsequent tax
audit or dispute.
4.7 Financial Information. The Sellers understand and acknowledge that
---------------------
the Purchaser or one of its Affiliates (including the Corporation) may file a
registration statement (the "Registration Statement") with the Securities and
----------------------
Exchange Commission, which Registration Statement might be required to include
financial statements of the Corporation prepared in accordance with Regulation
S-X promulgated under the Securities Act of 1933, as amended (the "S-X
---
Financials"). Accordingly, the Sellers shall furnish to the Purchaser any
- - ----------
information or documents within their possession or control or available to
them, requested by
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<PAGE>
the Purchaser and reasonably necessary or desirable for the completion of the S-
X Financials, and, subject to the next following sentence, the Sellers agree to
execute following the Closing any management representation letters that are
necessary to permit the Purchaser's or one of its Affiliate's (including the
Corporation's) independent accountants to issue unqualified reports with respect
to the S-X Financials to be included in the Registration Statement and any
amendments thereto. Nothing herein shall require any Seller to make any
statement in such management representation letter that such Seller does not
believe to be accurate or truthful, and all representations to be made by a
Seller in such letter shall be limited to and based upon the actual knowledge of
the Seller making the representation.
4.8 Bonuses for FY 1997. The Purchaser agrees to cause the Corporation
-------------------
to effect payment pursuant to the Corporation's bonus plans set forth on
Schedule 4.8 hereto at such times and in such manner as previously paid by the
- - ------------
Corporation to its employees; provided that in no event shall the annual bonuses
to be paid to Potter and Stanley for the Corporation's fiscal year ending
December 31, 1997 exceed $100,000 per individual.
4.9 Tax Return for Period Prior to Closing. The Sellers shall cause to
--------------------------------------
be prepared a Federal income tax return of the Corporation on Form 1120-S for
the short taxable year commencing on January 1, 1997, and ending on the Closing
Date. The Sellers shall be responsible for the payment of all taxes in respect
of the items described in Section 1366(a) of the Code that are reflected on such
return.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement to purchase the
Shares, pay the Purchase Price and employ and pay compensation to any employees
of the Corporation shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions unless waived in writing by
the Purchaser:
5.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Corporation and the Sellers set forth in Article II and
----------
elsewhere in this Agreement and all information contained in any exhibit or
schedule hereto delivered by, or on behalf of, the Corporation or the Sellers,
to the Purchaser, shall be true and correct, except as expressly provided
herein. The Corporation and the Sellers shall have performed and complied with
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by them prior to the Closing Date.
5.2 Consents and Approvals. The Purchaser and the Corporation shall
----------------------
have obtained any and all consents, approvals, Orders, qualifications, licenses,
Permits or other authorizations required by all applicable Regulations, Orders
and Contracts of the Corporation or binding on its properties and assets, with
respect to the execution, delivery and performance of the Agreement, the
financing and consummation of the transactions contemplated herein and the
conduct of the
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<PAGE>
business of the Corporation in the same manner after the Closing Date as before
the Closing Date.
5.3 Opinion of the Corporation's Counsel. The Purchaser shall have
------------------------------------
received an opinion of the Sellers' and the Corporation's counsel, dated the
Closing Date, in the form of Exhibit 5.3 hereto.
-----------
5.4 No Proceeding or Litigation. No preliminary or permanent injunction
---------------------------
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which would prevent the consummation
of the transactions contemplated hereby.
5.5 Secretary's Certificate. The Purchaser shall have received a
-----------------------
certificate, by the secretary of the Corporation, as to the charter and bylaws
of the Corporation, the resolutions adopted by the directors of the Corporation
in connection with this Agreement, the incumbency of certain officers of the
Corporation and the jurisdictions in which the Corporation is qualified to
conduct business in the form of Exhibit 5.5 hereto.
-----------
5.6 Certificates of Good Standing. At the Closing, the Corporation shall
-----------------------------
have delivered to the Purchaser certificates issued by the appropriate
governmental authorities evidencing the good standing, with respect to the
conduct of business, of the Corporation as of a date not more than fifteen (15)
days prior to the Closing Date as a corporation organized under the laws of the
state of New Jersey and as a foreign corporation authorized to do business under
the laws of the jurisdictions listed in the schedules hereto.
5.7 Resignations. The Sellers shall have caused the directors of the
------------
Corporation to have resigned from the Board of Directors.
5.8 Creditor Consents. The creditors set forth on Schedule 5.8 hereto
----------------- ------------
shall have agreed in writing with the Corporation as to the amounts owed in
order for such creditors to have been paid in full and to release all Liens in
favor of such creditors. The creditors set forth on Schedule 5.8 shall provide
------------
at Closing such UCC termination statements, releases of mortgages and other
releases of Liens as shall be required by the Purchaser and its lenders.
5.9 Employment Agreements. The Purchaser shall have caused the
---------------------
Corporation to enter into employment agreements with the Sellers in the form
attached hereto as Exhibit 5.9.
-----------
5.10 Shareholders' Notes. Upon delivery of the Shareholders' Notes, the
-------------------
Purchaser shall have received evidence that the prior notes held by such holders
shall have been surrendered and cancelled.
5.11 Shareholders' Agreement. The Purchaser shall have received evidence
-----------------------
that the Shareholders' Agreement shall have been terminated and that the parties
thereto have no further rights or obligations thereunder.
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<PAGE>
5.12 CoreStates Leasing Agreement. Purchaser shall have received evidence
----------------------------
that the total drawdowns under the CoreStates Leasing Agreement (including
principal and interest) does not exceed $220,000.00.
5.13 Restricted Stock Agreements. At least 80% of the employees listed on
---------------------------
Schedule 2.10(a) (excluding the Sellers), shall have entered into Restricted
----------------
Stock Agreements in the form attached hereto as Exhibit 5.13.
------------
5.14 Debt Forgiveness Arrangement. The Sellers shall have executed and
----------------------------
delivered to one another the Sellers' Representative Agreement of even date
herewith pursuant to which 50% of the principal balance of the promissory notes
of each Seller (other than Robin Potter and Beth Stanley) held by Robin Potter
and Beth Stanley will be forgiven if such Seller does not resign his or her
employment with the Corporation, or is not terminated by the Corporation for
cause, through March 31, 1999.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligation of the Sellers under this Agreement to sell the Shares shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Corporation, and the
Sellers:
6.1 Representations and Warranties; Performance. The representations and
-------------------------------------------
warranties of the Purchaser set forth in Article III and elsewhere in this
-----------
Agreement and all information contained in any exhibit or schedule hereto
delivered by, or on behalf of, the Purchaser to the Sellers, shall be true and
correct when made and on the Closing Date as though then made, except as
expressly provided herein. The Purchaser shall have performed and complied with
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by it prior to the Closing Date.
6.2 Consents and Approvals. The Purchaser, the Sellers, the Corporation
----------------------
and each Subsidiary shall have obtained any and all material consents,
approvals, orders, qualifications, licenses, permits or other authorizations
required by all applicable Regulations, Orders or Contracts of the Corporation
and each Subsidiary or binding on its properties and assets, with respect to the
execution, delivery and performance of the Agreement, the financing and
consummation of the transactions contemplated herein and the conduct of the
business of the Corporation and each Subsidiary in the same manner after the
Closing Date as before the Closing Date.
6.3 No Proceeding or Litigation. No preliminary or permanent injunction
---------------------------
or other Order, decree or ruling issued by a court of competent jurisdiction or
by any governmental, regulatory or administrative agency or commission, or any
statute, rule, Regulation or executive
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<PAGE>
order promulgated or enacted by any governmental authority shall be in effect,
which would prevent the consummation of the transactions contemplated hereby.
ARTICLE VII
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall be held concurrently with the execution and delivery of this
-------
Agreement in the offices of Greenberg Traurig in Miami, Florida, or at such
other place as mutually agreed to by the parties hereto.
ARTICLE VIII
SURVIVAL OF TERMS; INDEMNIFICATION
8.1 Survival. All of the representations, warranties and covenants
--------
contained herein or in any instrument or document delivered or to be delivered
pursuant to this Agreement, shall survive the execution of this Agreement and
the Closing Date notwithstanding any investigation heretofore or hereafter made
by or on behalf of any party hereto; provided, however, that (a) the agreements
and covenants (other than the indemnification provisions set forth in this
Article VIII, which shall survive as provided below) set forth in this Agreement
- - ------------
shall survive and continue until all obligations set forth therein shall have
been performed and satisfied; and (b) all representations and warranties, and
the agreements of the Sellers and the Purchaser to indemnify each other set
forth in this Article VIII, shall survive and continue for, and all claims with
------------
respect thereto shall be made prior to the end of, two (2) years following the
Closing Date, except for (i) the representations and warranties set forth in
Section 2.5 hereof and the agreements of the Sellers and the Purchaser to
- - -----------
indemnify each other set forth in this Article VIII with respect to such
------------
representations and warranties, which shall survive and continue without
limitation, and claims with respect thereto may be made at any time without
limitation, (ii) the representations and warranties set forth in Section 2.16
------------
and the agreements of the Sellers and the Purchaser to indemnify each other set
forth in this Article VIII with respect to such representations and warranties,
------------
which shall survive until, and all claims with respect thereto shall be made
within, sixty days after the expiration of the applicable statute of
limitations, and (iii) representations, warranties and indemnities for which an
indemnification claim shall be pending as of the end of the applicable period
referred to above, in which event such indemnities shall survive with respect to
such claim until the final disposition thereof.
8.2 Indemnification by Sellers.
--------------------------
(a) Subject to Sections 8.2(b) and (c) of this Agreement, each Seller
--------------- ---
agrees to and shall, severally and not jointly, indemnify the Purchaser and its
subsidiaries and the Corporation and their respective officers, directors,
employees, shareholders, representatives and
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<PAGE>
agents (collectively, the "Purchaser Parties") and hold each of them harmless at
-----------------
all times after the date of this Agreement, against and in respect of any and
all damage, loss, deficiency, liability, obligation, commitment, cost or expense
(including the fees and expenses of counsel) (any or all of the foregoing
referred to hereinafter as "Adverse Consequences") resulting from, or in respect
--------------------
of, any of the following:
(i) Any misrepresentation, breach of warranty, or non-
fulfillment of any obligation on the part of the Corporation or such Seller
under this Agreement, any document relating hereto or thereto or contained
in any schedule or exhibit to this Agreement.
(ii) Any failure of such Seller to have good, valid and
marketable title to the issued and outstanding Shares held by such Seller,
free and clear of all Liens.
(iii) Any Claim by a stockholder or former stockholder of the
Corporation or any other Person seeking to assert: (A) ownership or rights
to ownership of any shares of capital stock of the Corporation or any
Subsidiary; (B) any rights of a stockholder including any Option,
preemptive rights or rights to receive notice or to vote; (C) any rights
under the Corporation's charter, bylaws or other constituent documents; or
(D) any Claim that his shares of capital stock were not repurchased by the
Corporation.
(iv) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any action,
suit, proceeding or Claim incident to any of the foregoing.
(v) Any Claim arising out of that certain contract between the
Corporation and Maimonides Medical Center as identified on Schedule
--------
2.12(a).
-------
(vi) Any Claim in excess of $1,000 arising from the failure of
the Corporation to have made correct and timely filings with the
appropriate governmental agencies concerning the qualification to conduct
business in any particular state or country.
(b) The Sellers shall not be required to indemnify the Purchaser for
(i) the first Fifty Thousand Dollars ($50,000) in the aggregate of all Claims
for indemnification made by the Purchaser to the Sellers under this Section 8.2
-----------
(except for Claims arising from breaches of the representations and warranties
set forth in Section 2.9(c) and the last sentence of Section 2.11, which Claims
-------------- ------------
shall be subject to indemnification from the first dollar), or (ii) the portion
that exceeds Seven Million Five Hundred Thousand Dollars ($7,500,000) in the
aggregate of any and all Claims for indemnification made by the Purchaser to the
Sellers under this Section 8.2.
-----------
(c) The liability of each Seller to indemnify the Purchaser pursuant
to this Section 8.2 shall be limited to the amount that is equal to the product
-----------
of (i) the percentage of the aggregate number of Shares that such Seller is
selling to the Purchaser under this Agreement, as
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<PAGE>
set forth on Schedule 1.1 attached hereto, and (ii) the aggregate liability of
------------
all Sellers to indemnify the Purchaser pursuant to this Section 8.2.
-----------
8.3 Indemnification by the Purchaser.
--------------------------------
(a) Subject to Section 8.3(b) of this Agreement, the Purchaser agrees
to, and shall, indemnify the Sellers and hold each of them harmless at all times
after the date of this Agreement, against and in respect of any and all damage,
loss, deficiency, liability, obligation, commitment, cost or expense (including
the fees and expenses of counsel) resulting from, or in respect of, any of the
following:
(i) Any misrepresentation, breach of warranty or non-
fulfillment of any obligation on the part of the Purchaser under this
Agreement, any document relating hereto or thereto or contained in any
schedule or exhibit to this Agreement.
(ii) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with, any action,
suit, proceeding or Claim incident to any of the foregoing.
(b) The Purchaser shall not be required to indemnify the Sellers for
(i) the first Fifty Thousand Dollars ($50,000) in the aggregate of all Claims
for indemnification made by the Sellers to the Purchaser under this Section 8.3
(except this $50,000 limitation shall not apply to Claims arising with respect
to failure to make payments under the Shareholder Notes or with respect to the
Earnouts, unless such failure to pay is pursuant to Section 8.5 hereof), or (ii)
the portion that exceeds Seven Million Five Hundred Thousand Dollars
($7,500,000) in the aggregate of any and all Claims for indemnification made by
the Sellers to the Purchaser under this Section 8.3.
