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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-24343
ANSWERTHINK CONSULTING GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-0750100
- ------------------------------- ----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1001 BRICKELL BAY DRIVE, SUITE 3000
MIAMI, FLORIDA 33131
- ---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(305) 375-8005
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
As of April 2, 1999, there were 34,699,042 shares of common stock
outstanding.
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<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of April 2, 1999 and January 1, 1999 3
Consolidated Statements of Operations for the Quarter ended April 2, 1999
and April 3 1998 4
Consolidated Statements of Cash Flows for the Quarter ended April 2, 1999
and April 3, 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
2
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 2, JANUARY 1,
1999 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,432,717 $ 29,965,976
Short-term investments -- 1,000,000
Accounts receivable and unbilled revenue, net 40,165,494 32,943,585
Prepaid expenses and other current assets 1,911,761 1,415,321
------------- -------------
Total current assets 57,509,972 65,324,882
Property and equipment, net 4,232,424 4,046,570
Other assets 3,427,386 3,052,384
Goodwill, net 27,827,798 23,585,946
------------- -------------
Total assets $ 92,997,580 $ 96,009,782
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,395,791 $ 2,869,684
Accrued expenses and other liabilities 13,509,836 13,894,848
Income taxes payable 2,570,228 1,059,474
Current portion of notes payable 1,896,000 2,393,611
------------- -------------
Total current liabilities 21,371,855 20,217,617
Notes payable -- 2,324,329
Redeemable subordinated notes, net -- 4,508,811
------------- -------------
Total liabilities 21,371,855 27,050,757
------------- -------------
Commitments and contingencies
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: 34,699,042 shares at April 2, 1999; 33,849,542 shares at
January 1, 1999 34,699 34,539
Additional paid-in capital 117,520,996 113,391,461
Unearned compensation-restricted stock (1,246,782) (1,390,630)
Accumulated deficit (44,683,188) (43,076,345)
------------- -------------
Total shareholders' equity 71,625,725 68,959,025
------------- -------------
Total liabilities and shareholders' equity $ 92,997,580 $ 96,009,782
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------
APRIL 2, APRIL 3,
1999 1998
------------ ------------
<S> <C> <C>
Net revenues $ 44,805,186 $ 22,836,120
Costs and expenses:
Project personnel and expenses 26,809,217 14,101,404
Selling, general and administrative 12,787,087 7,508,275
Compensation related to vesting of restricted shares -- 40,843,400
Merger related expenses 2,500,000 --
------------ ------------
Total costs and operating expenses 42,096,304 62,453,079
------------ ------------
Income (loss) from operations 2,708,882 (39,616,959)
Other income (expense):
Interest income 198,107 30,072
Interest expense (290,487) (353,739)
------------ ------------
Income (loss) before income taxes and extraordinary loss 2,616,502 (39,940,626)
Income taxes 2,110,754 --
------------ ------------
Income (loss) before extraordinary loss 505,748 (39,940,626)
Extraordinary loss on early extinguishment of debt (net of taxes of $1,408,000) 2,112,591 --
------------ ------------
Net loss $ (1,606,843) $(39,940,626)
============ ============
Basic net income (loss) per common share:
Income (loss) before extraordinary loss $ 0.02 $ (3.64)
Extraordinary loss on early extinguishment of debt $ (0.08) $ --
Net loss per common share $ (0.06) $ (3.64)
Weighted average common shares outstanding 25,193,425 10,984,103
Diluted net income (loss) per common share:
Income (loss) before extraordinary loss $ 0.01 $ (3.64)
Extraordinary loss on early extinguishment of debt $ (0.06) $ --
Net loss per common share $ (0.04) $ (3.64)
Weighted average common and common equivalent shares outstanding 35,711,862 10,984,103
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------
APRIL 2, APRIL 3,
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,606,843) $(39,940,626)
Adjustments to reconcile net loss to net cash used in operating activities:
Extraordinary loss on early extinguishment of debt 2,112,591 --
Compensation related to vesting of restricted shares -- 40,843,400
Depreciation and amortization 1,242,273 743,334
Deferred income taxes 600,000 --
Changes in assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable and unbilled revenue (6,916,935) (3,962,068)
Increase in prepaid expenses and other current and non-current assets (330,343) (391,784)
Increase in accounts payable 520,808 507,966
(Decrease) increase in accrued expenses and other liabilities (204,940) 1,367,243
Increase in income taxes payable 1,510,754 --
------------ ------------
Net cash used in operating activities (3,072,635) (832,535)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (494,300) (814,286)
Sale of property and equipment under sale/leaseback arrangement -- 456,041
Sales of short-term investments 1,000,000 --
Cash used in acquisition of businesses, net of cash acquired (2,428,691) --
------------ ------------
Net cash used in investing activities (1,922,991) (358,245)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,371,796 126
Repurchase of common stock -- (1,018)
Proceeds from issuance of convertible preferred stock -- 1,099,995
Proceeds from revolving credit facility -- 3,265,827
Repayment of revolving credit facility -- (3,760,000)
Proceeds from issuance of notes payable -- 1,712,500
Repayment of notes payable (2,865,790) (985,328)
Repayment of redeemable subordinated notes (8,000,000) --
Proceeds from capital lease obligation -- 507,015
Repayment of obligation under capital lease (43,639) (25,112)
------------ ------------
Net cash (used in) provided by financing activities (9,537,633) 1,814,005
------------ ------------
Net (decrease) increase in cash and cash equivalents (14,533,259) 623,225
Cash and cash equivalents at beginning of period 29,965,976 3,277,121
------------ ------------
Cash and cash equivalents at end of period $ 15,432,717 $ 3,900,346
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of AnswerThink
Consulting Group, Inc. (the "Company") include the accounts of the Company and
all of its wholly owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation. In February 1999, the Company
merged with triSpan, Inc ("triSpan"). The merger with triSpan was accounted for
using the pooling-of-interests method of accounting. All prior historical
consolidated financial statements presented herein have been restated to include
the financial position, results of operations, and cash flows of triSpan. (See
Note 3.)
In the opinion of management, the consolidated financial statements
reflect all normal and recurring adjustments, which are necessary for a fair
presentation of the Company's financial position, results of operations, and
cash flows as of the dates and for the periods presented. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information. Consequently, these
statements do not include all the disclosures normally required by generally
accepted accounting principles for annual financial statements. Accordingly,
these financial statements should be read in conjunction with the Company's
audited financial statements and notes thereto for the year ended January 1,
1999, included in the Form 10-K filed by the Company with the Securities and
Exchange Commission. The consolidated results of operations for the quarter
ended April 2, 1999, are not necessarily indicative of results for the full
year. Certain prior period amounts have been reclassified to conform with
current period presentation.
2. NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares outstanding during
the period. With regard to restricted common shares issued to employees under
employment agreements, the calculation includes only the vested portion of such
shares. Accordingly, common shares outstanding for the basic net income (loss)
per share computation is significantly lower than actual shares issued and
outstanding.
Income (loss) per common share assuming dilution is computed by
dividing the net income (loss) by the weighted average number of common shares
outstanding, increased by the assumed conversion of other potentially dilutive
securities during the period. Potentially dilutive shares as of April 3, 1998,
were excluded from the fully diluted loss per share calculation for the quarter
ended April 3, 1998 because their effect would have been anti-dilutive to the
operating loss incurred by the Company during the first quarter of 1998.
Accordingly, the amount reported for basic and diluted net loss per share were
the same. Potentially dilutive shares which were not included in the diluted
loss per share calculation for the three months ended April 3, 1998 include
9,797,442 shares of unvested restricted common stock issued under employment
agreements and 6,881,742 shares from the assumed conversion of the convertible
preferred stock outstanding at that time.
6
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)
The following table presents the calculation of earnings per share:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------
APRIL 2, APRIL 3,
1999 1998
------------ ------------
<S> <C> <C>
Net income (loss) before extraordinary loss $ 505,748 $(39,940,626)
Extraordinary loss on early extinguishment of debt $ (2,112,591) $ --
------------ ------------
Net loss $ (1,606,843) $(39,940,626)
============ ============
Basic net income per common share:
Weighted average common shares outstanding 25,193,425 10,984,103
============ ============
Income (loss) before extraordinary loss $ 0.02 $ (3.64)
Extraordinary loss on early extinguishment of debt $ (0.08) $ --
Net loss per common share $ (0.06) $ (3.64)
Diluted net income (loss) per common share:
Weighted average common shares outstanding 25,193,425 10,984,103
Dilutive effects of unvested restricted common shares and stock options 10,518,437 --
------------ ------------
Weighted average common and common equivalent shares outstanding 35,711,862 10,984,103
============ ============
Income (loss) before extraordinary loss $ 0.01 $ (3.64)
Extraordinary loss on early extinguishment of debt $ (0.06) $ --
Net loss per common share $ (0.04) $ (3.64)
</TABLE>
3. MERGER WITH TRISPAN
On February 26, 1999, the Company merged with triSpan, Inc ("triSpan").
triSpan is an internet commerce consulting firm that provides Internet
consulting, web application development and integration services. The merger was
accomplished through an exchange of 689,880 shares of the Company's common stock
for all outstanding shares of capital stock of triSpan. Each outstanding share
of common stock of triSpan was converted into 0.311 shares of the Company's
common stock. The transaction was accounted for under the pooling-of-interests
method and, accordingly, the accompanying financial statements and footnotes
have been restated to include the operations of triSpan for all periods
presented. For the quarters ended April 2, 1999 and April 3, 1998, triSpan's
revenues were $3.7 million and $4.3 million, respectively. For the quarters
ended April 2, 1999 and April 3, 1998, triSpan's net losses, excluding merger
related expenses and an extraordinary loss on early extinguishment of debt, were
$419,000 and $487,000, respectively. Merger related expenses included investment
banking, legal and accounting fees as well as the costs of combining operations
and the elimination of duplicate facilities.