8.4 Third-Party Claims.
------------------
(a) Except as otherwise provided in this Agreement, the following
procedures shall be applicable with respect to indemnification for third-party
Claims. Promptly after receipt by the party seeking indemnification hereunder
(hereinafter referred to as the "Indemnitee") of notice of the commencement of
----------
any (i) Tax audit or proceeding for the assessment of Tax by any Taxing
Authority or any other proceeding likely to result in the imposition of a Tax
liability or obligation or (ii) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other party to this
Agreement (hereinafter the "Indemnitor") is, or may be, required under this
----------
Agreement to indemnify such Indemnitee, the Indemnitee will, if a Claim thereon
is to be, or may be, made against the Indemnitor, notify the Indemnitor in
writing of the commencement or assertion thereof and give the Indemnitor a copy
of such Claim, process and all legal pleadings.
(b) The Indemnitor shall have the right to participate in the defense
of such action with counsel of reputable standing. The Indemnitor shall have
the right to assume the defense of such action unless such action (i) may result
in injunctions or other equitable remedies
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<PAGE>
in respect of the Indemnitee or its business; (ii) may result in liabilities
which, taken with other then existing Claims under this Article VIII, would not
------------
be fully indemnified hereunder or (iii) could potentially result in the payment
by the Indemnitee of an amount in excess of $[100,000]. The Indemnitor and the
Indemnitee shall cooperate in the defense of such Claims. In the case that the
Indemnitor shall assume or participate in the defense of such audit, assessment
or other proceeding as provided herein, the Indemnitee shall make available to
the Indemnitor all relevant records and take such other action and sign such
documents as are reasonable necessary to defend such audit, assessment or other
proceeding in a timely manner. If the Indemnitee shall be required by judgment
or a settlement agreement to pay any amount in respect of any obligation or
liability against which the Indemnitor has agreed to indemnify the Indemnitee
under this Agreement, the Indemnitor shall promptly reimburse the Indemnitee in
an amount equal to the amount of such payment plus all reasonable expenses
incurred by such Indemnitee in connection with such obligation or liability
subject to this Article VIII. The Indemnitor shall not be required to reimburse
------------
the Indemnitee for any legal fees and expenses incurred by the Indemnitee unless
the Indemnitor fails to assume the defense of the Claim; provided, that, the
Indemnitee shall be entitled to reimbursement for legal fees and expenses if
such action is of a type described in clauses (i), (ii) or (iii) of the second
sentence of this Section 8.4(b). No Indemnitor, in the defense of any such
Claim, shall, except with the consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnitee of a
release from all liability with respect to such Claim. In the event that the
Indemnitor does not accept the defense of any matter for which it is entitled to
assume such defense as above provided, the Indemnitee shall have the full right
to defend against any such Claim, and shall be entitled to settle or agree to
pay in full such claim or demand, in its sole discretion. With respect to any
matter as to which the Indemnitor is not entitled to assume the defense pursuant
to the terms of this paragraph, the Indemnitee shall not enter into any
settlement for which an indemnification claim will be made hereunder without the
approval of the Indemnitor, which will not be unreasonably withheld.
(c) Prior to paying or settling any Claim against which an Indemnitor
is, or may be, obligated under this Agreement to indemnify an Indemnitee, the
Indemnitee must first supply the Indemnitor with a copy of a final court
judgment or decree holding the Indemnitee liable on such Claim or failing such
judgment or decree, must first receive the written approval of the terms and
conditions of such settlement from the Indemnitor. An Indemnitor or Indemnitee
shall have the right to settle any Claim against it, subject to the prior
written approval of the other, which approval shall not be unreasonably
withheld.
(d) An Indemnitee shall have the right to employ its own counsel in
any case, but the fees and expenses of such counsel shall be at the expense of
the Indemnitee unless (i) the employment of such counsel shall have been
authorized in writing by the Indemnitor in connection with the defense of such
action or claim or (ii) the Indemnitor shall not have employed counsel in the
defense of such action or claim.
-26-
<PAGE>
8.5 Setoff. Notwithstanding anything set forth in this Agreement to the
------
contrary, and subject to Section 8.2(c), any Adverse Consequences that any
Purchaser Party suffers, sustains or becomes subject to and with respect to
which such Purchaser Party is entitled to indemnification from the Sellers
pursuant to this Article VIII may, at the option of the Purchaser, be satisfied
------------
by setting off all or any portion of such Adverse Consequences against any
amounts that such Purchaser Party owes to any Seller or any of Sellers'
Affiliates at such time, including, but not limited to the Earnout and the
Shareholder Notes, provided, however, that no such set-off by Purchaser against
amounts owed to a particular Seller shall exceed that Seller's proportionate
share of the indemnification liability as computed under Section 8.2(c). In the
event that Purchaser believes that it is entitled to indemnification against any
amounts that such Purchaser owes to any Seller, excluding such amounts owed to
any Seller pursuant to any employment agreement entered into between such Seller
and the Purchaser, and such Seller disputes such Purchaser's right to effect
such set-off, the Purchaser shall deposit the set-off amount that is being
disputed in an escrow account established with a bank or other third party
institution reasonably acceptable to such Seller, which funds shall be held by
such escrow agent until the dispute is resolved by agreement of the arbitration
tribunal resolving the dispute. The parties to this agreement agree to cooperate
with one another in establishing and selecting an escrow agent to act in such
capacity. In the event of a deposit with an Escrow Agent pursuant to the
provisions of this Section 8.5, the Purchaser on the one hand, and the Sellers
on the other hand, shall equally pay the aggregate reasonable legal and
accounting fees, costs, and expenses incurred in presenting, arguing and
resolving such dispute.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
9.2 Waiver of Compliance; Consents. Any failure of any party hereto
------------------------------
to comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
9.3 Certain Definitions.
-------------------
"ADVERSE CONSEQUENCES" has the meaning set forth in Section 8.2.
-------------------- -----------
"AFFILIATE" means, with regard to any Person, (a) any Person, directly
---------
or indirectly, controlled by, under common control of, or controlling such
Person, (b) any Person, directly or indirectly, in which such Person holds, of
record or beneficially, five percent or more
-27-
<PAGE>
of the equity or voting securities, (c) any Person that holds, of record or
beneficially, five percent or more of the equity or voting securities of such
Person, (d) any Person that, through Contract, relationship or otherwise, exerts
a substantial influence on the management of such person's affairs, (e) any
Person that, through Contract, relationship or otherwise, is influenced
substantially in the management of their affairs by such Person, or (f) any
director, officer, partner or individual holding a similar position in respect
of such Person.
"AGREEMENT" has the meaning set forth in the preamble.
---------
"AUTHORITY" means any governmental, regulatory or administrative body,
---------
agency, commission, board, arbitrator or authority, any court or judicial
authority, any public, private or industry regulatory authority, whether
international, national or local.
"CLAIM" means any action, claim, lawsuit, demand, suit, inquiry,
-----
hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, appeals or other dispute, whether civil, criminal, administrative
or otherwise.
"CODE" means the Internal Revenue Code of 1986, as amended.
----
"CLOSING" has the meaning set forth in Article VII.
------- -----------
"CLOSING DATE" means the date of this Agreement or any other date on
------------
which the Closing shall occur.
"CONTRACT" means any legally binding agreement, contract, commitment,
--------
instrument or other legally binding arrangement or understanding, whether
written or oral.
"CORESTATES LEASING AGREEMENT" has the meaning set forth in Section
---------------------------- -------
2.9(c).
- - ------
"CORPORATION" has the meaning set forth in the preamble. Not
-----------
withstanding the foregoing, (i) when used in Article II, Article V and Article
---------- --------- -------
VIII, "Corporation" means the Corporation and its Subsidiaries taken as a whole,
- - ---- -----------
and (ii) "Corporation" also means any division of the Purchaser that succeeds to
-----------
the business of the Corporation upon its liquidation pursuant to Section 4.1 of
-----------
this Agreement.
"EARNOUTS" has the meaning set forth in Section 1.2(a).
-------- --------------
"ENVIRONMENTAL LAW" means any statute, code, ordinance, law or
-----------------
regulation relating to pollutants, contaminants or hazardous or toxic wastes,
substances or materials which govern or control the impact they may have on
public health or the environment.
"ENVIRONMENTAL PERMIT" means Permits, certificates, approvals,
--------------------
licenses and other authorizations relating to or required by Environmental Law
and necessary or desirable for the Corporation's business.
-28-
<PAGE>
"ERISA AFFILIATE" means any trade or business, whether or not
---------------
incorporated, that together with the Corporation would be deemed a "single
employer" within the meaning of Section 4001(b)(i) of the Employee Retirement
Income Security Act of 1974, as amended.
"EXPENSES" mean, with respect to the fiscal year ending December 31,
--------
1998, (i) all expenses incurred by the Corporation, including, without
limitation, all expenses for services of the kinds described in clause (z) below
that are incurred directly by the Corporation and not by the Purchaser, (ii) all
costs of service expenses (including consultant salaries, benefits, out-of-
pocket and client reimbursement expenses) incurred in connection with
performance of services related to People Soft software by any other division or
operation of the Purchaser to the extent that Revenues were credited to the
Corporation pursuant to clause (ii) of the definition of Revenues set forth
herein, and (iii) time incurred, on a per-hour usage basis, by any employee of
the Purchaser (or any unit or division thereof other than the Corporation)
utilized by the Corporation on projects as to which the revenues from such
project are not paid to the Purchaser (or any unit or division thereof other
than the Corporation) but are paid to the Corporation, at a rate equal to the
rate paid by the client of the Corporation for such employee time; provided,
however, that Expenses do not include (v) the restricted stock awards payable to
Sellers and any senior executive pursuant either to this Agreement or the
individual employment agreements between the Corporation and such Seller or
senior executive, (w) any amortization, or depreciation that otherwise would be
incurred as a result of any write-up of the assets of the Corporation in the
course of or following upon the transaction contemplated by this Agreement, (x)
any interest charges (other than interest charges on the Shareholders' Notes,
which shall be included in Expenses), (y) any other charges that arise out of or
relate to the transaction contemplated by this Agreement and (z) any overhead
expense incurred by the Purchaser to provide recruiting, information network,
accounting, e-mail, legal, human resource and other corporate administrative
services to the Corporation or for allocation of general overhead of the
Purchaser to the Corporation. For the fiscal year ending December 31, 1998,
Potter and Stanley shall have the option to accept a lower bonus payment than
such person would otherwise have been entitled to receive pursuant to the terms
of such person's employment agreement with the Corporation.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 2.9.
-------------------- -----------
"FINANCIAL STATEMENTS DATE" has the meaning set forth in Section 2.9.
------------------------- -----------
"GAAP" means United States generally accepted accounting principles,
----
consistently applied, as in existence at the date hereof.
"GUARANTEE" means any guarantee or other contingent liability (other
---------
than any endorsement for collection or deposit in the ordinary course of
business), direct or indirect with respect to any obligations of another Person,
through an agreement or otherwise, including, without limitation, (a) any
endorsement or discount with recourse or undertaking substantially equivalent to
or having economic effect similar to a guarantee in respect of any such
obligations and (b) any Contract (i) to purchase, or to advance or supply funds
for the payment or purchase of, any such obligations, (ii) to purchase, sell or
lease property, products, materials or supplies, or
-29-
<PAGE>
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or non-delivery of the property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or for,
such other Person in respect of enabling such Person to satisfy an obligation
(including any liability for a dividend, stock liquidation payment or expense)
or to assure a minimum equity, working capital or other balance sheet condition
in respect of any such obligation.
"INDEBTEDNESS" with respect to any Person means any obligation of such
------------
Person for borrowed money, but in any event shall include (a) any obligation or
liabilities incurred for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary course
of business, (whether or not such Person has assumed or become liable for the
payment of such obligation) (whether accrued, absolute, contingent, unliquidated
or otherwise, known or unknown, whether due or to become due), (b) the face
amount of all letters of credit issued for the account of such Person and all
drafts drawn thereunder, (c) capitalized lease obligations, and (d) all
Guarantees of such Person.
"INDEMNITEE" has the meaning set forth in Section 8.4.
---------- -----------
"INDEMNITOR" has the meaning set forth in Section 8.4.
---------- -----------
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in Section
---------------------------- -------
2.9(b).
- - ------
"LICENSED SOFTWARE" has the meaning set forth in Section 2.19(c).
----------------- ---------------
"LIEN" means any security interest, lien, mortgage, pledge,
----
hypothecation, encumbrance, Claim, easement, restriction on transfer or
otherwise, or interest of another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" means any developments or changes that would
-----------------------
have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of facts or
-----------------------
matters that would reasonably be expected to have a material adverse effect in
respect of the Corporation's business, operations, properties, assets, condition
(financial or otherwise), results, plans, strategies or prospects.
"OCCURRENCE" means any accident, happening or event which occurs or
----------
has occurred at any time prior to the Closing Date that is caused or allegedly
caused by any hazard or defect in manufacture, design, materials or workmanship
including, without limitation, any failure or alleged failure to warn or any
breach or alleged breach of express or implied warranties or representations
with respect to a product manufactured, shipped, sold or delivered by or on
behalf of the Corporation that results or is alleged to have resulted in injury
or death to any
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<PAGE>
person or damage to or destruction of property (including damage to or
destruction of the product itself) or other consequential damages, at any time.
"OPTION" means any subscription, option, warrant, right, security,
------
Contract, commitment, understanding, outstanding or stock appreciation, phantom
stock option, profit participation or arrangement by which (i) with respect the
Corporation, the Corporation is bound to issue any additional shares of its
capital stock or rights pursuant to which any Person has a right to purchase
shares of the Corporation's capital stock or (ii) with respect to any Seller,
such Seller is bound to sell or allow another Person to vote, encumber or
control the disposition of any shares of the Corporation's capital stock or
rights pursuant to which any Person has a right to purchase, vote, encumber or
control the disposition of shares of the Corporation's capital stock from such
Seller.
"ORDER" means any decree, order, judgment, injunction, rule, lien,
-----
voting right, consent of or by an Authority.
"OWNED SOFTWARE" has the meaning set forth in Section 2.19(c).
-------------- ---------------
"PENSION/BENEFIT PLANS" means all plans, arrangements, agreements,
---------------------
programs, policies or practices, whether oral or written, formal or informal,
funded or unfunded, to which the Corporation is a party or by which the
Corporation is bound or under which the Corporation has any liability or
contingent liability (including without limitation any such plans, arrangements,
agreements, programs, policies or practices of any ERISA Affiliate of the
Corporation for which the Corporation has or may have any liability or
contingent liability), relating to:
(i) retirement savings or pensions, including, without
limitation, any defined benefit pension plan, defined contribution pension
plan, group registered retirement saving plan, or supplemental pension or
retirement plan; or
(ii) any bonus, profit sharing, deferred compensation,
incentive compensation, hospitalization, health, dental, disability,
unemployment insurance, vacation pay, severance pay or other benefit plan
with respect to any of its employees or former employees, individuals
working on contract with it or other individuals providing services to it
of a kind normally provided by employees, and all statutory plans with
which the Corporation is required to comply, including, without limitation,
workers' compensation and unemployment insurance legislation;
"PERMITS" means all permits, licenses, registrations, certificates,
-------
orders or approvals from any Authority or other Person (including without
limitation those relating to the occupancy or use of owned or leased real
property) issued to or held by the Corporation.
"PERMITTED LIENS" means (i) statutory Liens not yet delinquent, (ii)
---------------
such imperfections or irregularities of title, Liens, easements, charges or
encumbrances as do not materially detract from or interfere with the present use
of the properties or assets subject thereto
-31-
<PAGE>
or affected thereby, otherwise impair present business operations at such
properties, or do not detract from the value of such properties and assets,
taken as a whole, (iii) Liens reflected in the Financial Statements, the Interim
Financial Statements or the notes thereto, (iv) the rights of customers of the
Corporation with respect to inventory or work in progress under orders or
contracts entered into by the Corporation in the ordinary course of business,
(v) mechanics', carriers', workers', repairmen's, warehousemen's, or other
similar Liens arising in the ordinary course of business in respect of
obligations not overdue or that are being contested in good faith and covered by
a bond in an amount at least equal to the amount of the Lien, and (vi) deposits
or pledges to secure workmen's compensation, unemployment insurance, old age
benefits or other social security obligations in connection with, or to secure
the performance of, bids, tenders, trade contracts not for the payment of money
or leases, or to secure statutory obligations or surety or appeal bonds or other
pledges or deposits for purposes of like nature in the ordinary course of
business.
"PERSON" means any corporation, partnership, joint venture,
------
organization, entity, Authority or natural person.
"POLICIES" means all Contracts that insure (i) the Corporation's or
--------
any of its Subsidiaries properties, plant and equipment for loss or damage, and
(ii) the Corporation or any of its Subsidiaries or their officers, directors,
employees or agents against any liabilities, losses or damages (or lost profits)
for any reason or purpose.
"PRE TAX PROFIT" means the Revenues less the Expenses, determined in
--------------
accordance with GAAP, applied consistently with the accounting principles that
were applied in preparation of the Financial Statements, except as otherwise
specifically provided herein.
"PROPRIETARY RIGHTS" means all (i) patents, patent applications,
------------------
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, reexamination, utility, model, certificate of invention and
design patents, patent applications, registrations and applications for
registrations, (ii) trademarks, service marks, trade dress, logos, trade names
and corporate names and registrations and applications for registration thereof,
(iii) copyrights and registrations and applications for registration thereof,
(iv) computer software, data and documentation, (v) trade secrets and
confidential business information, including any methods, processes, programs
and templates (including all "deliverables" as such term is used in the
Corporation's industry), whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and production processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (vi) other
proprietary rights relating to any of the foregoing and (vii) copies and
tangible embodiments thereof.
"PTP98" has the meaning set forth in Section 1.2(b)(i).
----- -----------------
"PURCHASE PRICE" has the meaning set forth in Section 1.2.
-------------- -----------
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<PAGE>
"PURCHASER" has the meaning set forth in the preamble.
---------
"PURCHASER PARTIES" has the meaning set forth in Section 8.2.
----------------- -----------
"REGISTRATION STATEMENT" has the meaning set forth in Section 4.7.
---------------------- -----------
"REGULATION" means any rule, law, code, statute, regulation,
----------
ordinance, requirement, announcement or other binding action of or by an
Authority.
"REPORT" has the meaning set forth in Section 1.2 (c).
------ -----------
"REVENUES" mean, with respect to the fiscal year ending December 31,
--------
1998, (i) all revenues earned by the Corporation, (ii) all revenues earned for
performance of services related to People Soft software by any other division or
operation of the Purchaser, except as otherwise agreed pursuant to Section
-------
4.1(d) of this Agreement, and (iii) time incurred, on a per-hour usage basis, by
- - ------
any employee of the Corporation utilized by the Purchaser on projects as to
which the revenues from such project are not paid to the Corporation but are
paid to the Purchaser, at a rate equal to the rate paid by the client of the
Purchaser for such employee time.
"SECTION 338(H)(10) ELECTION" has the meaning set forth in Section
--------------------------- -------
4.6(a).
- - ------
"SELLER" and "SELLERS" have the meanings set forth in the preamble.
------ -------
"SELLERS' REPRESENTATIVE" has the meaning set forth in Section 9.19.
----------------------- ------------
"SHAREHOLDER NOTES" shall have the meaning set forth in Section
----------------- -------
1.2(e).
"SHAREHOLDERS AGREEMENT" shall have the meaning set forth in Section
---------------------- -------
2.5.
- - ---
"SHARES" has the meaning set forth in the recitation section of this
------
Agreement.
"SUBSIDIARY" any Person in which the Corporation has (i) an ownership
----------
interest, (ii) advanced funds or provided financial accommodations to which, in
each case, is secured by an ownership interest in or has an Option to acquire an
ownership interest in such Person.
"S-X FINANCIALS" has the meaning set forth in Section 4.7.
-------------- -----------
"TAX RETURNS" includes, without limitation, all returns, reports,
-----------
declarations, elections, notices, filings, information returns and statements
filed in respect of Taxes.
"TAXES" includes, without limitation, all taxes, duties, fees,
-----
premiums, assessments, imposts, levies and other charges of any kind whatsoever
imposed by any Authority, together with all interest, penalties, fines,
additions to tax or other additional amounts imposed in respect thereof,
including, without limitation, those levied on, or measured by, or referred to
as income, gross receipts, profits, capital transfer, land transfer, sales,
goods and services, use, value-added, excise, stamp, withholding, business,
franchising, property, payroll, employment, health, social services, education
and social security taxes, all surtaxes, all customs
-33-
<PAGE>
duties and import and export taxes, all license, franchise and registration fees
and all unemployment insurance and health insurance.
"TIER 1 AMOUNT" has the meaning set forth in Section 1.2(a).
------------- --------------
"TIER 2 AMOUNT" has the meaning set forth in Section 1.2(a).
------------- --------------
9.4 Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or mailed, first class certified mail
with postage paid or by Federal Express or United Parcel Service:
(a) If to the Corporation or the Sellers, to:
Delphi Partners, Inc.
One Greentree Center, Suite 201
Marlton, NJ 08053
Telephone: (609) 988-5480
Fax: (609) 988-5564
With Copies to Seller's Representative:
Robin M. Potter
563 Warwick Road
Haddonfield, New Jersey 08033
Telephone: (609) 429-6630
Fax: (609) 429-5564
Robert H. Strouse, Esquire
Drinker Biddle & Reath LLP
1000 Westlakes Drive, Ste. 300
Berwyn, PA 19312
Telephone: (610) 993-2213
Fax: (610) 993-8585
or to such other person or address as the Corporation shall furnish by notice to
the Purchaser in writing.
(b) If to the Purchaser, to:
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<PAGE>
AnswerThink Consulting Group, Inc.
Suite 440
1401 Brickell Avenue
Miami, Florida 33131
Attn.: Ted A. Fernandez, President
Telephone: 305-375-8005
Telefax: 305-379-8810
with a copy to:
Paul Berkowitz, Esq.
Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telephone: 305-579-0685
Telefax: 305-579-0717
or to such other person or address as the Purchaser shall furnish by notice to
the Corporation in writing.
9.5 Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any Affiliate, and may grant Liens or security interests in respect
of its rights and interests hereunder without the prior approval of the Sellers
or the Corporation. No such assignment shall relieve the Purchaser of its
obligations hereunder to the Sellers.
9.6 Governing Law. The Agreement shall be governed by the laws of
-------------
Florida as to all matters, including but not limited to matters of validity,
construction, effect and performance.
9.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.9 Entire Agreement. This Agreement, including the schedules and
----------------
exhibits hereto and the documents, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and supersedes all
prior agreements, representations, warranties, promises, covenants,
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<PAGE>
arrangements, communications and understandings, oral or written, express or
implied, between the parties with respect to such transactions. There are no
agreements, representations, warranties, promises, covenants, arrangements or
understandings between the parties with respect to such transactions, other than
those expressly set forth or referred to herein.
9.10 Consent to Jurisdiction; Service of Process. Each of the Sellers
-------------------------------------------
hereby irrevocably submits to the jurisdiction of the Federal or state courts
located in Florida in connection with any suit, action or other proceeding
arising out of or relating to this Agreement and the transactions contemplated
hereby, and hereby agree not to assert, by way of motion, as a defense, or
otherwise in any such suit, action or proceeding that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced by such courts.
9.11 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
--------------------
IRREVOCABLY, UNCONDITIONALLY AND TO THE FULLEST EXTENT THAT IT SO MAY DO LEGALLY
AND EFFECTIVELY, WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
9.12 Injunctive Relief. The parties hereto agree that in the event of
-----------------
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
9.13 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
9.14 Severability. Unless otherwise provided herein, if any provision
------------
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
9.15 Expenses. The Purchaser shall bear its own expenses, including
--------
without limitation, legal fees and expenses, with respect to this Agreement and
the transactions
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<PAGE>
contemplated hereby. The Sellers shall each bear their own respective expenses
and their pro rata share of the Corporation's expenses, including without
limitation, legal fees and expenses, brokerage commissions, investment banking
fees, finders' fees and similar compensation with respect to this Agreement and
the transactions contemplated hereby.
9.16 Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement (including any Taxes attributable to
(i) a Section 338(h)(10) Election or (ii) an election corresponding to an
election under Code Section 338(g) with respect to the purchase and sale of the
capital stock of the Company where the state, local or foreign Tax jurisdiction
does not recognize a Section 338(h)(10) Election or does not apply the
provisions of Code Section 338(h)(10) to the purchase and sale of the capital
stock of the Company hereunder) shall be paid by the Sellers when due, and the
Sellers, at their own expense, shall file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use stamp,
registration and other Taxes and fees (including any penalties and interest),
and, if required by applicable Regulations, the Purchaser shall join in the
execution of any such Tax Returns and other documentation.
9.17 Binding Effect; No Third Party Beneficiaries. This Agreement is
--------------------------------------------
for the benefit of and binding upon, and shall not confer any rights or remedies
upon any Person other than, the parties hereto (and with respect to Article
-------
VIII, the Purchaser Parties) and their respective successors and permitted
- - ----
assigns.
9.18 Construction. Where specific language is used to clarify by example
------------
a general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa. The
parties to this Agreement intend that each representation, warranty and covenant
contained herein shall have independent significance. If any party has breached
any representation, warranty or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating to
the same subject matter (regardless of the relative levels of specificity) that
such party has not breached shall not detract from or mitigate the fact that
such party is in breach of the first representation, warranty or covenant.
9.19 Sellers' Representative. The Sellers hereby designate Potter to
-----------------------
be the "Sellers' Representative." The Sellers' Representative shall act as the
-----------------------
representative and agent of the Sellers with respect to certain matters arising
under and in connection with this Agreement, including, without limitation,
payment of the Purchase Price to the Sellers' Representative on behalf of the
Sellers and with respect to indemnification claims made by the Purchaser against
the Sellers under this Agreement. Notwithstanding the foregoing, the Seller
shall not be required
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<PAGE>
to rely upon any act, agreement, covenant or representation of the Sellers'
Representative as being on behalf of or binding upon any or all of the Sellers
in lieu of receiving a written document signed by each Seller (or counterparts
of such document signed, in the aggregate, by all of the Sellers).
* * *
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Stock Purchase Agreement as of the date first written above.
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
-------------------------------
Ted A. Fernandez, President
DELPHI PARTNERS, INC.
By: /s/ Robin M. Potter
--------------------------------
Name: Robin M. Potter
Title: President
THE SELLERS
/s/ Robin M. Potter
--------------------------------
ROBIN M. POTTER
563 Warwick Road
Haddonfield, MJ 08033
/s/ Beth E. Stanley
--------------------------------
BETH E. STANLEY
2 Chipping Woods Court
Medford, NJ 08055
Robert T. Gursky
--------------------------------
ROBERT T. GURSKY
12 Meadow Lane
Marlboro, NJ 07746
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<PAGE>
/s/ George T. Redfern
--------------------------------
GEORGE T. REDFERN
715 Violet Road
Warminster, PA 18974
/s/ Kevin J. Barnes
---------------------------------
KEVIN J. BARNES
2433 Diamond Street
Sellersville, PA 18960
/s/ Robert L. Brown
---------------------------------
ROBERT L. BROWN
26 Albany Road
Marlton, NJ 08053
/s/ Jeffrey S. Malkin
---------------------------------
JEFFREY S. MALKIN
801 1/2 Ocean Avenue
Bradley Beach, NJ 07720
/s/ Barbara J. Dockrill
---------------------------------
BARBARA J. DOCKRILL
141 Payne Avenue
Midland Park, NJ 07432
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<PAGE>
Exhibit 10.11
ANSWERTHINK CONSULTING GROUP, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
1. PURPOSE
2. DEFINITIONS
3. ADMINISTRATION OF THE PLAN
3.1. Board.
3.2. Committee.
3.3. Grants.
3.4. No Liability.
3.5. Applicability of Rule 16b-3
4. STOCK SUBJECT TO THE PLAN
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. Effective Date.
5.2. Term.
6. OPTION GRANTS
6.1. Company or Subsidiary Employees.
6.2. Successive Grants.
7. LIMITATIONS ON GRANTS
7.1. Limitation on Shares of Stock Subject to Grants.
7.2. Limitations on Incentive Stock Options.
8. AWARD AGREEMENT
9. OPTION PRICE
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. Vesting and Option Period.