7
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. ACQUISITIONS AND NON-CASH INVESTING ACTIVITIES
In February 1999, the Company acquired all the outstanding shares of
Group Cortex, Inc. ("Group Cortex") for 70,839 shares of the Company's common
stock valued at $2.0 million. Group Cortex is a Philadelphia-based provider of
Internet consulting, web application development and integration services. Group
Cortex develops customized business applications that leverage the Internet. Its
project teams provide strategic guidance and hands-on-know how, in the delivery
of complex, scalable Intranet and Internet commerce projects.
In February 1999, the Company acquired certain assets of the Call
Center Enterprises ("CCE") consulting organization of the Quintus Corporation
for $2.5 million in cash. CCE plans, designs and implements modern large scale
call centers. CCE continues to support the eContact Quintus software product
suite for routing and managing customer transactions across all electronic
media.
The Company's acquisitions of Group Cortex and CCE 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 acquisitions. The excess of
the purchase prices of Group Cortex and CCE over the estimated fair values of
the net identifiable assets acquired totaled $4.6 million and has been recorded
as goodwill which is being amortized on a straight-line basis over fifteen
years. The pro forma impact of these acquisitions was not significant to the
results of the Company's consolidated operations for the quarter ended April 2,
1999.
5. INCOME TAXES
The Company's effective tax rate for the first quarter of 1999 was
80.7% compared with no income tax provision in the first quarter of 1998. The
high effective tax rate in the first quarter of 1999 was the result of the
Company incurring non-deductible merger related expenses and the establishment
of a deferred tax liability for triSpan as a result of its conversion from an S
corporation to a C corporation. The Company's effective tax rate, excluding
these items, was 40.0%. The Company did not record a tax provision in the first
quarter of 1998 due to the utilization of net operating loss carryforwards.
6. EXTRAORDINARY LOSS
The extraordinary loss on early extinguishment of debt related to the
repayment of subordinated notes which were assumed in connection with the
triSpan merger. These notes, which had a face amount of $8.0 million and a
stated interest rate of 8.0%, were originally issued at a substantial discount
and were due on June 26, 2003. Immediately following the merger with triSpan,
the Company repaid these notes in full, which resulted in an extraordinary loss
of $2.1 million, net of a $1.4 million tax benefit.
8
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-Q are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
involve known and unknown risks, uncertainties and other factors that may cause
the Company's actual results, performance or achievements to be materially
different from the results, performance or achievements expressed or implied by
the forward looking statements. Factors that impact such forward looking
statements include, among others, the ability of the Company to attract
additional business, changes in expectations regarding the information
technology industry, the ability of the Company to attract skilled employees,
possible changes in collections of accounts receivable, risks of competition,
price and margin trends, changes in general economic conditions and interest
rates and the Year 2000 issue including the potential reduction in demand for
information technology services if customers redirect resources to solve their
Year 2000 issues. A discussion of the Company's risk factors is set forth in the
Company's Registration Statement on Form S-1 (Registration Form 333-48123) under
the caption "Risk Factors".
OVERVIEW
AnswerThink Consulting Group, Inc. ("AnswerThink" or the "Company")
provides integrated consulting and technology enabled solutions focused on the
emerging Internet-driven electronic commerce marketplace. AnswerThink offers a
wide range of integrated solutions, including benchmarking, business process
transformation, software package implementation, Internet commerce, decision
support technology and Year 2000 solutions. These solutions span across
multi-entity functional areas and include supply chain, sales and marketing,
customer support, finance, human resources and information technology. The
Company markets its services to senior executives in organizations where
business transformation and technology-enabled change can have a significant
competitive impact.
In February 1999, the Company merged with triSpan, Inc ("triSpan"). The
merger was accomplished through an exchange of 689,880 shares of the Company's
common stock for all outstanding shares of capital stock of triSpan. The merger
with triSpan was accounted for using the pooling-of-interests method of
accounting. All prior historical consolidated financial statements presented
herein have been restated to include the financial position, results of
operations, and cash flows of triSpan.
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.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------
APRIL 2, 1999 APRIL, 3, 1998
---------------------- --------------------
<S> <C> <C> <C> <C>
Net revenues $ 44,805 100.0% $ 22,836 100.0%
Costs and expenses:
Project personnel and expenses 26,809 59.8% 14,102 61.7%
Selling, general and administrative 12,787 28.6% 7,508 32.9%
Compensation related to vesting of restricted shares -- -- 40,843 178.9%
Merger related expenses 2,500 5.6% -- --
-------------------- --------------------
Total costs and operating expenses 42,096 94.0% 62,453 273.5%
-------------------- --------------------
Income (loss) from operations 2,709 6.0% (39,617) (173.5%)
Other income (expense):
Interest income (expense), net (92) (0.2%) (324) (1.4%)
-------------------- --------------------
Income (loss) before income taxes and extraordinary loss 2,617 5.8% (39,941) (174.9%)
Income taxes 2,111 4.7% -- --
-------------------- --------------------
Income (loss) before extraordinary loss on early extinguishment of debt 506 1.1% (39,941) (174.9%)
Extraordinary loss on early extinguishment of debt (net of taxes of $1,408) 2,113 4.7% -- --
-------------------- --------------------
Net loss $ (1,607) (3.6%) $(39,941) (174.9%)
==================== ====================
</TABLE>
9
<PAGE>
NET REVENUES. Net revenues for the first quarter of 1999 increased by
$22.0 million or 96.2% over the comparative quarter of 1998. This increase was
attributable to several factors, including: an increase in the number of clients
served, sales of additional projects to existing clients, additional service
offerings provided by the Company and the Company's acquisitions in 1998 and
1999.
PROJECT PERSONNEL AND EXPENSES. Project personnel costs and expenses
consist of salaries and payroll-related expenses for consultants. Project
personnel and expenses for the first quarter of 1999 increased by $12.7 million
or 90.1% over the comparative quarter of 1998. The increase in project personnel
and expenses is attributable to an increase in the number of consultants from
438 at the end of the first quarter of 1998 to 838 at the end of the first
quarter of 1999. This increase was the result of hiring additional consultants
to support the Company's internal growth and expanded service offerings as well
as the Company's four acquisitions since the end of the first quarter of 1998.
Project personnel and expenses as a percentage of net revenues decreased
slightly in the first quarter of 1999 to 59.8% compared to 61.7% during the
comparative 1998 quarter due primarily to an increase in the average billing
rate for consultants.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were $12.8 million in the first quarter of 1999 compared
to $7.5 million during the first quarter of 1998. Selling, general and
administrative expenses as a percentage of net revenues decreased to 28.6% in
the first quarter of 1999 from 32.9% during the first quarter of 1998. This
decrease was due primarily to higher revenue levels during the first quarter of
1999, as well as the Company's ability to leverage its infrastructure to the
acquired companies. The increased dollar amount of selling, general and
administrative expenses was primarily attributable to an increase in the number
of sales and functional support associates, additional selling costs related to
the higher sales volume as well as higher recruiting and training costs
resulting from the increase in the number of consultants.
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 seven of the Company's
senior managers and one director that were subject to certain performance
vesting criteria. There are no additional restricted shares outstanding that are
subject to performance criteria for vesting.
MERGER RELATED EXPENSES. Merger related expenses were $2.5 million for
the three months ended April 2, 1999. These expenses related primarily to the
Company's merger with triSpan in February 1999, which was accounted for as a
pooling-of-interests. The expenses included investment banking, legal and
accounting fees as well as the costs of combining operations and eliminating
duplicate facilities.
INTEREST INCOME (EXPENSE), NET. Net interest expense totaled $92,000 in
the first quarter of 1999 compared to $324,000 of net interest expense in the
comparative quarter of 1998. Net interest expense was lower in 1999 primarily as
a result of lower debt levels as the Company utilized the proceeds of its
initial public offering in the second quarter of 1998 to repay the majority of
its long-term borrowings.
INCOME TAXES. The Company's effective tax rate for the first quarter of
1999 was 80.7% compared with no income tax provision in the first quarter of
1998. The high effective tax rate in the first quarter of 1999 was attributable
to the non-deductibility of merger related expenses and the establishment of a
deferred tax liability for triSpan as a result of its conversion from an S
corporation to a C corporation. The Company's effective tax rate, excluding
these items, was 40.0%. The Company did not record a tax provision in the first
quarter of 1998 due to the utilization of net operating loss carryforwards.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. The extraordinary
loss on early extinguishment of debt was a result of the repayment of
subordinated notes which were assumed in connection with the triSpan merger.