10.2. Term.
10.3. Acceleration.
10.4. Termination of Employment or Other Relationship.
10.5. Rights in the Event of Death.
10.6. Rights in the Event of Disability.
10.7. Limitations on Exercise of Option.
10.8. Method of Exercise.
10.9. Delivery of Stock Certificates.
11. TRANSFERABILITY OF OPTIONS
11.1. General Rule
11.2. Family Transfers.
-i-
<PAGE>
12. RESTRICTED STOCK
12.1. Grant of Restricted Stock or Restricted Stock Units.
12.2. Restrictions.
12.3. Restricted Stock Certificates.
12.4. Rights of Holders of Restricted Stock.
12.5. Rights of Holders of Restricted Stock Units.
12.6. Termination of Employment or Other Relationship.
12.7. Rights in the Event of Death.
12.8. Rights in the Event of Disability.
12.9. Delivery of Stock and Payment Therefor.
13. PARACHUTE LIMITATIONS
14. REQUIREMENTS OF LAW
14.1. General.
14.2. Rule 16b-3.
15. AMENDMENT AND TERMINATION OF THE PLAN
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1. Changes in Stock.
16.2. Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of Control Occurs.
16.3. Reorganization, Sale of Assets or Sale of Stock Which Involves a Change
of Control
16.4. Adjustments.
16.5. No Limitations on Company.
17. DISCLAIMER OF RIGHTS
18. NONEXCLUSIVITY OF THE PLAN
19. WITHHOLDING TAXES
20. CAPTIONS
21. OTHER PROVISIONS
22. NUMBER AND GENDER
23. SEVERABILITY
24. POOLING
25. GOVERNING LAW
-ii-
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
AnswerThink Consulting Group, Inc., a Florida corporation (the "Company"),
sets forth herein the terms of its 1998 Stock Option and Incentive Plan (the
"Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, outside directors and other persons,
and to motivate such officers, key employees, outside directors and other
persons to serve the Company and its affiliates (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company, by providing to such officers, key employees, outside directors and
other persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, restricted stock and restricted
stock units in accordance with the terms hereof. Stock options granted under
the Plan may be non-qualified stock options or incentive stock options, as
provided herein, except that stock options granted to outside directors shall in
all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any company
or other trade or business that controls, is controlled by or is under common
control with such person within the meaning of Rule 405 of Regulation C under
the Securities Act.
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Beneficial Owner" means a beneficial owner within the meaning of Rule
13d-3 under the Exchange Act.
2.4 "Benefit Arrangement" shall have the meaning set forth in SECTION 13
hereof.
<PAGE>
2.5 "Board" means the Board of Directors of the Company.
2.6 "Change of Control" means (A) any Person, other than any Person who is
a Beneficial Owner of the Company's securities before the Effective Date,
becomes, after the Effective Date, the beneficial owner, directly or indirectly,
of securities of the Company representing 40% or more of the combined voting
power of the Company's then outstanding securities; (B) during any two-year
period, individuals who at the beginning of such period constitute the Board
(including, for this purpose, any director who after the beginning of such
period filled a vacancy on the Board caused by the resignation, mandatory
retirement, death, or disability of a director and whose election or appointment
was approved by a vote of at least two-thirds of the directors then in office
who were directors at the beginning of such period) cease for any reason to
constitute a majority thereof; (C) notwithstanding clauses (A) or (E) of this
paragraph, the Company consummates a merger or consolidation of the Company with
or into another corporation, the result of which is that the Persons who were
stockholders of the Company at the time of the execution of the agreement to
merge or consolidate own less than 80% of the total equity of the corporation
surviving or resulting from the merger or consolidation or of a corporation
owning, directly or indirectly, 100% of the total equity of such surviving or
resulting corporation; or (D) the sale in one or a series of transactions of all
or substantially all of the assets of the Company; (E) any Person has commenced
a tender or exchange offer, or entered into an agreement or received an option
to acquire beneficial ownership of 40% or more of the total number of voting
shares of the Company, unless the Board has made a determination that such
action does not constitute and will not constitute a material change in the
Persons having control of the Company; or (F) there is a change of control in
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act
other than in circumstances specifically covered by clauses (A) through (E)
above.
2.7 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.8 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate of the Company.
2.9 "Company" means AnswerThink Consulting Group, Inc.
2
<PAGE>
2.10 "Effective Date" means April 23, 1998, the date on which the Plan was
adopted by the Board.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.12 "Fair Market Value" means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the NASDAQ National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Stock is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Board in good faith.
2.13 "Grant" means an award of an Option, Restricted Stock or Restricted
Stock Units under the Plan.
2.14 "Grant Date" means, as determined by the Board or authorized Committee,
(i) the date as of which the Board or such Committee approves a Grant, (ii) the
date on which the recipient of such Grant first becomes eligible to receive a
Grant under SECTION 6, hereof, or (iii) such other date as may be specified by
the Board or such Committee.
2.15 "Grantee" means a person who receives or holds an Option, Restricted
Stock or Restricted Stock Units under the Plan.
2.16 "Immediate Family Members" means the spouse, children and
grandchildren of the Grantee.
2.17 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.18 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.19 "Option Period" means the period during which Options may be exercised
as set forth in SECTION 10 hereof.
3
<PAGE>
2.20 "Option Price" means the purchase price for each share of Stock subject
to an Option.
2.21 "Other Agreement" shall have the meaning set forth in SECTION 13
hereof.
2.22 "Outside Director" means a member of the Board who is not an officer or
employee of the Company.
2.23 "Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
2.24 "Plan" means this AnswerThink Consulting Group, Inc. 1998 Stock Option
and Incentive Plan.
2.25 "Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.26 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
SECTION 12.2 hereof.
2.27 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant
to SECTION 12 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.28 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
SECTION 12 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.29 "Securities Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.30 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Board pursuant to
SECTION 6 hereof.
2.31 "Stock" means the common stock, par value $0.01 per share, of the
Company.
2.32 "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code.
4
<PAGE>
2.33 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in SECTION 10.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1. BOARD.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's certificate of incorporation and by-
laws and applicable law. The interpretation and construction by the Board of
any provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive. As permitted by law, the Board may delegate its authority under the
Plan to a member of the Board of Directors or an executive officer of the
Company.
3.2. COMMITTEE.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in SECTION 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws of
the Company and applicable law. In the event that the Plan, any Grant or any
Award Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken by or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. As
permitted by law, the Committee may delegate its authority under the Plan to a
member of the Board of Directors or an executive officer of the Company.
3.3. GRANTS.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the type
or types of Grant to be made to a Grantee, (iii) to determine the number of
shares of Stock to be
5
<PAGE>
subject to a Grant, (iv) to establish the terms and conditions of each Grant
(including, but not limited to, the exercise price of any Option, the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting, exercise, transfer, or forfeiture of a Grant or the
shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options), (v) to prescribe the
form of each Award Agreement evidencing a Grant, and (vi) to amend, modify, or
supplement the terms of any outstanding Grant. Such authority specifically
includes the authority, in order to effectuate the purposes of the Plan but
without amending the Plan, to modify Grants to eligible individuals who are
foreign nationals or are individuals who are employed outside the United States
to recognize differences in local law, tax policy, or custom. As a condition to
any subsequent Grant, the Board shall have the right, at its discretion, to
require Grantees to return to the Company Grants previously awarded under the
Plan. Subject to the terms and conditions of the Plan, any such new Grant shall
be upon such terms and conditions as are specified by the Board at the time the
new Grant is made.
3.4. NO LIABILITY.
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Grant or
Award Agreement.
3.5. APPLICABILITY OF RULE 16B-3
Those provisions of the Plan that make express reference to Rule 16b-3
under the Exchange Act shall apply only to Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in SECTION 16 hereof, the number of shares
of Stock available for issuance under the Plan shall be (i) 10,000,000, no more
than 5,000,000 of which may be issued pursuant to awards of Restricted Stock or
Restricted Stock Units and (ii) any shares of Stock that are represented by
awards previously granted by the Company, including awards granted under the
AnswerThink Consulting Group, Inc. 1997 Stock Option Plan and the AnswerThink
Consulting Group, Inc. Restricted Stock Plan as of the Effective Date (the
"Prior Plans"). Notwithstanding the foregoing, subject to SECTION 16 hereof,
the maximum aggregate number of shares of Stock available for grants of
Incentive Stock Options shall be 10,000,000. All stock options previously
granted by the Company shall be deemed to be grants of Options pursuant to the
Plan. Stock issued or to be issued under the Plan shall be authorized but
unissued shares. If any shares covered by a Grant, including Grants made prior
to the Effective Date, are not purchased or are forfeited, or if a Grant
otherwise terminates without delivery of any Stock subject thereto, then the
number of
6
<PAGE>
shares of Stock counted against the aggregate number of shares available under
the Plan with respect to such Grant shall, to the extent of any such forfeiture
or termination, again be available for making Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date, by a majority of the votes
cast on the proposal at a meeting of shareholders, provided that the total votes
cast represent a majority of all shares entitled to vote or by the written
consent of the holders of a majority of the Company's shares entitled to vote.
Upon approval of the Plan by the shareholders of the Company as set forth above,
all Grants made under the Plan on or after the Effective Date shall be fully
effective as if the shareholders of the Company had approved the Plan on the
Effective Date. If the shareholders fail to approve the Plan within one year
after the Effective Date, any Grants made hereunder shall be null and void and
of no effect.
5.2. TERM
The Plan has no termination date; however, no Incentive Stock Option may
be granted under the Plan on or after the tenth anniversary of the Effective
Date.
6. OPTION GRANTS
6.1. COMPANY OR SUBSIDIARY EMPLOYEES.
Grants (including Grants of Incentive Stock Options) may be made under the
Plan to any employee of, or Service Provider of employee of a Service Provider
providing, or who has provided, services to, the Company or of any Subsidiary,
including any such employee who is an officer or director of the Company or of
any Subsidiary, as the Board shall determine and designate from time to time.
6.2. SUCCESSIVE GRANTS.
An eligible person may receive more than one Grant, subject to such
restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1. LIMITATION ON SHARES OF STOCK SUBJECT TO GRANTS.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, no person eligible for a Grant under
SECTION 6 hereof may be awarded Options in any calendar year exercisable for
granter than 3,000,000 shares of Stock (subject to adjustment as provided in
SECTION 16 hereof).
7
<PAGE>
During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act , the maximum number of shares of Restricted
Stock that can be awarded under the Plan (including for this purpose any shares
of Stock represented by Restricted Stock Units) to any person eligible for a
Grant under SECTION 6 hereof is 3,000,000 per calendar year (subject to
adjustment as provided in SECTION 16 hereof).
7.2. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
in such form or forms as the Board shall from time to time determine. Award
Agreements granted from time to time or at the same time need not contain
similar provisions but shall be consistent with the terms of the Plan. Each
Award Agreement evidencing a Grant of Options shall specify whether such Options
are intended to be non-qualified stock options or Incentive Stock Options, and
in the absence of such specification such options shall be deemed non-qualified
stock options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price shall be no lower
than the Fair Market Value on the Grant Date of a share of Stock; provided,
--------
however, that in the event that a Grantee would otherwise be ineligible to
- - -------
receive an Incentive Stock Option by reason of the provisions of Sections
422(b)(6) and 424(d) of the Code (relating to ownership of more than ten percent
of the Company's outstanding Stock), the Option Price of an Option granted to
such Grantee that is intended to be an Incentive Stock Option shall be not less
than the greater of the par value or 110 percent of the Fair Market Value of a
share of Stock on the Grant Date. In no case shall the Option Price of any
Option be less than the par value of a share of Stock.
8
<PAGE>
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. VESTING AND OPTION PERIOD.
Subject to SECTIONS 10.2 AND 16.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Board and stated in the Award Agreement. For purposes of
this SECTION 10.1, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number. The period during which
any Option shall be exercisable shall constitute the "Option Period" with
respect to such Option.
10.2. TERM.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
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otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
10.3. ACCELERATION.
Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in SECTION 5.1 hereof.
10.4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Option or portion
thereof held by such Grantee that has not vested in accordance with the
provisions of SECTION 10.1 hereof shall terminate immediately, and any Option or
portion thereof that has vested in accordance with the provisions of SECTION
10.1 hereof but has not been exercised shall terminate at the close of business
on the 90th day following the Grantee's termination of employment or other
relationship(or, if such 90th day is a Saturday, Sunday or holiday, at the close
of business on the next preceding day that is no a Saturday, Sunday or holiday),
unless the Board, in its discretion, extends the period during which the Option
may be exercised (which period may not be extended
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beyond the original term of the Option). Upon termination of an Option or
portion thereof, the Grantee shall have no further right to purchase shares of
Stock pursuant to such Option or portion thereof. Whether a leave of absence or
leave on military or government service shall constitute a termination of
employment or other relationship for purposes of the Plan shall be determined by
the Board, which determination shall be final and conclusive. For purposes of
the Plan, a termination of employment, service or other relationship shall not
be deemed to occur if the Grantee is immediately thereafter employed with the
Company or any other Service Provider, or is engaged as a Service Provider or an
Outside director of the Company. Whether of termination of a Service Provider's
or an Outside Director's relationship with the Company shall have occurred shall
be determined by the Committee, which determination shall be final and
conclusive.
10.5. RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by or providing services to the Company,
all Options granted to such Grantee shall fully vest on the date of death, and
the executors or administrators or legatees or distributees of such Grantee's
estate shall have the right, at any time within one year after the date of such
Grantee's death (or such longer period as the Board, in its discretion, may
determine prior to the expiration of such one-year period) and prior to
termination of the Option pursuant to SECTION 10.2 above, to exercise any Option
held by such Grantee at the date of such Grantee's death.
10.6. RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee's employment or other relationship with the Company is
terminated by reason of the "permanent and total disability" (within the meaning
of Section 22(e)(3) of the Code) of such Grantee, such Grantee's Options shall
continue to vest, and shall be exercisable to the extent that they are vested,
for a period of one year after such termination of employment or service (or
such longer period as the Board, in its discretion, may determine prior to the
expiration of such one-year period), subject to earlier termination of the
Option as provided in SECTION 10.2 above. Whether a termination of employment
or service is to be considered by reason of "permanent and total disability" for
purposes of the Plan shall be determined by the Board, which determination shall
be final and conclusive.