These notes, which had a face amount of $8.0 million and a stated interest rate
of 8.0%, were originally issued at a substantial discount and were due on June
26, 2003. Immediately following the merger with triSpan, the Company repaid
these notes in full, which resulted in an extraordinary loss of $2.1 million,
net of a $1.4 million tax benefit.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At April 2, 1999, the Company had $15.4 million of cash and cash
equivalents compared to $3.9 million at April 3, 1998. Prior to its initial
public offering in May 1998, the Company's primary source of liquidity had been
its initial capitalization, operating cash flows and borrowings under the
Company's revolving credit facility. The Company has a revolving credit facility
with BankBoston for up to $20 million. The credit facility is unsecured and
contains certain restrictive covenants. There were no borrowings under this
credit facility as of April 2, 1999.
Net cash used in operating activities was $3.1 million for the quarter
ended April 2, 1999 compared to $833,000 used during the comparable period of
1998. During the quarter ended April 2, 1999, net cash used in operating
activities was primarily attributable to an increase in accounts receivable and
unbilled revenue, partially offset by an increase in income taxes payable and
the Company's operating income. During the comparable period of 1998, net cash
used in operating activities was primarily attributable to an increase in
accounts receivable and unbilled revenue, which was partially offset by
increases in accrued expenses and other liabilities and the Company's earnings
excluding non-cash charges.
Net cash used in investing activities was $1.9 million for the first
quarter of 1999 compared to $358,000 during the first quarter of 1998. The use
of cash for investing activities in 1999 was attributable to $2.4 million used
in the acquisition of businesses and $494,000 of purchases of property and
equipment, partially off-set by sales of short-term investments of $1.0 million.
During the comparable period of 1998, net cash used in investing activities was
for purchases of property and equipment, which were offset by a sale of property
and equipment under a sale/leaseback arrangement.
Net cash used in financing activities was $9.5 million in the first
three months of 1999 compared to $1.8 million provided by financing activities
during the first three months of 1998. The use of cash for financing activities
during 1999 was primarily the result of the repayment of $8.0 million of
subordinated notes which were assumed in connection with the triSpan merger as
well as the repayment of other notes payable totaling $2.9 million, which were
partially offset by the proceeds from the employee stock purchase plan. The
primary source of cash from financing activities during the first three months
of 1998 was $1.1 million received from the issuance of convertible preferred
stock.
Based on the Company's current financial position and funds available
under its credit facility or that may be generated from operations, the Company
believes that it will be able to meet all of its currently anticipated
short-term and long-term financial requirements.
YEAR 2000 READINESS
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 internal systems were implemented during 1997 and
1998. The Company has prepared an inventory of information technology and
non-information technology system components and has begun to classify system
components in terms of its criticality to the Company's operations. Its mission
critical components, which include Oracle Financials, Personnel, Time and
Expense, and Project Billing software modules, are considered by the vendors to
be Year 2000 compliant. In December of 1998, as part of its overall Year 2000
readiness assessment effort, the Company kicked off its efforts to confirm this
fact. The Company is in the process of confirming the Year 2000 compliance of
its mission critical system vendors, and has currently targeted May 31, 1999 as
the completion date for this assessment. The Company anticipates that the Year
2000 compliance of mission critical components will be confirmed in all material
respects. If compliance is not successfully confirmed, the Company anticipates
that components that are not compliant will be able to be fixed using software
vendor release updates in connection with existing maintenance agreements that
include as a component a Year 2000 remedy. The Company estimates that the cost
to apply the Year 2000 release updates will not be material. The testing of
critical applications will begin during the second quarter of 1999. If, as a
result of this testing, further updates are required, the Company believes that
all required updates will be installed and tested prior
11
<PAGE>
to December 31, 1999. However there can be no assurances that all required tests
and updates will be completed by that date.
As part of its overall Year 2000 program the Company plans to assess
the readiness of its external business relationships on which it relies in the
conduct of its business. For example, a third party vendor performs the payroll
function for the Company. The Company also relies on the services of
telecommunications companies, Internet service providers, banks, utilities and
commercial airlines, among others. The Company is in the process of inventorying
and classifying these relationships according to its criticality to the
Company's operations. The Company plans to seek assurances from its material
vendors and suppliers that there will be no interruption of service as a result
of the Year 2000 issue, and to the extent not given, the Company intends to
devise contingency plans designed to mitigate the impact on the Company's
business in the event the Year 2000 issue results in the unavailability of
services. There can be no assurance that any contingency plans developed by the
Company will prevent any such service interruption on the part of one or more of
the Company's third party suppliers from having a material adverse effect on the
Company's business, operating results and financial condition. In addition, the
failure on the part of the accounting systems of the Company's clients due to
the Year 2000 issue could result in a delay in the payment of invoices issued by
the Company for services and expenses. A failure of the accounting systems of a
significant number of the Company's clients would have a material adverse effect
on the Company's business, operating results and financial condition.
The Company believes the Year 2000 Issue as it relates to its internal
information technology and non-information technology system components will not
have material impact on the Company's financial condition or results of
operations. However, the potential failure of the systems of its external
business relationships discussed above and the potential for failures at its
material clients which cause the postponement or cancellation of ongoing
projects could result in an interruption of normal business activities and
operations and result in the cancellation of future project. Such failures could
materially and adversely affect the Company's results of operations. Due to the
general uncertainty inherent in the Year 2000 Issue, resulting in part from the
uncertainty of the Year 2000 readiness of external business relationships, the
Company is unable to determine at this time whether the consequences of external
Year 2000 failures will have a material impact on the Company's results of
operations.
The services offered by the Company do not include actual Year 2000
code remediation services. However, approximately 6% of the Company's revenues
for the three months ended April 2, 1999 were related to assisting clients
assess Year 2000 readiness and assist clients designing and managing the process
whereby necessary remediation is accomplished. The Company's clients are
ultimately responsible for the actual remediation process. However, these
clients could assert that certain services performed by the Company contributed
to their failure to resolve their Year 2000 issues on a timely basis. In
addition, the Company's principal service offerings include software package
recommendation and implementation as well as system design. These software
packages are created by third parties. Further, the hardware and software
components of the systems designed by the Company are created by third parties.
Clients could assert that the services rendered in connection with the
recommendation and installation of software packages and system design,
installation, and implementation and the interfacing of software packages with
existing client systems involved or are related to the Year 2000 issue. There
can be no way of assuring that all such software packages and systems components
will be Year 2000 compliant. Further, clients have the ability to alter and
upgrade software and system components after project completion. These client
activities may render these software packages or systems non-compliant. Due to
the potential significance of the Year 2000 issue upon client operations, upon
any failure of critical client systems or processes that may be directly or
indirectly connected or related to services provided by the Company, the Company
may be subjected to claims regardless of whether the failure is related to the
services provided by the Company. If asserted, such claims (and the associated
cost of defending such claims) could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Company's policy has been to attempt to include provisions in its
client contracts that, among other things, disclaim implied warranties, limit
the Company's liability to the amount of fees paid by the client to the Company
in connection with the project, and disclaim liability arising from third party
software that is implemented or installed by the Company. There can be no
assurance that the Company will be able to obtain these contractual protections
in agreements concerning future projects or that any contractual provisions
governing current completed projects will prevent clients from asserting claims
against the Company with respect to the Year 2000 issue. There
12
<PAGE>
can also be no assurance that the contractual protections, if any, obtained by
the Company will effectively operate to protect the Company from, or limit the
amount of, any liability arising from claims asserted against the Company.
The forgoing discussion of the Company's Year 2000 readiness contains
forward looking statements including estimated timeframes and costs for
addressing the known Year 2000 issues confronting the Company and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the ability of the Company to identify and correct all Year 2000 problems
and the success of external business relationships in addressing their Year 2000
issues.
13
<PAGE>
ANSWERTHINK CONSULTING GROUP, INC.
PART II - - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) (i) On February 12, 1999, in connection with the Registrant's
acquisition of Group Cortex, Inc. ("Group Cortex"), the Registrant issued 70,839
shares of common stock that were not registered under the Securities Act of 1933
to the former stockholders of Group Cortex. These shares were issued in reliance
upon an exemption from registration under Section 4(2) of the Securities Act of
1933.
(ii) On February 26, 1999, in connection with the Registrant's
merger with triSpan, Inc. ("triSpan"), the Registrant exchanged 689,880 shares
of common stock for all outstanding shares of capital stock of triSpan. These
shares of common stock were not registered under the Securities Act of 1933 and
were issued in reliance upon an exemption from registration under Section 4(2)
of the Securities Act of 1933.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(c) EXHIBITS
NUMBER EXHIBIT
------ -------
4.1 Registration Rights Agreement by and among AnswerThink
Consulting Group, Inc. and certain shareholders of triSpan,
Inc.