10.7. LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as provided herein, or after ten years following the
date upon which the Option is granted, or after the occurrence of an event
referred to in SECTION 16 hereof which results in termination of the Option.
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10.8. METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised. The minimum number of shares of
Stock with respect to which an Option may be exercised, in whole or in part, at
any time shall be the lesser of (i) 100 shares or such lesser number set forth
in the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise. Payment of the
Option Price for the shares purchased pursuant to the exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the tender to the
Company of shares of Stock, which shares, if acquired from the Company, shall
have been held for at least six months and which shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their Fair Market Value on the date of exercise; or (iii) by a combination of
the methods described in (i) and (ii). The Board may provide, by inclusion of
appropriate language in an Award Agreement, that payment in full of the Option
Price need not accompany the written notice of exercise provided that the notice
of exercise directs that the certificate or certificates for the shares of Stock
for which the Option is exercised be delivered to a licensed broker acceptable
to the Company as the agent for the individual exercising the Option and, at the
time such certificate or certificates are delivered, the broker tenders to the
Company cash (or cash equivalents acceptable to the Company) equal to the Option
Price for the shares of Stock purchased pursuant to the exercise of the Option
plus the amount (if any) of federal and/or other taxes which the Company may in
its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Unless otherwise
stated in the applicable Award Agreement, an individual holding or exercising an
Option shall have none of the rights of a shareholder (for example, the right to
receive cash or dividend payments or distributions attributable to the subject
shares of Stock or to direct the voting of the subject shares of Stock) until
the shares of Stock covered thereby are fully paid and issued to such
individual. Except as provided in SECTION 16 hereof, no adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such issuance.
10.9. DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
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11. TRANSFERABILITY OF OPTIONS
11.1. GENERAL RULE
Except as provided in SECTION 11.2, during the lifetime of a Grantee,
only the Grantee (or, in the event of legal incapacity or incompetency, the
Grantee's guardian or legal representative) may exercise an Option. Except as
provided in SECTION 11.2, no Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and
distribution.
11.2. FAMILY TRANSFERS.
If authorized in the applicable Award Agreement, a Grantee may
transfer all or part of an Option that is not an Incentive Stock Option to (i)
any Immediate Family Member, (ii) a trust or trusts for the exclusive benefit of
any Immediate Family Member, or (iii) a partnership in which Immediate Family
Members are the only partners, provided that (x) there may be no consideration
for any such transfer, and (y) subsequent transfers of transferred Options are
prohibited except those in accordance with this SECTION 11.2 or by will or the
laws of descent and distribution. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of SECTION 11.2 hereof
the term "Grantee" shall be deemed to refer the transferee. The events of
termination of the employment or other relationship of SECTION 10.4 hereof shall
continue to be applied with respect to the original Grantee, following which the
Option shall be exercisable by the transferee only to the extent, and for the
periods specified in SECTIONS 10.4, 10.5 or 10.6.
12. RESTRICTED STOCK
12.1. GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS.
The Board may from time to time grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Grants under SECTION 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
12.2. RESTRICTIONS.
At the time a Grant of Restricted Stock or Restricted Stock Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Stock or Restricted Stock Units. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period.
The Board may, in its sole discretion, at the time a Grant of Restricted Stock
or Restricted Stock Units is made, prescribe restrictions in addition to or
other than the expiration of the Restricted Period, including the satisfaction
of corporate or individual performance
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objectives, which may be applicable to all or any portion of the Restricted
Stock or Restricted Stock Units. Such performance objectives shall be
established in writing by the Board prior to the ninetieth day of the year in
which the Grant is made and while the outcome is substantially uncertain.
Performance objectives shall be based on Stock price, market share, sales,
earnings per share, return on equity or costs. Performance objectives may
include positive results, maintaining the status quo or limiting economic
losses. Subject to the second sentence of this SECTION 12.2, the Board also may,
in its sole discretion, shorten or terminate the Restricted Period or waive any
other restrictions applicable to all or a portion of the Restricted Stock or
Restricted Stock Units. Neither Restricted Stock nor Restricted Stock Units may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such Restricted Stock or
Restricted Stock Units.
12.3. RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Secretary of the Company shall hold such
certificates for the Grantee's benefit until such time as the Restricted Stock
is forfeited to the Company, or the restrictions lapse.
12.4. RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board
may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions
and restrictions applicable to such Restricted Stock. All distributions, if
any, received by a Grantee with respect to Restricted Stock as a result of any
stock split, stock dividend, combination of shares, or other similar transaction
shall be subject to the restrictions applicable to the original Grant.
12.5. RIGHTS OF HOLDERS OF RESTRICTED STOCK UNITS.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a Grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding Stock,
a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the Stock. Such Award Agreement may also provide that such
cash payment will be deemed reinvested in additional Restricted Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
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12.6. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of the employment of a Grantee with the Company or a
Service Provider or of a Service Provider's relationship with the Company, in
either case other than, in the case of individuals, by reason of death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code), any shares of Restricted Stock or Restricted Stock Units held by such
Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Board, in its discretion, determines otherwise. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Grant, including but not limited to any
right to vote Restricted Stock or any right to receive dividends with respect to
shares of Restricted Stock or Restricted Stock Units. Whether a leave of
absence or leave on military or government service shall constitute a
termination of employment or other relationship for purposes of the Plan shall
be determined by the Board, which determination shall be final and conclusive.
For purposes of the Plan, a termination of employment, service or other
relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider or an Outside Director of the Company. Whether a
termination of a Service Provider's or an Outside Director's relationship with
the Company shall have occurred shall be determined by the Committee, which
determination shall be final and conclusive.
12.7. RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by the Company or a Service Provider, or
while serving as a Service Provider, all Restricted Stock or Restricted Stock
Units granted to such Grantee shall fully vest on the date of death, and the
shares of Stock represented thereby shall be deliverable in accordance with the
terms of the Plan to the executors, administrators, legatees or distributees of
the Grantee's estate.
12.8. RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee's employment or other relationship with the Company or a
Service Provider, or while serving as a Service Provider, is terminated by
reason of the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock or
Restricted Stock Units shall continue to vest in accordance with the applicable
Award Agreement for a period of one year after such termination of employment or
service (or such longer period as the Board, in its discretion, may determine
prior to the expiration of such one-year period), subject to the earlier
forfeiture of such Restricted Stock or Restricted Stock Units in accordance with
the terms of the applicable Award Agreement. Whether a termination of
employment or service is to be considered by reason of "permanent and total
disability" for purposes of the Plan shall be determined by the Board, which
determination shall be final and conclusive.
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12.9. DELIVERY OF STOCK AND PAYMENT THEREFOR.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, upon payment by the Grantee to the Company, in cash or by check, of the
aggregate par value of the shares of Stock represented by such Restricted Stock
or Restricted Stock Units, a stock certificate for such shares shall be
delivered, free of all such restrictions, to the Grantee or the Grantee's
beneficiary or estate, as the case may be.
13. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
---
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
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14. REQUIREMENTS OF LAW
14.1. GENERAL.
The Company shall not be required to sell or issue any shares of Stock under
any Grant if the sale or issuance of such shares would constitute a violation by
the Grantee, any other individual exercising an Option, or the Company of any
provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to a Grant upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
shares hereunder, no shares of Stock may be issued or sold to the Grantee or any
other individual exercising an Option pursuant to such Grant unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Grant. Specifically, in connection with the Securities Act, upon the exercise
of any Option or the delivery of any shares of Restricted Stock or Stock
underlying Restricted Stock Units, unless a registration statement under such
Act is in effect with respect to the shares of Stock covered by such Grant, the
Company shall not be required to sell or issue such shares unless the Board has
received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from
registration under the Securities Act. Any determination in this connection by
the Board shall be final, binding, and conclusive. The Company may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of
Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the shares of Stock
covered by such Option are registered or are exempt from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
14.2. RULE 16B-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Grants pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan.
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In the event that Rule 16b-3 is revised or replaced, the Board may exercise its
discretion to modify this Plan in any respect necessary to satisfy the
requirements of, or to take advantage of any features of, the revised exemption
or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
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Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this SECTION 15 or
SECTION 16 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1. CHANGES IN STOCK.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company on account of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Company occurring after the Effective Date, the
number and kinds of shares for which Grants of Options, Restricted Stock and
Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and
kind of shares for which Grants are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of an Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share. The conversion of any convertible securities of the Company shall not be
treated as an increase in shares effected without receipt of consideration.
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16.2. REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY AND IN
WHICH NO CHANGE OF CONTROL OCCURS.
Subject to SECTION 16.3 hereof, if the Company shall be the surviving entity
in any reorganization, merger, or consolidation of the Company with one or more
other entities in which no Change in Control occurs, any Option theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to such Option would
have been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the Option Price
per share so that the aggregate Option Price thereafter shall be the same as the
aggregate Option Price of the shares remaining subject to the Option
immediately prior to such reorganization, merger, or consolidation. Subject to
any contrary language in an Award Agreement evidencing a Grant of Restricted
Stock, any restrictions applicable to such Restricted Stock shall apply as well
to any replacement shares received by the Grantee as a result of the
reorganization, merger or consolidation.
16.3. REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK WHICH INVOLVES A
CHANGE OF CONTROL
Subject to the exceptions set forth in the last sentence of this SECTION
16.3, (i) upon the occurrence of a Change of Control, all outstanding shares of
Restricted Stock and Restricted Stock Units shall be deemed to have vested, and
all restrictions and conditions applicable to such shares of Restricted Stock
and Restricted Stock Units shall be deemed to have lapsed, immediately prior to
the occurrence of such Change of Control, and (ii) fifteen days prior to the
scheduled consummation of the Change of Control, all Options outstanding
hereunder shall become immediately exercisable and shall remain exercisable for
a period of fifteen days. Any exercise of an Option during such fifteen-day
period shall be conditioned upon the consummation of the event and shall be
effective only immediately before the consummation of the event. Upon
consummation of any Change of Control, the Plan and all outstanding but
unexercised Options shall terminate. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold Options
not later than the time at which the Company gives notice thereof to its
shareholders. This SECTION 16.3 shall not apply to any Change of Control to the
extent that (A) provision is made in writing in connection with such Change of
Control for the continuation of the Plan or the assumption of the Options,
Restricted Stock and Restricted Stock Units theretofore granted, or for the
substitution for such Options, Restricted Stock and Restricted Stock Units of
new options, restricted stock and restricted stock units covering the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Plan and Options, Restricted Stock and Restricted Stock Units
theretofore granted shall continue in the manner and under the terms so provided
or (B) a majority of the full Board determines that such Change of Control shall
not trigger application of the provisions of this SECTION 16.3 subject to
SECTION 24.
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16.4. ADJUSTMENTS.
Adjustments under this SECTION 16 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share.
16.5. NO LIMITATIONS ON COMPANY.
The making of Grants pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company or a Service Provider
either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company. In addition, notwithstanding anything
contained in the Plan to the contrary, unless otherwise stated in the applicable
Award Agreement, no Grant awarded under the Plan shall be affected by any change
of duties or position of the Optionee, so long as such Grantee continues to be a
director, officer, consultant or employee of the Company. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan. No Grantee shall have
any of the rights of a shareholder with respect to the shares of Stock subject
to an Option except to the extent the certificates for such shares of Stock
shall have been issued upon the exercise of the Option.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive
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compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company or the Subsidiary, as the case may be, any
amount that the Company or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior approval
of the Company or the Subsidiary, which may be withheld by the Company or the
Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company or the
Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or the Subsidiary shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company or the Subsidiary as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this SECTION 19 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
20. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
21. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
20
<PAGE>
23. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
24. POOLING
Notwithstanding anything in the Plan to the contrary, if any right under or
feature of the Plan would cause to be ineligible for pooling of interest
accounting a transaction that would, but for the right or feature hereunder, be
eligible for such accounting treatment, the Board may modify or adjust the right
or feature so that the transaction will be eligible for pooling of interest
accounting. Such modification or adjustment may include payment of cash or
issuance to a Grantee of Stock having a Fair Market Value equal to the cash
value of such right or feature.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Grants awarded hereunder shall be governed by the laws of the State of
Florida.
* * *
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 23rd day of April, 1998.
/s/ John F. Brennan
-------------------
John F. Brennan
Secretary
The Plan was duly approved by the shareholders of the Company on the 23rd
day of April, 1998.
/s/ John F. Brennan
-------------------
John F. Brennan
Secretary
21
<PAGE>
Exhibit 10.18
CONFIDENTIAL MATERIAL
FILED UNDER SEAL
- - ----------------
This Settlement Agreement is subject to a
confidentiality agreement as established in
Section 10.0 of this Settlement Agreement and
shall be treated as confidential, and must not
be shown to any person except as authorized in
Section 10.0 of this Settlement Agreement.
CONFIDENTIAL SETTLEMENT AGREEMENT
---------------------------------
This Settlement Agreement (the "Agreement") is entered into between
KPMG Peat Marwick LLP ("KPMG"), on the one hand, and Ted A. Fernandez, Ulysses
S. Knotts III, Allan R. Frank, David A. Dungan, Anita Allen, Thomas J.
Bloomquist, Kenneth M. Coppins, David A. Flaxman, John P. Kril, Mark W. McElroy,
Julio O. Ramirez, Richard T. Roth, Patrick J. Slattery, Steven W. Sparling, and
N. Lee White (collectively, the "Departing Partners"), and each of the persons
appearing on Exhibit B hereto (collectively the persons on Exhibit B shall be
referred to as the "Departing Personnel"), Answerthink Consulting Group, Inc.
("Answerthink"), Interprise Technology Solutions, Inc. ("ITS"), Edmund Miller
("Miller"), and Miller Capital Management ("Miller Capital"), on the other. The
Agreement shall take effect on the date the last signatory hereto executes the
Agreement (the "Effective Date").
RECITALS
--------
WHEREAS, the Departing Partners were or are partners of KPMG, and each
of them entered into the KPMG Peat Marwick LLP Articles of Partnership, as
amended through August 15, 1994 (the "Articles of Partnership");
<PAGE>
WHEREAS, the Departing Personnel were or are employees of KPMG;
WHEREAS, Answerthink and ITS are Florida corporations that Messrs.
Fernandez, Knotts, Frank, and Miller have caused to be formed to engage in the
business of offering strategic consulting services;
WHEREAS, the Departing Partners and Departing Personnel have each
resigned or announced their intent to resign from KPMG and have become or
announced their intent to become affiliated with ITS and/or Answerthink;
WHEREAS, certain disputes have arisen among the parties to the
Agreement relating to the departures from KPMG of the Departing Partners and the
Departing Personnel and the formation of ITS and Answerthink;
WHEREAS, on February 24, 1997, KPMG served on Messrs. Fernandez,
Knotts, Frank, and Dungan a demand for arbitration regarding certain of these
disputes and filed an action in the Court of Chancery of the State of Delaware
in and for New Castle County, entitled KPMG Peat Marwick LLP v. Ted A.
-------------------------------
Fernandez, Ulysses S. Knotts III, Allan R. Frank, and David A. Dungan, Case No.
- - ---------------------------------------------------------------------
15570, seeking injunctive relief pending completion of the arbitration ("the
Action").
WHEREAS, on April 17, 1997, KPMG served on the remaining Departing
Partners a demand for arbitration;
WHEREAS, KPMG maintains that it has similar putative claims against
the Departing Personnel, Answerthink, ITS, Miller, and Miller Capital;
WHEREAS, the Departing Partners maintain they have putative claims
against KPMG and certain of its existing partners;
-2-
<PAGE>
WHEREAS, each party hereto denies any wrongdoing on his respective
part; and
WHEREAS, the parties to this Agreement desire to resolve their
differences in order to avoid the further expense, inconvenience, and
uncertainty of litigation and/or arbitration.
NOW THEREFORE, in consideration of the covenants and agreements
contained herein, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.0 AGREED ORDER
------------
1.1 Within two business days of the Effective Date, the parties shall
present to the Court an Agreed Order which attaches the Agreement and provides
for the Court retaining jurisdiction to enforce the Agreement. A copy of the
proposed Agreed Order is attached hereto as Exhibit A. The entry of the
attached Agreed Order is a material condition of the Agreement, and without
entry of such an Agreed Order the Agreement shall be null and void.
2.0 RESTRICTIONS ON CLIENTS
-----------------------
2.1 For a period of two years commencing on December 31, 1996, the
Departing Partners, the Departing Personnel, Answerthink, ITS, Miller, Miller
Capital, and anyone acting in concert or privity with any of them, shall
strictly abide by the terms of Article III, Section 9(b)(i) of the Articles of
Partnership.
-3-
<PAGE>
3.0 RESTRICTIONS ON CONTACT WITH PERSONNEL
--------------------------------------
3.1 For a period of two years following December 31, 1996, neither
the Departing Partners, the Departing Personnel, Answerthink ITS, Miller
Capital, nor any other business with which any of them are affiliated, shall,
either directly or indirectly, hire, retain, subcontract with, employ or use as
an advisor or consultant, appoint to the Board of Directors of Answerthink ITS,
Miller Capital, or any affiliate thereof, otherwise contract with, or have any
communications of any kind regarding the foregoing with any employee or partner
of KPMG. For the same period of time, KPMG shall not directly or indirectly
solicit any of the Departing Partners, the Departing Personnel, or employees of
Answerthink to join KPMG.
4.0 KPMG PROPERTY
-------------
4.1 The Departing Partners, the Departing Personnel, Answerthink,
ITS, Miller, and Miller Capital shall return to KPMG within five days of the
Effective Date any and all property and materials in their possession owned by
KPMG or relating to KPMG's business, including but not limited to any such
property or material obtained from KPMG, created by KPMG, created by a Departing
Partner or Departing Personnel while affiliated with KPMG, or computer equipment
and information stored on or in such equipment. Any destruction or deletion of
such documents, material, or equipment will constitute a breach of the
Agreement.
5.0 SEPARATION DATES, PROFIT PARTICIPATIONS, DEBTS, AND BENEFITS
------------------------------------------------------------
5.1 Fernandez, Knotts, Frank, and Dungan expressly acknowledge that
their withdrawal from KPMG shall be effective for all purposes as of November
30,
-4-
<PAGE>
1996. All other Departing Partners expressly acknowledge that their withdrawal
from KPMG shall be effective for all purposes as of March 21, 1997, except that
the effective withdrawal dates for Richard Roth, Julio Ramirez, Lee White, and
Anita Allen shall be: May 9, 1997 for Roth; May 7, 1997 for Ramirez; April 17,
1997 for White; and May 31, 1997 for Allen.
5.2 The Departing Personnel expressly acknowledge that their
withdrawal from KPMG shall be effective for all purposes as of the dates
provided for each on Exhibit B hereto.
5.3 The Departing Partners' agree and acknowledge that they are
waiving any claim and shall not be entitled to any accrued vacation. The
Departing Personnel are not waiving any accrued vacation to which they may be
entitled.
5.4 The Departing Partners' profit participation, capital balances,
and authorized but unreimbursed expenses and any other amounts due them shall be
paid to them by KPMG on or before June 1, 1997 net of usual and ordinary
deductions. All of the Departing Partners expressly agree and acknowledge that
they are obliged to repay all outstanding loans, debts, or advances owing by
them to KPMG. On or before June 1, 1997, KPMG shall deduct a Departing
Partner's loans, debts, and advances from the amount due for such Departing
Partner's profit participation.
5.5 KPMG agrees and acknowledges that the Departing Partners are
waiving any claim and shall not be entitled to any incentive compensation and
KPMG and the Departing Partners agree and acknowledge that the calculation of
the Departing Partners' profit participation shall be based upon unit values for
KPMG's fiscal year ending June 30, 1996, and the number of units originally
assigned to the
-5-
<PAGE>
Departing Partners for the KPMG fiscal year starting July 1, 1996, and shall not
include any contribution to an incentive compensation pool. KPMG agrees to pay
all pension and retirement benefits of the Departing Partners and the Departing
Personnel as they become due and payable.
6.0 TAX SUPPORT
-----------
6.1 KPMG shall provide all Departing Partners with the same tax
support for their 1996 and 1997 tax returns in accordance with KPMG's provision
of those services to current partners.
7.0 INDEMNITY
---------
7.1 KPMG will indemnify and hold harmless the Departing Partners and
Departing Personnel against claims, losses, damages and liabilities arising out
of KPMG's or their acts, errors, or omissions in the conduct of any activities
or professional services performed on behalf of or at the request of KPMG to the
same extent that other former partners or employees of KPMG are indemnified or
held harmless based on KPMG's professional indemnity insurance policies. The
Departing Partners and Departing Personnel agree, without additional
compensation, to cooperate fully with KPMG in the defense of any such claims,
losses, damages, or liabilities, including permitting KPMG's attorneys to
represent them at KPMG's expense.
-6-
<PAGE>
8.0 VIOLATION OF SETTLEMENT AGREEMENT
---------------------------------
8.1 The Court of Chancery of the State of Delaware in and for New
Castle County ("Chancery Court") shall retain jurisdiction to enforce the terms
of the Agreement. In the event that any party believes that there has been a
breach of the Agreement, the party shall have the right to petition the Chancery
Court for specific performance, injunctive, equitable, and/or any other relief.
All parties to the Agreement agree to submit and consent to the jurisdiction of
the Chancery Court for purposes of enforcement of the Agreement. The prevailing
party in any action brought pursuant to this section 6.1 shall be entitled to
recover from any or all non-prevailing parties all reasonable costs and
attorneys' fees incurred to enforce the terms of this Agreement.
9.0 RELEASES
--------
9.1 KPMG, for itself and each of its partners, principals, employees,
agents, representatives, affiliates, and successors in interest hereby releases
the Departing Partners, the Departing Personnel, their estates, heirs,
executors, administrators, legal representatives, personal representatives,
successors, and assigns (the "Departing Releasees") from any and all claims,
demands, obligations, causes of action, rights, or damages of any kind or nature
whatsoever, whether in law or equity, that KPMG has or has ever had against the
Departing Releasees, provided that the parties expressly agree and acknowledge
that any claim under this Agreement is not subject to this release and is
expressly reserved.
-7-
<PAGE>
9.2 Each of the Departing Partners and the Departing Personnel,
personally and for his estate, heirs, executors, administrators, legal
representatives, personal representatives, successors, assigns, and anyone with
any claim on his behalf, hereby releases KPMG and each of its officers, director
partners, principals, employees, agents, representatives, affiliates, assigns,
and successors in interest (the "KPMG Releasees") from any and all claims,
demands, causes of action, rights, or damages of any kind or nature whatsoever,
whether in law or equity, that the Departing Partners or the Departing
Personnel, or any of them, has or has ever had against the KPMG Releasees,
provided that the parties expressly agree and acknowledge that any claim under
this Agreement is not subject to this release and is expressly reserved.
Without limiting the generality of the foregoing, this release includes any
putative defamation claim against the KPMG Releasees.
9.3 The KPMG Releasees hereby release Answerthink and ITS, as well as
their respective officers, directors, shareholders, employees, agents,
representatives, affiliates, investors, successors, and assigns (the
"Answerthink Releasees"), from any and all claims, demands, obligations, causes
of action, rights, or damages of any kind or nature whatsoever, whether in law
or equity, that KPMG has or has ever had against the Answerthink Releasees,
provided that the parties expressly agree and acknowledge that any claim under
this Agreement is not subject to this release and is expressly reserved.
9.4 The Answerthink Releasees hereby release the KPMG Releasees from
any and all claims, demands, obligations, causes of action, rights, or damages
of any kind or nature whatsoever, whether in law or equity, that Answerthink or
ITS has
-8-
<PAGE>
had or has ever had against the KPMG Releasees, provided that the parties
expressly agree and acknowledge that any claim under the Agreement is not
subject to this release and is expressly reserved.
9.5 The KPMG Releasees hereby release Miller and Miller Capital as
well as their officers, directors, shareholders, employees, agents,
representatives, affiliates, investors, estate, heirs, executors,
administrators, assigns and successors in interest (the "Miller Releasees"),
from any and all claims, demands, obligations, causes of action, rights, or
damages of any kind or nature whatsoever, whether in law or equity, that the
KPMG Releasees have or have ever had against the Miller Releasees, provided that
the parties expressly agree and acknowledge that any claim under this Agreement
is not subject to this release and is expressly reserved.
9.6 The Miller Releasees hereby release the KPMG Releasees from any
and all claims, demands, obligations, causes of action, rights, or damages of
any kind or nature whatsoever, whether in law or equity, that the Miller
Releasees have or have ever had against the KPMG Releasees, provided that the
parties expressly agree and acknowledge that any claim under this Agreement is
not subject to this release and is expressly reserved.
10.0 CONFIDENTIALITY AND NON-DISPARAGEMENT
-------------------------------------
10.1 The parties hereto and their attorneys, and any person connected
to, affiliated with, or in privity with the parties or their attorneys, shall
keep and maintain in strict confidence all of the terms of this Agreement and
not voluntarily publish, display, disclose or characterize the provisions or
terms of the Agreement to anyone who is not a party to the Settlement Agreement.
Further, KPMG on the one
-9-
<PAGE>
hand, and the Departing Partners, the Departing Personnel, Answerthink, ITS,
Miller Capital, and Miller, on the other, agree not to make any public
defamatory or disparaging remarks about the other. The parties expressly agree
that KPMG may disclose and characterize the terms of this Agreement to KPMG
partners and employees, in a manner not inconsistent with the foregoing terms of
this paragraph of this Agreement. Similarly, the parties expressly agree that
Answerthink may disclose and characterize the terms of this Agreement to its
employees, in a manner not inconsistent with the foregoing terms of this
paragraph of this Agreement. The parties agree and acknowledge that the
provisions in this paragraph are a material part of the Agreement.
10.2 Exceptions to the confidentiality requirements established in
paragraph 10.1 may arise under the following circumstances: (a) such disclosure
as may be agreed to in writing by the Parties; (b) such disclosure as is
required by law; or (c) such disclosure as reasonably may be required for
auditing or tax purposes. The parties and their attorneys may state in response
to inquiries: "The case has been resolved upon terms acceptable to all parties."
In addition, upon entry of the Consent Decree by the Court, the parties may, if
they jointly choose to do so and agree upon the specific wording thereof, cause
a joint press release to issue announcing that the parties have amicably
resolved their differences. No other press releases shall be issued relating to
the Agreement or the parties' disputes.
10.3 Prior to making such disclosure as is permitted by paragraph
10.2(b), the party seeking to make the disclosure shall provide prompt notice in
advance of disclosure to the other parties to allow them an opportunity to seek
additional protection, whether from a court or other authority, or through other
means. Each party shall cooperate with the other parties in ensuring that the
parties receive adequate information and opportunity to seek
-10-
<PAGE>
additional protection, whether from a court or other authority, or through other
means. Each party shall cooperate with the other parties in ensuring that the
parties receive adequate information and opportunity to seek additional
protection from a court or other authority, or through other means.
11.0 NOTICE
------
11.1 Any notices, requests, claims, demands, and other communications
hereunder shall be in writing and shall be deemed delivered if given by hand,
express-mail delivery, facsimile, or by United States mail (registered or
certified mail, postage prepaid, return receipt requested) to the parties as
follows:
If to KPMG, notices shall be directed to:
John A. Shutkin
Deputy General Counsel
KPMG Peat Marwick LLP
599 Lexington Avenue
New York, NY 10022
and
John G. Levi
Sidley & Austin
One First National Plaza
Chicago, IL 60603
If to Answerthink, ITS, the Departing Partners, or the Departing
Personnel:
Ted Fernandez
660 Warren Lane
Key Biscayne, FL 33149
and
-11-
<PAGE>
S. Daniel Ponce
Hanzman, Criden, Korge
& Chaykin, P.A.