10.36 Merger Agreement, dated as of February 26, 1999, by and
among the Registrant, triSpan, Inc. ("triSpan") and the
Shareholders of triSpan.
10.37 Escrow Agreement by and among AnswerThink Consulting Group,
Inc., First Union National Bank and those certain
shareholders, vested option holders and warrant holders of
triSpan, Inc. listed on the signature page thereof.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended April 2, 1999.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANSWERTHINK CONSULTING GROUP, INC.
Date: May 17, 1999 By: /s/ LUIS E. SAN MIGUEL
------------------------------------
Luis E. San Miguel
Executive Vice President, Finance
and Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
NUMBER EXHIBIT
------ -------
4.1 Registration Rights Agreement by and among AnswerThink
Consulting Group, Inc. and certain shareholders of triSpan,
Inc.
10.36 Merger Agreement, dated as of February 26, 1999, by and
among the Registrant, triSpan, Inc. ("triSpan") and the
Shareholders of triSpan.
10.37 Escrow Agreement by and among AnswerThink Consulting Group,
Inc., First Union National Bank and those certain
shareholders, vested option holders and warrant holders of
triSpan, Inc. listed on the signature page thereof.
27.1 Financial Data Schedule
16
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
TRISPAN SHAREHOLDERS
THIS REGISTRATION RIGHTS AGREEMENT (this "REGISTRATION RIGHTS AGREEMENT")
is made as of February 26, 1999, by and among AnswerThink Consulting Group,
Inc., a Florida corporation (the "COMPANY"), and the undersigned shareholders
(the "SHAREHOLDERS").
RECITALS
The Company desires to provide certain registration rights with respect to
shares of the Company's common stock, par value $.001 ("COMMON STOCK"), owned or
acquired by the Shareholders, pursuant to that certain Merger Agreement, dated
as of February 26, 1999, by and among the Company, ACG-triSpan Sub, Inc.,
triSpan Inc. and the Sellers named as such therein.
Based on the foregoing premises, the Company and the Shareholders hereby
agree as follows:
I. EFFECTIVE TIME. This Registration Rights Agreement shall be effective as of
the date first set forth above (the "EFFECTIVE TIME").
II. PIGGYBACK REGISTRATIONS.
A. RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of its
securities under the Securities Act of 1933, as amended (the "SECURITIES
ACT")(other than pursuant to a registration of securities on Form S-4 or S-8
under the Securities Act (or a successor form to either of such Forms) or
pursuant to a "Demand Registration," as such term is defined in that certain
Registration Agreement dated as of April 23, 1997 by and among the Company and
certain investors in and executives of the Company (as such Registration
Agreement may be amended or amended and restated from time to time, the
"INVESTORS AND EXECUTIVES REGISTRATION RIGHTS AGREEMENT") and that certain
Registration Agreement dated as of August 1, 1997 by and among the Company and
certain other executives and shareholders of the Company ((as such Registration
Agreement may be amended or amended and restated from time to time, the "RTI
REGISTRATION RIGHTS AGREEMENT"), and the registration form to be used may be
used for the registration of Registrable Securities (as defined below) (a
"PIGGYBACK REGISTRATION"), the Company shall give prompt written notice to all
Shareholders of its intention to effect such a registration and shall include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 10 days after the
receipt of the Company's notice. "REGISTRABLE Securities" means all of the
shares of Common Stock held by each Shareholder at the Effective Time, together
with any other shares of Common Stock issued or issuable with respect to said
shares by way of a stock dividend or stock split or conversion or in connection
with an exchange or combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities and the
Company shall not be required to continue to maintain the effectiveness of a
registration statement with respect thereto upon the earliest to occur of the
following: (i) when they have been sold under the Securities Act in a registered
offering, (ii) sold to the public through a broker, dealer or market maker in
compliance with Rule 144 under the Securities Act (or any similar rule then in
force) ("RULE 144") (iii) or become eligible for sale (without limitation) under
Rule 144K or any successor rule. For purposes of this Registration Rights
Agreement, a person shall be deemed to be a holder of Registrable Securities
whenever such person has the right to acquire such Registrable Securities (upon
conversion or exercise of securities or otherwise), whether or not such
acquisition has actually been effected; PROVIDED, HOWEVER, that such acquisition
must actually have been effected prior to the effective date of any registration
statement which includes any Registrable Securities to be so acquired.
<PAGE>
B. PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in an orderly manner in such offering within a price range acceptable to
the Company without adversely affecting the marketability of the offering, the
Company shall include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Registrable Securities held only by those
parties with registration rights under the Investors and Executives Registration
Rights Agreement and under the RTI Registration Rights Agreement requested to be
included in such registration, pro rata among the holders of such Registrable
Securities on the basis of the number of shares owned by each such holder, (iii)
third, the Registrable Securities held by the Shareholder hereunder, and (iv)
fourth, other securities requested to be included in such registration.
C. PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the holders of a majority of the "Registrable
Securities" under the Investors and Executives Registration Rights Agreement,
the RTI Registration Rights Agreement and this Registration Rights Agreement
without adversely affecting the marketability of the offering, the Company shall
include in such registration (i) first, the securities requested to be included
therein by the holders on whose behalf such registration is being effected, (ii)
second, the Registrable Securities held only by those parties with registration
rights under the Investors and Executives Registration Rights Agreement and
under the RTI Registration Rights Agreement requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, (iii) third, the
Registrable Securities held by Paul Puzzenghera granted in connection with the
Company's acquisition of Legacy Technology, Inc., (iv) fourth, the Registrable
Securities held by the Shareholder hereunder, and (v) fifth, other securities
requested to be included in such registration.
III. FORM S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 or its successor form. After the Company has qualified
for the use of Form S-3 , the Company shall notify the Shareholders of such
qualification and shall, within thirty (30) days of such qualification, register
the number of shares of Registrable Securities to be disposed of in accordance
with the intended method of disposition of shares sought to be disposed of by
such Shareholder. Notwithstanding such 30-day grace period, so long as one of
the events listed in SECTION 7 below has not occurred or is occurring, the
Company will use its best efforts to file such registration statement on Form
S-3 on or soon as practicable after, the date on which the Company becomes Form
S-3 eligible.
The Company shall give written notice to all Shareholders of
registration pursuant to this SECTION 3 and shall provide a reasonable
opportunity (no fewer than ten (10) days from the delivery of the notice) for
other Shareholders to participate in the registration.
IV. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities have
requested that any Registrable Securities be registered pursuant to this
Registration Rights Agreement, the Company shall use its best efforts to effect
the registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof, and pursuant thereto the Company
shall as expeditiously as possible:
A. prepare and file with the Securities and Exchange Commission (the "SEC")
a registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed);
B. notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the SEC
such amendments and supplements
<PAGE>
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement in the case of a
registration statement under SECTION 2 effective for a period of not less than
90 days and, in the case of a registration statement under SECTION 3 for a
period of not less than 2 years and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
C. furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
D. use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
E. notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
F. cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on "NASDAQ" (as defined in Rule 11Aa3-1 of the
SEC under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"))
and, if listed on NASDAQ, use its best efforts to secure designation of all such
Registrable Securities covered by such registration statement as a "national
market system security" within the meaning of Rule 11Aa2-1 of the SEC under the
Exchange Act or, failing that, to secure NASDAQ authorization for such
Registrable Securities;
G. provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
H. enter into such customary agreements (including underwriting agreements
in customary form, if any) and take all such other actions as the holders of a
majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
I. make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accounts to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
J. otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the
<PAGE>
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
K. permit any holder of Registrable Securities which holder, in its sole
and exclusive judgment, might be deemed to be an underwriter or a controlling
person of the Company, to participate in the preparation of such registration or
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such holder and
its counsel should be included;
L. in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
M. use its best efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities; and
N. in the case of a registration statement other than pursuant to
Securities Act Rule 415, obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute a least 10% of the securities
covered by such registration statement).
V. REGISTRATION EXPENSES.
A. All expenses incident to the Company's performance of or compliance with
this Registration Rights Agreement, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other persons retained by the Company
(all such expenses being herein called "REGISTRATION EXPENSES"), shall be borne
by the Company.
B. The Registration Expenses of the holders of Registrable Securities shall
be paid by the Company in all Piggyback and Shelf Registrations.
C. In connection with each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one counsel chosen by the holders
of a majority of the Registrable Securities and for the reasonable fees and
disbursements of each additional counsel retained by any holder of Registrable
Securities for the purpose of rendering a legal opinion on behalf of such holder
in connection with any underwritten Piggyback Registration.
VI. HOLD-BACK AGREEMENT.
Each holder of Registrable Securities shall agree not to effect any public
sale or distribution of securities of the Company of the same or similar class
or classes of the securities included in a registration statement or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, for
a period beginning on the effective date of a registered offering and ending 90
days thereafter or that shorter period requested by the underwriter in an
underwritten public offering by the Company.