First Union Financial Center
Suite 2100
200 South Biscayne Boulevard
Miami, FL 33131
If to Miller or Miller Capital:
Edmund Miller
Miller Capital Management
2665 South Bayshore Drive
Suite 1101
Coconut Grove, FL 33133
12.0 MISCELLANEOUS
-------------
12.1 This Agreement contains the entire agreement between the parties
with regard to the matters set forth in it and supersedes any and all prior
agreements, understandings and negotiations, whether written or oral, of the
parties hereto relating to the subject matter hereof, except that to the extent
not waived or modified herein applicable provisions of the Articles of
Partnership remain in full force and effect.
12.2 This Agreement may be amended, or any right or condition
hereunder waived, only by written instrument signed by the party against whom
such amendment or waiver is sought to be enforced.
12.3 No waiver by any party to this Agreement of any breach of any of
the covenants, agreement, or undertakings contained in this Agreement shall be
construed as a waiver of any succeeding breach of the same or of any other
covenant, agreement, or undertaking, nor shall any such waiver affect the right
of any party to this Agreement to require the strict performance thereof on a
subsequent occasion.
-12-
<PAGE>
12.4 The headings herein have been inserted for convenience of
reference only, and shall not modify, define, expand or limit any of the
provisions contained in this Agreement.
12.5 This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original instrument, but all such counterparts
together shall constitute one and the same instrument. Moreover, this Agreement
is neither effective nor enforceable unless and until all Departing Partners,
Departing Personnel, Answerthink, ITS, Miller and Miller Capital, as well as
KPMG, sign this Agreement.
12.6 This Agreement shall be governed in all respects by Delaware
law.
13.0 ARBITRATION
-----------
13.1 Upon the Effective Date, this Agreement shall constitute the
withdrawal with prejudice of KPMG's above-referenced demands for arbitration
against the Departing Partners.
IN WITNESS WHEREOF, the parties, have executed this Settlement
Agreement as of the date of the last signatory hereto.
KPMG PEAT MARWICK LLP INTERPRISE TECHNOLOGY
SOLUTIONS, INC.
By: /s/ John A. Shutkin By: /s/ Edmund R. Miller
---------------------------- -------------------------------
Dated: May 8 , 1997 Dated: May 8 , 1997
------------------ ---------------------
-13-
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
-------------------------------
Dated: May 8 , 1997
----------------------
TED A. FERNANDEZ ULYSSES S. KNOTTS, III
By: /s/ Ted A. Fernandez By: /s/ Ulysses S. Knotts, III
----------------------------- ------------------------------
Dated: May 8 , 1997 Dated: May 8 , 1997
-------------------- ---------------------
ALLAN R. FRANK DAVID N. DUNGAN
By: /s/ Allan R,. Frank By: /s/ David N. Dungan
----------------------------- ------------------------------
Dated: May 8 , 1997 Dated: May 9 , 1997
-------------------- ---------------------
THOMAS J. BLOOMQUIST KENNETH M. COPPINS
By: /s/ Thomas J. Bloomquist By: /s/ Kenneth M. Coppins
----------------------------- ------------------------------
Dated: May 13 , 1997 Dated: May 9 , 1997
-------------------- ---------------------
-14-
<PAGE>
DAVID A. FLAXMAN JOHN P. KRIL
By: /s/ David A. Flaxman By: /s/ John P. Kril
----------------------------- ------------------------------
Dated: May 9 , 1997 Dated: May 9 , 1997
-------------------- ---------------------
MARK W. McELROY JULIO O. RAMIREZ
By: /s/ Mark W. McElroy By: /s/ Julio O. Ramirez
----------------------------- ------------------------------
Dated: May 12 , 1997 Dated: May 9 , 1997
-------------------- ---------------------
RICHARD T. ROTH PATRICK J. SLATTERY
By: [signature appears here] By: /s/ Patrick J. Slattery
----------------------------- ------------------------------
Dated: ____________________, 1997 Dated: May 12 , 1997
---------------------
STEVEN W. SPARLING ANITA ALLEN
By: /s/ Steven W. Sparling By: [signature appears here]
----------------------------- ------------------------------
Dated: May 9 , 1997 Dated: _____________________, 1997
-------------------
-15-
<PAGE>
N. LEE WHITE MILLER CAPITAL MANAGEMENT, INC.
By: /s/ N. Lee White By: /s/ Edmund R. Miller
----------------------------- ------------------------------
Dated: May 9 , 1997 Dated: May 8 , 1997
-------------------- ---------------------
EDMUND MILLER JOSEPH JAMES
By: /s/ Edmund R. Miller By: /s/ Joseph James
----------------------------- ------------------------------
Dated: May 8 , 1997 Dated: May 8 , 1997
-------------------- ---------------------
CODY SHENAULT BRUCE DEBONIS
By: /s/ Cody Shenault By: /s/ Bruce Debonis
----------------------------- ------------------------------
Dated: May 13 , 1997 Dated: May 15 , 1997
-------------------- ---------------------
ANTHONY DELIMA LEE FIELDS
By: /s/ Anthony Delima By: /s/ Lee C. Fields
----------------------------- ------------------------------
Dated: May 14 , 1997 Dated: May 8 , 1997
-------------------- ---------------------
-16-
<PAGE>
GRANT FITZWILLIAM TIM GERIOS
By: /s/ Grant Fitzwilliam By: /s/ Tim Gerios
----------------------------- ------------------------------
Dated: May 13 , 1997 Dated: May 13 , 1997
-------------------- ---------------------
STEWART GLENDINNING RICH JASO
By: /s/ Stewart Glendinning By: /s/ Rich Jaso
----------------------------- ------------------------------
Dated: May 13 , 1997 Dated: May 14 , 1997
-------------------- ---------------------
BRUCE KELLY BRIAN MILLER
By: /s/ Bruce Kelly By: /s/ Brian Miller
----------------------------- ------------------------------
Dated: May 14 , 1997 Dated: May 12 , 1997
-------------------- ---------------------
ENRICO POLUMBO DAN RUBIO
By: /s/ Enrico Polumbo By: /s/ Dan Rubio
----------------------------- ------------------------------
Dated: May 19 , 1997 Dated: May 15 , 1997
-------------------- ---------------------
-17-
<PAGE>
ALEX SHARPE TAMI SKIFSTAD
By: /s/ Alex Sharpe By: [signature appears here]
----------------------------- ------------------------------
Dated: May 9 , 1997 Dated: _____________________, 1997
--------------------
JOHN STONE DENISE ALBRECHT
By: [signature appears here] By: /s/ Denise M. Albrecht
----------------------------- ------------------------------
Dated: ____________________, 1997 Dated: May 9 , 1997
---------------------
JONI CASTA VIRGINIA CHAVEZ
By: /s/ Joni Casta By: /s/ Virginia Chavez
----------------------------- ------------------------------
Dated: May 12 , 1997 Dated: May 12 , 1997
-------------------- ---------------------
YVES DUPONT LINDA FIORAVANTE
By: /s/ Yves Dupont By: /s/ Linda Fioravante
----------------------------- ------------------------------
Dated: May 12 , 1997 Dated: May 8 , 1997
-------------------- ----------------------
-18-
<PAGE>
CRAIG FOX ELIZABETH HAYES
By: /s/ Craig Fox By: /s/ Elizabeth Hayes
----------------------------- ------------------------------
Dated: May 8 , 1997 Dated: May 12 , 1997
-------------------- ---------------------
COLLEEN KEMPTON GAIL KEEVERS
By: /s/ Colleen Kempton By: /s/ Gail Keevers
----------------------------- ------------------------------
Dated: May 21 , 1997 Dated: May 9 , 1997
-------------------- ---------------------
BETH JAROSIEWICZ SANDY LAHTIO
By: /s/ Beth Jarosiewicz By: /s/ Sandy Lahtio
----------------------------- ------------------------------
Dated: May 12 , 1997 Dated: May 9 , 1997
-------------------- ---------------------
SUSIE MASON SONYA McHENRY
By: /s/ Susie Mason By: /s/ Sonya McHenry
----------------------------- ------------------------------
Dated: May 9 , 1997 Dated: May 12 , 1997
-------------------- ---------------------
-19-
<PAGE>
LUIS SAN MIGUEL MARIANNE NADOTTI
By: /s/ Luis San Miguel By: /s/ Marianne Nadoitti
---------------------------- ------------------------------
Dated: May 12 , 1997 Dated: May 9 , 1997
--------------------- ---------------------
DIANE NIGH DAVID OPPENHEIM
By: /s/ Diane Nigh By: /s/ David Oppenheim
----------------------------- ------------------------------
Dated: May 8 , 1997 Dated: May 12 , 1997
-------------------- ---------------------
CRIS PERKINS JORGE SANCHEZ
By: /s/ Cris Perkins By: /s/ Jorge Sanchez
----------------------------- ------------------------------
Dated: May 8 , 1997 Dated: May 15 , 1997
-------------------- ---------------------
STEVE SHEAR CARRIE SHEVLIN
By: /s/ Steve Shear By: /s/ Carrie Shelvin
------------------------------ ------------------------------
Dated: May 9 , 1997 Dated: _____________________, 1997
---------------------
-20-
<PAGE>
The Exhibits to this Confidential Settlement Agreement are not included with
this Registration Statement on Form S-1. Answerthink will provide these
exhibits upon the request of the Securities and Exchange Commission.
-21-
<PAGE>
Exhibit 10.20
AMENDMENT NO. 2
TO
PURCHASE AGREEMENT
MADE AS OF MARCH 5, 1998
AMONG
ANSWERTHINK CONSULTING GROUP, INC.
AND
FSC CORP.
WHEREAS, AnswerThink Consulting Group, Inc., a Florida corporation (the
"Company") and FSC Corp., a Massachusetts corporation ("FSC") are parties to the
certain Purchase Agreement dated as of March 5, 1998 (the "Agreement"), as
amended by that certain Amendment No. 1 to the Agreement, dated as of April 13,
1998 (the "Amendment").
WHEREAS, FSC holds all of the "Investor Stock," as such term is defined in
the Agreement; and
WHEREAS, the Company and FSC wish to amend the Agreement and the Amendment
as set forth herein;
NOW, THEREFORE, the Company and FSC hereby agree as follows:
1. Replacement of the Amendment. This Amendment No. 2 to the Agreement
----------------------------
supersedes and replaces the Amendment in all respects.
2. Section 3E (Preemptive Rights). Section 3E of the Agreement shall be
------------------------------
deleted in its entirety.
3. Section 4(iv) (Rights of First Refusal). Section 4(iv) of the Agreement
---------------------------------------
shall be deleted in its entirety.
4. Section 6 (Definitions). Section 6 of the Agreement shall be amended by
-----------------------
adding thereto the following new definition:
"Common Stock" means the common stock of the Company, par value $.001
------------
per share, and any other shares of capital stock of a corporation issued
in exchange for such common stock in connection with an exchange or
combination of shares, recapitalization, merger, consolidation or
other reorganization.
5. Remaining Provisions. In all other respects, the Agreement remains
--------------------
unchanged.
<PAGE>
6. Effective Date. This Amendment No. 2 to the Agreement shall be effective as
--------------
of the date upon which the Company signs an underwriting agreement relating
to its initial public offering.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of this 5th day of May, 1998.
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ Ted A. Fernandez
----------------------
Ted A. Fernandez
President, Chief Executive Officer and
Chairman
FSC CORP.
By: /s/ Robert T. Jefferson
-------------------------------
Name: Robert T. Jefferson
--------------------------
Title: Chairman and President
-------------------------
<PAGE>
EXHIBIT 10.22
AMENDMENT TO CERTAIN SENIOR MANAGEMENT AGREEMENTS
-------------------------------------------------
This AMENDMENT TO CERTAIN SENIOR MANAGEMENT AGREEMENTS (this
"AMENDMENT") is entered into as of March 27, 1998, by and among those executives
whose signatures appear on the signature page hereto (the "EXECUTIVES") of
AnswerThink Consulting Group, Inc. (the "COMPANY"), and those members of the
Company's Board of Directors whose signatures appear on the signature page
hereto (the "DIRECTORS").
RECITALS
--------
A. Executives Fernandez, Frank and Knotts have entered into Senior
Management Agreements with the Company dated as of April 23, 1997 and Executive
Dungan entered into a Senior Management Agreement with the Company dated as of
July 11, 1997 (the "MANAGEMENT AGREEMENTS"). Executive Miller has entered into
a Senior Management Management Agreement with the Company dated as of April 23,
1997 (the "MILLER AGREEMENT," collectively with the Management Agreements, the
"SENIOR MANAGEMENT AGREEMENTS").
B. The Directors and each of the Executives desire to revise the
respective Senior Management Agreements in certain respects, all pursuant to the
terms and provisions of this Amendment.
C. Capitalized terms used but not defined herein have the meanings
assigned to such terms in the Senior Management Agreements.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing premises, and good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties agree as follows:
1. AMENDMENTS TO THE SENIOR MANAGEMENT AGREEMENTS.
----------------------------------------------
(A) AMENDMENT TO THE MANAGEMENT AGREEMENTS.
--------------------------------------
(i) AMENDMENT TO SECTION 3. Section 3 of each of the Management
----------------------
Agreements shall be amended by inserting the following:
(g) The Executive and the Company may agree at any time to
exchange any number of Restricted Shares held by the Executive to the
Company for an equal number of shares of the Company's Common Stock (the
"Exchange Shares"). The Exchange Shares received by the Executive shall
not be deemed to be Restricted Shares for purposes of this Agreement or
the Restricted Securities Agreement. Any Exchange Shares so received shall
vest immediately upon receipt by the Executive, and shall not be subject to
the Repurchase Option contained in this Section 3, or to the restrictions
set forth in Section 4 hereof. Any such exchange of these shares shall be
deemed to be an Exempt Transfer, as that term is defined in Section 4(b)
hereof.