<PAGE>
VII. STANDBY AND BLACK OUT ARRANGEMENTS.
A. Notwithstanding any other provision of this Agreement to the contrary,
the Company shall not be required to file any registration statement pursuant to
SECTION 3 of this Agreement (i) within a period of 90 days after the effective
date of any other registration statement filed by the Company (other than a
registration statement on Form S-8, and (ii) for a deferral period of up to 90
days if the Board of Directors of the Company in good faith determines that such
registration would interfere with any proposed offering of shares of the
Company's capital stock (and the Company notifies the Shareholders of its
intention to file a registration statement relating to such offering); PROVIDED,
HOWEVER, that the Company shall be able to defer registration under this
subclause only one time in any 12-month period.
B. Following the effectiveness of a registration statement (and the filings
with any state securities commissions), the Company may direct a holder of
Registrable Securities to suspend sales of the Registrable Securities for such
times as the Company reasonably may determine is necessary and advisable, for
any event for which disclosure may be required under the securities laws,
including the following events (a "SUSPENSION EVENT"), (i) an underwritten
primary offering by the Company where the Company is advised by the underwriters
for such offering that sale of Registrable Shares under the registration
statement would have a material adverse effect on the primary offering, or (ii)
pending negotiations relating to, or consummation of, a transaction or the
occurrence of an event (x) that would require additional disclosure of material
information by the Company in the registration statement (or such filings), (y)
as to which the Company has a BONA FIDE business purpose for preserving
confidentiality or (z) which renders the Company unable to comply with SEC
requirements, or (iii) the continued effectiveness of a registration statement
would have a material adverse effect on any proposed or pending acquisition,
merger, business combination or other material transaction involving the
Company, in each case under circumstances that would make it impractical or
inadvisable to cause the registration statement (or such filings) to become
effective or to promptly amend or supplement the registration statement on a
post-effective basis, as applicable.
C. In the case of an event which causes the Company to suspend the
effectiveness of a registration statement, the Company may give notice (a
"SUSPENSION NOTICE") to the holders of Registrable Securities to suspend sales
of the Registrable Shares (other than pursuant to a Piggyback Registration as
provided in SECTION 2 where the Suspension Notice relates to a Shelf
Registration under SECTION 3) so that the Company may correct or update the
registration statement (or such filings); provided, however, that such
suspension shall continue only for so long as the Suspension Event or its effect
is continuing. Each holder of Registrable Securities agrees that it will not
effect any sales of the Registrable Shares pursuant to such registration
statement (or such filings) at any time after it has received a Suspension
Notice from the Company. If so directed by the Company, each holder of
Registrable Securities will deliver to the Company all copies of the Prospectus
covering the Registrable Shares held by them at the time of receipt of the
Suspension Notice. The holders of Registrable Securities may recommence
effecting sales of the Registrable Shares pursuant to the registration statement
(or such filings) following further notice to such effect (an "END OF SUSPENSION
NOTICE") from the Company, which End of Suspension Notice shall be given by the
Company promptly following the conclusion of any Suspension Event and the
effectiveness of any required amendment or supplement to be the registration
statement.
D. Notwithstanding the provisions of SECTIONS 7(A) and 7(B) to the
contrary: (i) no holder of Registrable Securities shall be subject to the
provisions of SECTIONS 7(A) and 7(B) hereof for a period of time in excess of
ninety (90) days; and (ii) no Suspension Notice may be given more than twice in
any twelve (12) month period. Moreover, notwithstanding SECTIONS 2(A) and 3
hereof, if the Company shall give a Suspension Notice pursuant to this SECTION
7, the Company agrees it shall extend the period during which the registration
statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from the date of the giving of the Suspension Notice
to and including the date when the holders of Registrable Securities shall have
received the End of Suspension Notice and copies of the supplemented or amended
Prospectus necessary to resume sales.
<PAGE>
VIII. INDEMNIFICATION.
A. The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, its officers and directors and each person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus filed pursuant to the terms of
this Agreement or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the Company by
such holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
B. In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
C. Any person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying part of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any person's right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
D. The indemnification provided for under this Registration Rights
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
(E) Each Shareholder agrees to indemnify and hold harmless the Company, its
directors and officers 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 to the same extent as the foregoing indemnity from the Company to
such Shareholder with respect to information relating to such Shareholder
<PAGE>
furnished in writing by such Shareholder expressly for use in, and information
provided under this Agreement for use in, any registration statement or
prospectus, or any amendment or supplement thereto, or any preliminary
prospectus.
The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information so furnished in writing by such persons specifically for
inclusion in any prospectus or registration statement or any amendment or
supplement thereto, or any preliminary prospectus.
9. PARTICIPATION IN REGISTRATIONS. No person may participate in any registration
hereunder unless such person (i) agrees to sell such person's securities on the
basis provided in any underwriting arrangements approved by the person or
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the securities laws or under the
terms of any such underwriting arrangements; provided that no holder of
Registrable Securities included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 8 hereof.
10. MISCELLANEOUS.
A. NO INCONSISTENT AGREEMENTS. The Company shall not enter into any
agreement with respect to its securities which is inconsistent with or violates
the rights granted to the holders of Registrable Securities in this Registration
Rights Agreement.
B. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company shall not take
any action, or permit any change to occur, with respect to its securities which
would adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in a registration undertaken pursuant to
this Registration Rights Agreement or which would adversely effect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
C. REMEDIES. Any person having rights under any provisions of this
Registration Rights Agreement shall be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Registration Rights Agreement and to exercise all other rights granted
by law. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Registration Rights
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any, bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Registration Rights
Agreement.
D. AMENDMENT AND WAIVERS. Except as otherwise provided herein, the
provisions of this Registration Rights Agreement may be amended or waived only
upon the prior written consent of the Company and the Shareholders.
E. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Registration Rights 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, whether or not any
express assignment has been made, the provisions of this Registration Rights
Agreement which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities.
F. SEVERABILITY. Whenever possible, each provision of this Registration
Rights Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but
<PAGE>
if any provision of this Registration Rights 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 Registration Rights Agreement.
G. COUNTERPARTS. This Registration Rights 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 Registration Rights Agreement.
H. DESCRIPTIVE HEADINGS. The descriptive headings of this Registration
Rights Agreement are inserted for convenience only and do not constitute a part
of this Registration Rights Agreement.
I. GOVERNING LAW. THIS REGISTRATION RIGHTS AGREEMENT, THE RIGHTS AND DUTIES
OF THE PARTIES HERETO, AND ANY CLAIMS OR DISPUTES RELATING THERETO, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA
(BUT NOT INCLUDING THE CHOICE OF LAW RULES THEREOF).
J. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Registration Rights
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 at
the addresses set forth: (i) in the case of the Shareholders, on the books and
records of the Company (or such other address as to which the Shareholders has
notified the Company); or (ii) in the case of the Company, below:
AnswerThink Consulting Group, Inc.
1001 Brickell Bay Drive
Suite 3000
Miami, Florida 33131
Telephone: (305) 375-8005
Facsimile: (305) 379-8810
Attention: Ted A. Fernandez
President, Chief Executive
Officer and Chairman.
11. TRANSFER OF REGISTRATION RIGHTS. Each Shareholder's rights under this
Agreement may not be assigned by such Shareholder except to (a) any other
Shareholder, (b) any affiliate, as that term is defined in the Investment
Company Act of 1940, as amended, of such Shareholder (including a partner of
such Shareholder), or (c) any person or entity acquiring from such Shareholder
at least twenty five percent (25%) of the Registrable Securities held by such
Shareholder on the date of this Agreement or an equivalent amount (as adjusted
for stock splits, stock dividends, reclassifications, recapitalizations or other
similar events) of Common Stock. Notwithstanding anything to the contrary in
this Agreement, John P. Louchheim's rights under this Agreement may be
transferred with respect to 15,000 shares of Common Stock to not more than four
(4) charities. Any transfer or assignment permitted by the foregoing sentences
shall be effective as long as (1) the Company is given written notice by such
Shareholder at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such registration rights are being assigned and
(2) the transferee or assignee agrees in writing to be bound by the terms and
conditions of this Agreement.
* * * * *
[EXECUTION PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
THE COMPANY:
ANSWERTHINK CONSULTING GROUP, INC., a
Florida corporation
By: /s/ JOHN F. BRENNAN
-------------------------
John F. Brennan
Executive Vice President
SELLERS:
/s/ JOHN LOUCHHEIM
-------------------------
Name: John Louchheim
-------------------------
/s/ DENNIS M. MCGRATH
-------------------------
Name: Dennis M. McGrath
-------------------------
/s/ JEFFREY L. WORTHINGTON
----------------------------
Name: Jeffrey L. Worthington
----------------------------
JK&B CAPITAL L.P.
By: JK&B MANAGEMENT, LLC
GENERAL PARTNER
By: /s/ DAVID KRONFELD
-------------------------
Name: David Kronfeld
Its: Manager
JK&B CAPITAL II, L.P.
By: JK&B MANAGEMENT, LLC
GENERAL PARTNER
By: /s/ DAVID KRONFELD
-------------------------
Name: David Kronfeld
Its: Manager
APEX STRATEGIC PARTNERS, L.L.C.
By: APEX MANAGEMENT III, L.L.C., ITS MANAGER
By: FIRST ANALYSIS APEX MANAGEMENT CO. III, L.L.C.
MANAGING PARTNER
By: /s/ BRET R. MAXWELL
-------------------------
Name: Bret R. Maxwell, Member
APEX INVESTMENT FUND III, L.P.
By: APEX MANAGEMENT III, L.L.C.,
ITS GENERAL PARTNER
By: FIRST ANALYSIS APEX MANAGEMENT CO. III, L.L.C.
MANAGING PARTNER
By: /s/ BRET R. MAXWELL
-------------------------
Name: Bret R. Maxwell, Member
Its: Member
WINSTON PARTNERS, L.P.
By: CHATTERJEE FUND MANAGEMENT, L.P.
By: /s/ PETER A. HURWITZ
-------------------------
Name: Peter A. Hurwitz
Its: Attorney in Fact
WINSTON PARTNERS II LLC
By: CHATTERJEE ADVISORS L.L.C.
By: /s/ PETER A. HURWITZ
-------------------------
Name: Peter A. Hurwitz
Its: Manager
BOSTON CAPITAL VENTURES III
By: /s/ DAVID KRONFELD
-------------------------
Name: David Kronfeld
Its: General Partner
VELOCITY CAPITAL, LLC
By: /s/ DAVID A. VOGEL
-------------------------
Name: David A. Vogel
Its: Member/Manager
EXHIBIT 10.36
MERGER AGREEMENT
BY AND AMONG
ANSWERTHINK CONSULTING GROUP, INC.,
(BUYER)
ACG - TRISPAN SUB, INC.,
(NEWCO)
TRISPAN INC.,
(TRISPAN)
AND
THE SHAREHOLDERS
OF TRISPAN
(SELLERS)
DATED AS OF FEBRUARY 26, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 ................................................................ 5
1. Definitions ....................................................... 5
Article 2 ................................................................ 10
2. The Merger ........................................................ 10
2.1. The Merger ................................................ 10
2.2. Effective Time of the Merger .............................. 10
2.3. Certificate of Incorporation .............................. 10
2.4. Bylaws .................................................... 11
2.5. Directors and Officers of the Surviving
Corporation .............................................. 11
2.6. Effect of the Merger ...................................... 11
2.7. Conversion of triSpan Shares and Options .................. 11
2.8. Purchase Price ............................................ 12
(i) Payment of Purchase Price to triSpan
Shareholders .............................. 12
(ii) Payment of triSpan Purchase Price
to Escrow Account ......................... 12
2.9. Reserved .................................................. 12
2.10. The Closing .............................................. 12
2.11. Deliveries at the Closing ................................ 12
2.12. Escrow Arrangements ...................................... 12
Article 3 ................................................................ 13
3. Representations and Warranties Concerning the Transaction ......... 13
3.1. Representations and Warranties of Sellers ................. 13
(a) Authorization of Transaction ......................... 13
(b) Noncontravention ..................................... 13
(c) Broker's Fees ........................................ 13
(d) Investment ........................................... 14
(e) triSpan Shares ....................................... 14
3.2. Representations and Warranties of the Buyer and Newco ..... 14
(a) Organization of the Buyer and Newco .................. 14
(b) Authorization of Transaction ......................... 14
(c) Noncontravention ..................................... 14
(d) Brokers'Fees ......................................... 15
(e) Investment ........................................... 15
(f) Filings with the SEC ................................. 15
(g) Capitalization ....................................... 15
(h) Financial Statements ................................. 15
(i) Undisclosed Liabilities .............................. 15
(j) Tax-Related Matters .................................. 15
(k) No Material Adverse Effect ........................... 16
(l) Availability of Funds ................................ 16
(m) No Litigation ........................................ 16
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<PAGE>
Article 4 ................................................................ 16
4.1. Organization, Qualification, and Corporate Power .......... 17
4.2. Capitalization ............................................ 17
4.3. Noncontravention .......................................... 18
4.4. Subsidiaries .............................................. 18
4.5. Financial Statements ...................................... 18
4.6. Events Subsequent to the Most Recent Fiscal Year End ...... 18
4.7. Undisclosed Liabilities ................................... 20
4.8. Tax Matters ............................................... 20
4.9. Tangible Assets ........................................... 22
4.10. Owned Real Property ...................................... 22
4.11. Intellectual Property .................................... 22
4.12. Real Property Leases ..................................... 23
4.13. Contracts ................................................ 23
4.14. Powers of Attorney ....................................... 24
4.15. Insurance ................................................ 24
4.16. Litigation ............................................... 24
4.17. Employees ................................................ 25
4.18. Employee Benefits ........................................ 25
4.19. Guaranties ............................................... 26
4.20. Environment, Health, and Safety .......................... 26
4.21. Legal Compliance ......................................... 27
4.22. Certain Business Relationships with triSpan .............. 27
4.23. Brokers'Fees ............................................. 28
4.24. Disclaimer of Other Representations and Warranties ....... 28
Article 5 ................................................................ 28
Reserved ....................................................... 28
Article 6 ................................................................ 28
6. Additional Covenants ........................................ 28
6.1. General ................................................... 28
6.2. Litigation Support ........................................ 28
6.3. Confidentiality ........................................... 28
6.4. Landlords'Consents ........................................ 29
6.5. Additional Tax Matters .................................... 29
6.6. Covenant Not to Compete ................................... 30
6.7. Reorganization Intent ..................................... 30
6.8. Pooling Transaction ....................................... 30
6.9. Registration Rights ....................................... 31
6.10. triSpan Options .......................................... 31
6.11. 401(k) Plan .............................................. 32
6.12. TriSub ................................................... 32
Article 7 ................................................................ 33
7. Conditions to Obligations to Close ................................ 33
7.1. Conditions to Obligation of the Buyer ..................... 33
7.2. Conditions to Obligations of the Sellers .................. 34
Article 8 ................................................................ 35
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<PAGE>
8. Remedies for Breaches of This Agreement ........................... 35
8.1. Survival .................................................. 35
8.2. Indemnification Provisions for Benefit of the Buyer ....... 35
8.3. Indemnification Provisions for Benefit of the Sellers ..... 36
8.4. Matters Involving Third Parties ........................... 36
8.5. Exclusive Remedy .......................................... 37
8.6. Payment; General Right of Offset .......................... 37
8.7. Arbitration with Respect to CertainIndemnification Matters. 37
Article 9 ................................................................ 38
Reserved ....................................................... 38
Article 10 ............................................................... 38
10. Miscellaneous ............................................. 38
10.1. Press Releases and Announcements ......................... 38
10.2. No Third-Party Beneficiaries ............................. 38
10.3. Entire Agreement ......................................... 38
10.4. Succession and Assignment ................................ 38
10.5. Facsimile/Counterparts ................................... 39
10.6. Descriptive Headings ..................................... 39
10.7. Notices .................................................. 39
10.8. Governing Law ............................................ 40
10.9. Amendments and Waivers ................................... 40
10.10. Severability ............................................ 40
10.11. Expenses ................................................ 41
10.12. Construction ............................................ 41
10.13. Incorporation of Exhibits, Annexes, and Schedules ....... 41
10.14. Specific Performance .................................... 41
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<PAGE>
LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B triSpan Financial Statements
Exhibit C Form of Equity Subscription Agreement
Exhibit D Form of Compliance Agreement
Exhibit E Form of Opinion of Sellers' Legal Counsel
Exhibit F Form of Stock Option Agreement for Buyer's Shares
Exhibit G Form of Registration Rights Agreement
Exhibit H Buyer Financial Statements
ANNEXES AND TABLES
Annex I Exceptions to Representations and Warranties of Sellers
Annex II Exceptions to Representations and Warranties of Buyer
Annex III List of Key Employees
Annex IV List of Specified Contingencies
SCHEDULES
Equity Allocation Schedule
Sellers' and triSpan's Disclosure Schedule
Required Consents Schedule
Schedule 5.8 (Variable Life Insurance Policy Holders)
Schedule 7.2(i) (Key Employee Salaries)
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<PAGE>
MERGER AGREEMENT
This MERGER AGREEMENT ("AGREEMENT") is entered into as of the 26th
day of February 1999, by and among ANSWERTHINK CONSULTING GROUP, INC., a Florida
corporation (the "BUYER"), ACG - triSpan SUB, INC., a Delaware corporation and
wholly owned subsidiary of Buyer ("NEWCO"), triSpan Inc., a Pennsylvania
corporation ("TRISPAN"), and all of THE SHAREHOLDERS of triSpan LISTED ON THE
SIGNATURE PAGE HEREOF (collectively, the "SELLERS"). The Buyer, triSpan, Newco
and the Sellers are referred to herein individually as a "PARTY" and
collectively as the "PARTIES." triSpan and Newco are sometimes referred to
herein as the "CONSTITUENT CORPORATIONS." If the context so requires, references
herein to triSpan shall mean the Surviving Corporation (as hereinafter defined)
for periods after the Closing Date.
RECITALS
A. The Sellers collectively own all of the outstanding capital stock
of triSpan.