<PAGE>
(II) AMENDMENT TO SECTION 4(B). Section 4(b) of each of the Senior
------------------------- ------------
Management Agreements is hereby amended by deleting the previous text in its
entirety and inserting the following in lieu thereof:
(b) Transfer of Executive Stock. Subject to Section 4(a) above,
---------------------------
Executive shall not Transfer any interest in any shares of Executive Stock,
except pursuant to (i) the provisions of Section 3 hereof, a Public Sale, a
Sale of the Company or the provisions of the Restricted Securities
Agreement ("Exempt Transfers") or (ii) the provisions of this Section 4;
provided that in no event shall any Transfer of Executive Stock pursuant to
this clause (ii) be made for any consideration other than cash payable upon
consummation of such Transfer; and provided further that Unvested Shares
may only be Transferred pursuant to the provisions of Section 3 hereof; and
provided further that Restricted Shares that remain unvested under the
Restricted Securities Agreement may only be Transferred pursuant to the
Restricted Securities Agreement or pursuant to Section 3 hereof. Executive
will not consummate any Transfer permitted by clause (ii) of the preceding
sentence until 60 days after the Sale Notice has been given to the Company,
the Investors and the Other Executives, unless the parties to the Transfer
have been finally determined pursuant to this Section 4 prior to the
expiration of such 60-day period. (The date of the first to occur of such
events is referred to herein as the "Authorization Date".)
(B) AMENDMENT TO SECTION 2(F) OF THE MILLER MANAGEMENT AGREEMENT. Section
------------------------------------------------------------
2(f) of the Miller Management Agreement shall be deleted in its entirety and
replaced with the following:
(f) The Executive and the Company may agree at any time to
exchange any number of Restricted Shares held by the Executive to the
Company for an equal number of shares of the Company's Common Stock (the
"Exchange Shares"). The Exchange Shares received by the Executive shall
not be deemed to be Restricted Shares for purposes of this Agreement or the
Restricted Securities Agreement. Any Exchange Shares so received shall
vest immediately upon receipt by the Executive, and shall not be subject to
the restrictions contained in Section 2(e) hereof.
2. EFFECTIVE DATE. The effective date of this Amendment shall be March 27,
--------------
1998.
3. COUNTERPARTS; FACSIMILE TRANSMISSION. This Amendment may be executed in
------------------------------------
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument. A party's signature
appearing on this Amendment sent by facsimile transmission shall be binding as
evidence of that party's acceptance and agreement to the terms hereof.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to Certain
Senior Management Agreements to be executed as of the date first written above.
THE EXECUTIVES: THE DIRECTORS:
/s/ Ted A. Fernandez /s/ Ted A. Fernandez
________________________________________ _____________________________________
Ted A. Fernandez Ted A. Fernandez
/s/ Allan R. Frank /s/ Allan R. Frank
________________________________________ _____________________________________
Allan R. Frank Allan R. Frank
/s/ Ulysses S. Knotts, III /s/ Ulysses S. Knotts, III
________________________________________ _____________________________________
Ulysses S. Knotts, III Ulysses S. Knotts, III
/s/ Edmund R. Miller /s/ Edmund R. Miller
________________________________________ _____________________________________
Edmund R. Miller Edmund R. Miller
/s/ David Dungan /s/ Bruce V. Rauner
________________________________________ _____________________________________
David Dungan Bruce V. Rauner
/s/ William C. Kessinger
_____________________________________
William C. Kessinger
* * * * *
-3-
<PAGE>
EXHIBIT 10.24
First Amendment dated at of April 3, 1998 to Revolving Credit Agreement
(the "First Amendment"), by and among ANSWERTHINK CONSULTING GROUP, INC (the
"Borrower"), BANKBOSTON, N.A. and the other lending institutions listed on
Schedule 1 to the Credit Agreement (as hereinafter defined) (the "Banks"),
- - -------- -
amending certain provisions of the Revolving Credit Agreement dated as of
November 7, 1997 (as amended and in effect from time to time, the "Credit
agreement") by and among the Borrower, the Banks and BankBoston, N.A. as agent
for the Banks (the "Agent"). Terms not otherwise defined herein which are
defined in the Credit Agreement shall have the same respective meanings herein
as therein.
WHEREAS, the Borrower and the Banks have agreed to modify certain terms and
conditions of the Credit Agreement as specifically set forth in this First
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge, the parties hereto hereby agree as
follows:
(S1.) Amendment to Section 1 of the Credit Agreement. Section 1.1
--------- -- ------- - -- --- ------ ---------
of the of the Credit Agreement is hereby amended by deleting the definition
of Consolidated Net income in its entirety and restating it as follows:
Consolidated Net Income (or Deficit). The consolidated net income (or
------------ --- ------ -- -------
deficit) of the Borrower and its Subsidiaries, after deduction of all
expenses, taxes and other proper charges, determined in accordance with
generally accepted principles, after eliminating therefrom all
extraordinary nonrecurring items of income or expense; provided, however,
-------- -------
for purposes of compliance with the financial covenants set forth in (S9),
Consolidated Net Income shall not include (without duplication) (a) any
non-cash writedowns of good will and/or purchased research and development;
(b) compensation expenses or additional goodwill amortization relating to
the granting by the Borrower of stock options and restricted stock; (c) the
nonrecurring charge of not more than $1,020,000 in the fiscal quarter
ending April 3, 1998 pertaining to the elimination of a vesting requirement
for the cash portion of an earnout consideration payable to an executive of
the Hackett Group, Inc.; and (d) the nonrecurring charge of not more than
$39,823,400 in the fiscal quarter ending April 3, 1998 pertaining to the
immediate vesting of performance shares issued to certain o f the
Borrower's executive, and, provided, further, for purposes of calculating
-------- -------
the Applicable Margin, Consolidated Net Income shall not include (without
duplication) those items set forth in paragraphs (c) and (d) above.
<PAGE>
(S2.) Amendment to Section 6 of the Credit Agreement. Section 6.4.1 of the
--------- -- ------- - -- --- ------ ---------
Credit Agreement is hereby amended by deleting (S6.4.1) in its entirety and
restating it as follows:
6.4.1 Fiscal Year. The Borrower and each of its Subsidiaries has a
------ ----
fiscal year which is the fifty-two week period ending on the dates set
forth on Schdule 6.4.1 attached hereto, with each fiscal quarter
within such fiscal year ending on the dates set forth in such Schedule
6.4.1.
(S3.) Amendment to Section 7 of the Credit Agreement Section 7.7.2 of the
--------- -- ------- - -- --- ------ ---------
Credit Agreement is hereby amended by deleting the words "deliver the Life
Insurance Assignment within sixty (60) days of the Closing Date" and
substituting in place thereof the words "deliver the Life Insurance
Assignment by not later than April 30, 1998".
(S4.) Amendment to Section 8 of the Credit Agreement Section 8 of the
--------- -- ------- - -- --- ------ ---------
Credit Agreement is hereby amended as follows:
(a) Section 8.1 of the Credit Agreement is hereby amended by (i)
deleting the word "and" which appears at the end of (S8.1) (f); (ii)
deleting the period which appears at the end of (S8.1) (g) and
substituting in place thereof a semicolon and the word "and"; and
(iii) inserting immediately after the text of (S8.1) (g) the
following:
(h) Indebtedness of the Borrower incurred in connection with certain
earnout provisions pertaining to the acquisition of the Hackett Group,
Inc. in the aggregate principal amount of not more than $2,400,000.
(b) Section 8.8 of the Credit Agreement is hereby amended by deleting
the text of (S8.8) in its entirety and substituting in place thereof
the word "Except for the change to the fiscal year occurring on
December 31, 1997, the Borrower will not, and will not permit any of
its Subsidiaries to change the date of the end of their respective
fiscal years from that set forth in (S6.4.1)
(c) Section 8.11 of the Credit Agreement is hereby amended by
inserting at the end of the text of (S8.11) the following: ";provided,
--------
however, the Borrower shall be permitted to amend those certain Senior
-------
Management Agreements, Restricted Securities Agreements and Letter
Agreements described on Schedule 8.11 hereto in the manner set forth
therein".
<PAGE>
(S5) Amendment to Section 9 of the Credit Agreement. Section 9 of the Credit
--------- -- ------- - -- --- ------ ---------
Agreement is hereby amended as follows:
(a) Section 9.1 of the Credit Agreement is hereby amended by deleting
the date "June 30, 1998" which appears in such section and
substituting in place thereof the date "July 3, 1998";
(b) Section 9.3 of the Credit Agreement is hereby amended by deleting
the date "March 31, 1998" which appears in such section and
substituting in place thereof the date "April 3, 1998";
(c) Section 9.4 of the Credit Agreement is hereby amended by inserting
at the end of the text of (S9.4) the following: "provided, however,
for purposes of calculating compliance with this -(S9.4) for the
fiscal quarter ending April 3, 1998, Indebtedness of the Borrower in
respect of notes issued in connection with the acquisition of The
Hackett Group, Inc, in the aggregate amount of not more than
$5,647,000 shall not be included in such calculations for such period
of the Credit Agreement is hereby amended by deleting the date "March
31, 1998" which appears in such section and substituting in place
thereof the date "April 3, 1998";
(S6). CONDITIONS TO EFFECTIVENESS. This First Amendent shall not
---------------------------
become effective until the Agent receives a counterpart of this First Amendment,
executed by the Borrower, the Guarantor and the Banks.
(S7). REPRESENTATIONS AND WARRANTIES. The Borrower hereby repeats, on
------------------------------
and as of the date hereof, each of the representations and warranties made by it
in (S6) of the Credit Agreement, and such representations and warranties remain
true as of the date hereof (except to the extent of changes resulting from
transactions contemplated or permitted by the Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date),
provided, that all references therein to the Credit Agreement shall refer to
- - ---------
such Credit Agreement as amended hereby. In addition, the Borrower hereby
represents and warrants that the execution and delivery by the Borrower of this
First Amendment and the performance by the Borrower of all of its agreements and
obligations under the Credit Agreement as amended hereby are within the
corporate authority of each the Borrower and has been duly authorized by all
necessary corporate action on the part of the Borrower.
<PAGE>
(S8.) RATIFICATION, ETC. Except as expressly amended hereby, the
------------------
Credit Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this First Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.
(S9.) NO WAIVER. Nothing contained herein shall constitute a waiver
----------
of, impair or otherwise affect any Obligations, any other obligation of the
Borrower or any rights of the Agent or the Banks consequent thereon.
(S10.) COUNTERPARTS. This First Amendment may be executed in one or
-------------
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
(S11.) GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
--------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as a
document under seal as of the date first above written.
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ John F. Brennan
-------------------------------
Title: Executive Vice President
BANKBOSTON, N.A.
By: [SIGNATURE APPEARS HERE]
-------------------------------
Title: Vice President
<PAGE>
RATIFICATION OF GUARANTY
Each of the undersigned guarantors hereby acknowledges and consents to the
foregoing First Amendment as of April 3, 1998, and agrees that the Guaranty
dated as of November 7, 1997 from the undersigned Guarantor remains in full
force and effect, and the Guarantor confirms and ratifies all of its obligations
thereunder.
THE HACKETT GROUP, INC.
By: /s/ John F. Brennan
----------------------------
Title: Vice President
<PAGE>
Schedule 6.41
1997 fiscal year end: January 2, 1998
1998 fiscal year end: January 1, 1999
Q1 1998 ends April 3, 1998
Q2 1998 ends July 3, 1998
Q3 1998 ends October 2, 1998
Q4 1998 ends January 1, 1999
1999 fiscal year end: December 31, 1999
Q1 1999 ends April 2, 1998
Q2 1999 ends July 2, 1998
Q3 1999 ends October 1, 1998
Q4 1999 ends December 31, 1999
2000 fiscal year end: December 29, 2000
Q1 2000 ends March 31, 2000
Q2 2000 ends June 30, 2000
Q3 2000 ends September 29, 2000
Q4 2000 ends December 29, 2000
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Name Jurisdiction of Incorporation
- - ---- -----------------------------
AnswerThink Consulting Group, Inc. Delaware
The Hackett Group, Inc. Ohio
Delphi Partners, Inc. New Jersey
Legacy Technology, Inc. Massachusetts
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No. 1 to
Form S-1 (File No. 333-48123) of our report dated March 12, 1998, on our audit
of the consolidated financial statements of AnswerThink Consulting Group, Inc.
We also consent to the references to our firm under the caption "Experts" and
"Selected Financial Data."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Miami, Florida
May 5, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No. 1 to
Form S-1 (File No. 333-48123) of our reports dated February 27, 1998, on our
audits of the financial statements of Delphi Partners, Inc., The Hackett Group,
Inc., Relational Technologies, Inc. and Legacy Technology, Inc. We also consent
to the references to our firm under the captions "Experts" and "Selected
Financial Data."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Miami, Florida
May 5, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-START> APR-23-1997
<PERIOD-END> JAN-02-1998
<CASH> 3,173,262
<SECURITIES> 0
<RECEIVABLES> 10,157,720
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,743,370
<PP&E> 2,732,951
<DEPRECIATION> 237,656
<TOTAL-ASSETS> 28,649,645
<CURRENT-LIABILITIES> 5,563,546
<BONDS> 0
10,040,196
0
<COMMON> 233,786
<OTHER-SE> 612,117
<TOTAL-LIABILITY-AND-EQUITY> 28,649,645
<SALES> 0
<TOTAL-REVENUES> 14,848,172
<CGS> 0
<TOTAL-COSTS> 27,321,087
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,555
<INCOME-PRETAX> (12,090,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,090,452)
<EPS-PRIMARY> (1.91)
<EPS-DILUTED> (1.91)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-START> JAN-02-1998
<PERIOD-END> APR-03-1998
<CASH> 3,944,221
<SECURITIES> 0
<RECEIVABLES> 14,010,003
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,586,122
<PP&E> 2,832,684
<DEPRECIATION> 450,661
<TOTAL-ASSETS> 37,841,267
<CURRENT-LIABILITIES> 14,336,374
<BONDS> 0
11,140,191
0
<COMMON> 232,000
<OTHER-SE> 2,412,654
<TOTAL-LIABILITY-AND-EQUITY> 37,841,267
<SALES> 0
<TOTAL-REVENUES> 18,531,770
<CGS> 0
<TOTAL-COSTS> 57,691,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321,765
<INCOME-PRETAX> (39,453,173)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,453,173)
<EPS-PRIMARY> (3.86)
<EPS-DILUTED> (3.86)
</TABLE>