B. This Agreement contemplates a transaction in which triSpan will
merge with and into Newco, with Newco being the surviving corporation, and all
of the shares of capital stock which are issued and outstanding as of the
Closing Date of triSpan being converted into the right to receive the Purchase
Price (as hereinafter identified), and the Parties intend such merger
transaction to (i) be a tax-free reorganization under Section 368 of the Code
(as defined) and intend this Agreement to be a "plan of reorganization" within
the meaning of the regulations promulgated under such section of the Code, and
(ii) qualify for pooling of interests accounting treatment.
AGREEMENT
In consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
I. DEFINITIONS.
"AA" means Arthur Andersen, LLP, triSpan's independent accountants.
"ADVERSE CONSEQUENCES" means any loss, liability, expense or damages
(other than incidental, punitive or consequential damages).
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Sec. 1504(a) (or any similar group defined under a similar provision of
state, local or foreign law).
"AGGREGATE TRISPAN EQUITY," for purposes of this Agreement, means
the aggregate number of 2,871,228 triSpan Shares.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms the reasonable basis for any
specified consequence.
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<PAGE>
"BUYER" has the meaning set forth in the preface above.
"BUYER COMMON STOCK" means the common stock, par value $.001 per
share, of Buyer.
"BUYER'S SHARES" means the shares of Buyer Common Stock that are
issued to the Sellers pursuant to this Agreement.
"CLOSING" has the meaning set forth in SECTION 2.10 below.
"CLOSING DATE" has the meaning set forth in SECTION 2.10 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of triSpan including, without limitation, the identity, lists or
descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals; PROVIDED, HOWEVER, that the
Confidential Information shall not include information that (i) was or becomes
generally available to the public other than as a result of its disclosure by
the receiving party, (ii) was or becomes available to the receiving party on a
nonconfidential basis from a source other than the Buyer or its advisors without
breach of this Agreement, PROVIDED, HOWEVER, that such source is not known to
such receiving party to be bound by a confidentiality agreement or otherwise
prohibited from transmitting the information to receiving party by a
contractual, legal or fiduciary obligation known to such receiving party, (iii)
was within receiving party's possession prior to its being furnished to such
receiving party by or on behalf of Buyer without breach of this Agreement,
PROVIDED, HOWEVER, that the source of such information was not bound by a
confidentiality agreement with Buyer or triSpan or otherwise prohibited from
transmitting the information to the receiving party by a contractual, legal or
fiduciary obligation, or (iv) is required to be and actually is disclosed by
operation of law.
"CONSTITUENT CORPORATIONS" has the meaning set forth in the preface
above.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code
Sec. 1563.
"CUSTOMER CONTRACT OR AGREEMENT" means any agreement whereby triSpan
provides consulting services to a third party during the 1998 or 1999 fiscal
year of triSpan.
"DGCL" has the meaning set forth in SECTION 2.1 below.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth in
Treas. Reg. ss.1.1502-13.
"DISCLOSURE SCHEDULE" has the meaning set forth in the preamble to
ARTICLE 4 below.
"EFFECTIVE TIME" has the meaning set forth in SECTION 2.2 below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement that is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
Material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(2).
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<PAGE>
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(1).
"EQUITABLE EXCEPTIONS" has the meaning set forth in SECTION 3.1
below.
"EQUITY ALLOCATION SCHEDULE" has the meaning set forth in SECTION
2.8(A) below.
"EQUITY SUBSCRIPTION AGREEMENT" has the meaning set forth in SECTION
7.1(K) below.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and
among the Sellers and Buyer in the form of EXHIBIT A.
"ESCROW PERIOD" has the meaning specified in SECTION 2.12.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FAIR MARKET PRICE" of a share of Buyer Common Stock shall mean the
closing price of a share of Buyer Common Stock as listed on the NASDAQ National
Market System on the applicable date.
"FAIR MARKET PRICE AT CLOSING" means the price of $27.6625 per
Buyer's Share.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.5
below.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of triSpan for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of triSpan; (iii) obligations of triSpan to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business on no more than
90-day payment terms; (iv) indebtedness of others guaranteed by triSpan or
secured by an Encumbrance on triSpan's property; (v) indebtedness of triSpan
under extended credit terms of more than 60 days from vendors provided to
triSpan; and (vi) transaction costs of triSpan and/or Sellers associated with
this Agreement or the transactions contemplated hereby (including without
limitation the Salomon Smith Barney fee referenced in SECTION 4.23, if same has
not been paid on or prior to the Closing but excluding any severance payments
(if any) to employees who cease to be employed by the Company following the
Closing) that are payable and not paid by triSpan on or prior to the Closing.
"GAAP" means generally accepted accounting principles, consistently
applied, as in effect from time to time.
"INCOME TAX" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether dispute or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 8.4 below.
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<PAGE>
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 8.4 below.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service marks,
trade dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data, and
documentation, (d) trade secrets and confidential business information
(including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information, (e) other proprietary rights and methodologies, and (f) copies and
tangible embodiments thereof (in whatever form or medium).
"KEY EMPLOYEES" has the meaning set forth in SECTION 7.1(G) below.
"KNOWLEDGE" means (a) with respect to any Seller, the actual
knowledge of such Seller, (b) with respect to Newco or Buyer, the actual
knowledge of the officers and employees of Buyer with responsibility for the
matters in question, and (c) with respect to triSpan, the actual knowledge of
John P. Louchheim and Dennis McGrath.
"LIABILITY" means any liability, debt, obligation, amount or sum due
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due) including any liability for
Taxes.
"MATERIAL" has the meaning set forth in the preamble to ARTICLE 4
below.
"MERGER" has the meaning set forth in SECTION 2.1 below.
"MERGER DOCUMENTS" has the meaning set forth in SECTION 2.2 below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" means the Financial Statements
for and as of the Most Recent Fiscal Year End.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in SECTION
4.5 below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"NEW BUYER OPTIONS" has the meaning set forth in SECTION 2.7(B)
below.
"NEWCO" has the meaning set forth in the preamble to this Agreement.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice.
"PARTY" has the meaning set forth in the preamble to this agreement.
"PBCL" has the meaning set forth in SECTION 2.1.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
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<PAGE>
"PURCHASE PRICE" and "PURCHASE PRICE PER SHARE" have the meaning set
forth in SECTION 2.8(A) below.
"PWC" shall mean Pricewaterhouse Coopers, LLP, Buyer's independent
accountants.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in
SECTION 6.9 below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"REQUIRED CONSENTS SCHEDULE" has the meaning set forth in SECTION
7.1(C).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) mechanic's, materialmen's and
similar liens, (b) liens for Taxes not yet due and payable (or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings), (c)
liens arising under workers' compensation, unemployment insurance, social
security, retirement, and similar legislation, (d) liens arising in connection
with sales of foreign receivables, (e) liens on goods in transit incurred
pursuant to documentary letters of credit, (f) purchase money liens and liens
securing rental payments under capital lease arrangements, and (g) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"SELLERS" has the meaning set forth in the preamble to this
Agreement.
"SUBSIDIARY" means any corporation with respect to which another
specified corporation has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"SURVIVING CORPORATION" has the meaning set forth in SECTION 2.1
below.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"TAX RETURN" means any federal, foreign, state and local
governmental tax return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"TRISPAN" has the meaning set forth in the preamble to this
Agreement.
"TRISPAN'S BUSINESS" means the business of implementation and
consulting services related to electronic commerce, including without limitation
web design, web enabling ERP software and other aspects of Internet integration
and implementation services for sophisticated customers.
"TRISPAN COMMON STOCK" means the common stock, par value $.01 per
share, of triSpan.
"TRISPAN OPTIONS" means all the option and other agreements between
triSpan and the triSpan Optionholders listed on the EQUITY ALLOCATION SCHEDULE
hereto related to the issuance of shares of triSpan Common Stock pursuant to
options to acquire triSpan Common Stock existing as of the Closing Date, whether
same are vested or unvested in the holder of such triSpan Option as of the
Effective Time.
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"TRISPAN SHARES" means all outstanding shares of triSpan Common
Stock.
"UNVESTED TRISPAN OPTIONHOLDERS" means the holders of unvested
options for the purchase of an aggregate of 264,490 shares of triSpan Common
Stock, as such holders are listed on the EQUITY ALLOCATION SCHEDULE hereto.
"UNVESTED TRISPAN OPTIONS" means all outstanding but unvested
options for the purchase of triSpan Common Stock.
"VESTED TRISPAN OPTIONHOLDERS" means the holders (including Dennis
McGrath and Mike Green) of vested options for the purchase of an aggregate of
411,464 shares of triSpan Common Stock existing as of the Closing Date, as such
holders are listed on the EQUITY ALLOCATION SCHEDULE hereto.
"VESTED TRISPAN OPTIONS" means all outstanding and vested options
for the purchase of triSpan Common Stock.
ARTICLE 2
THE MERGER
II. THE MERGER.
A. THE MERGER. At the Effective Time (as defined below), triSpan
shall be merged with and into Newco (the "MERGER"), and the separate existence
of triSpan shall thereupon cease, and the name of Newco, as the surviving
corporation in the Merger (the "SURVIVING CORPORATION"), shall by virtue of the
Merger be changed to "triSpan Inc.," and the Surviving Corporation shall operate
as "triSpan Inc." in the State of Delaware. The Merger shall have the effects
set forth in the Delaware General Corporation Law (collectively, the "DGCL") and
the Pennsylvania Business Corporation Law (collectively the "PBCL").
B. EFFECTIVE TIME OF THE MERGER. As soon as practicable after the
satisfaction or waiver of the conditions hereinafter set forth, the parties
hereto will file with the Secretaries of the State of Delaware and the
Commonwealth of Pennsylvania a certificate of merger or ownership and other
documents (the "MERGER DOCUMENTS"), in such respective forms as required by, and
executed in accordance with, the relevant provisions of the DGCL and the PBCL in
order to effect the Merger. The Merger shall become effective at such time as
the Merger Documents shall have been accepted for filing with the Secretaries of
State of the State of Delaware and the Commonwealth of Pennsylvania or such
other times and dates as the parties shall agree should be specified in the
Merger Documents (the "EFFECTIVE TIME").
C. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Newco in effect at the time of the Merger shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter amended, as
provided thereunder and in the DGCL.
D. BYLAWS. The Bylaws of Newco in effect at the time of the Merger
shall be the Bylaws of the Surviving Corporation until altered, amended or
repealed, as provided thereunder and in the Certificate of Incorporation and the
DGCL.
E. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
1. The sole director of Newco at the Effective Time, who shall be
Ted A. Fernandez, shall be the sole director of the Surviving Corporation
and shall hold office from the Effective Time until his respective
successor is duly elected or appointed and qualify in the manner provided
in the Articles of Organization and Bylaws of the Surviving Corporation,
or as otherwise provided by law.
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2. The officers of Newco at the Effective Time shall be the officers
of the Surviving Corporation and shall hold office from the Effective Time
until their respective successors are duly elected or appointed and
qualify in the manner provided in the Articles of Organization and Bylaws
of the Surviving Corporation, or as otherwise provided by law.
F. EFFECT OF THE MERGER. The Merger shall have the effects set forth
in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Constituent Corporations (including without limitation any
existing employment agreements between triSpan and any of the Key Employees
which are not superseded by an executed Compliance Agreement between such Key
Employee and Buyer in accordance with SECTION 7.1(G) below), shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Constituent
Corporations shall become the debts, liabilities and duties of the Surviving
Corporation. The purpose of the Surviving Corporation shall be the purposes of
triSpan immediately prior to the Merger. The total number of shares that the
Surviving Corporation is authorized to issue shall be 1,000 shares of Common
Stock, $0.01 par value per share.
G. CONVERSION OF TRISPAN SHARES AND OPTIONS. At the Effective Time,
by virtue of the Merger and without any action on the part of the Sellers
(except as indicated below):
1. Each triSpan Share issued and outstanding immediately prior to
the Effective Time (but other than triSpan Shares as to which the holders
thereof shall have properly exercised appraisal rights under the DGCL, if
any) shall be converted into the right to receive in Buyer's Shares the
Purchase Price Per Share (as hereinafter defined), as same is set forth in
SECTION 2.8(B) below.
2. Each Vested triSpan Option that has vested in the holder thereof
prior to the Effective Time and each Unvested triSpan Option shall be
converted into the right to receive options to purchase Buyer's Shares
pursuant to an arrangement on terms equivalent to such holders' current
option arrangement (including the vesting schedule) as set forth in the
form of Option Agreement for Buyer's Shares attached hereto as EXHIBIT F
("NEW BUYER Options"), and as reflected in the final EQUITY ALLOCATION
SCHEDULE. The Parties shall utilize the methodology set forth in SECTION
6.10 below to determine the number and exercise price of any such New
Buyer Options.
3. Each triSpan Share held in the treasury of triSpan immediately
prior to the Effective Time shall be canceled and retired and cease to
exist.
4. No interest, dividends or other distributions shall be payable
upon the surrender of certificates that represented triSpan Shares at the
Effective Time.
H. PURCHASE PRICE.
1. The purchase price per share for each triSpan Share shall be
$8.60, payable in Buyer's Shares at the rate of .3108901 Buyer Shares for
each triSpan Share (the "PURCHASE PRICE PER SHARE"). For purposes of this
Agreement, the aggregate Purchase Price Per Share paid or payable
hereunder to the holders of the triSpan Shares shall be referred to as the
"PURCHASE PRICE"; PROVIDED, HOWEVER, that the number of Buyer Shares
issued to each of the Sellers in the aggregate shall be rounded to the
nearest whole number.
2. At Closing, the Purchase Price shall be payable to the holders of
triSpan Shares in Buyer's Shares as follows:
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A. PAYMENT OF PURCHASE PRICE TO TRISPAN SHAREHOLDERS. The holders of
triSpan Shares shall each receive for their triSpan Shares their pro-rata share
(based on their share of the Aggregate triSpan Equity) of 95% of the Purchase
Price;
B. PAYMENT OF TRISPAN PURCHASE PRICE TO ESCROW ACCOUNT. Five percent
(5%) of the Purchase Price payable to the Sellers described in SUBPARAGRAPH (I)
above, shall be delivered to First Union National Bank as escrow agent (the
"ESCROW AGENT") for deposit into an escrow account pursuant to SECTION 2.12 to
secure the obligations set forth in the Escrow Agreement.
3. At the Closing, Newco (as the Surviving Corporation in the
Merger) will pay in cash by wire transfer of funds to such accounts as
specified in SECTION 2.8(D) of the Disclosure Schedule, such amounts as
are necessary in order to satisfy and discharge certain Funded
Indebtedness set forth thereon and owed by triSpan.
I. RESERVED.
J. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Hogan & Hartson
L.L.P. in Washington, D.C., commencing at 9:00 a.m. local time on the first
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby,
or such other date as the Buyer and the Sellers may mutually determine (the
"CLOSING DATE"); PROVIDED, HOWEVER, unless an extension is operable under the
terms of ARTICLE 9 below, the Closing Date is anticipated to occur no later than
March 1, 1999.
K. DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
satisfy such conditions and deliver to the Buyer the various certificates,
instruments, and documents referred to in SECTION 7.1 below, (ii) the Buyer will
satisfy such conditions and deliver to the Sellers the various certificates,
instruments, and documents referred to in SECTION 7.2 below.
L. ESCROW ARRANGEMENTS. Pursuant to the terms and conditions of the
Escrow Agreement, five percent (5%) of the Purchase Price payable to each of the
holders of triSpan Shares, shall be held by the Escrow Agent in escrow pursuant
to the Escrow Agreement (collectively, such Buyer's Shares and New Buyer Options
shall be referred to as the "ESCROWED PORTION OF THE PURCHASE PRICE"); PROVIDED,
HOWEVER, that the value of any Buyer Shares held in escrow shall for such
purposes continue to be valued at the Fair Market Price at Closing. The Escrowed
Portion of the Purchase Price shall be held pursuant to the terms of the Escrow
Agreement to secure Sellers' obligations to satisfy any amounts owing by the
Sellers to Buyer under the indemnification provisions of ARTICLE 8 below. At the
conclusion of the period ending on the first anniversary of the Closing Date
(such period being referred to herein as the "ESCROW PERIOD"), any remaining
portion of the Escrowed Portion of the Purchase Price not theretofore delivered
to Buyer in accordance with the terms of the Escrow Agreement or subject to a
pending claim under the Escrow Agreement and this Agreement or otherwise pledged
to Buyer shall be disbursed to the Sellers; PROVIDED, HOWEVER, that such
escrowed shares shall be released no later than as may be required (based on
advice from AA and PWC) under the applicable pooling rules. The Sellers and
Buyer agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrowed Portion of the Purchase Price to which
the furnishing party is entitled under the provisions of the Escrow Agreement
and this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
III. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
A. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each of the Sellers, severally,
and not jointly, represents and warrants to the Buyer as to himself or itself
and the triSpan Shares that he or it owns, as of the date of this Agreement and
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this SECTION 3.1), and
except as set forth in ANNEX I attached hereto, as follows, it being understood
that ANNEX I may be updated one or more times prior to the Closing Date and that
any updates shall be delivered at or before the Closing:
1. AUTHORIZATION OF TRANSACTION. The Sellers have full power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder, and this Agreement has been duly executed and
delivered by such Sellers. This Agreement constitutes the valid and
legally binding obligation of the Sellers, enforceable in accordance with
its terms and conditions, except that (i) such enforceability may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws, decisions or equitable principles now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights or debtors' obligations generally or noncompetition arrangements,
and to general equity principles, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought (the terms of CLAUSE (I) and
CLAUSE (II) are sometimes collectively referred to as the "EQUITABLE
EXCEPTIONS"). The Sellers need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions
contemplated by this Agreement (other than as provided for in ARTICLE 2 or
ARTICLE 7 of this Agreement).
2. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Sellers, nor the consummation of the transactions
contemplated hereby by any such Seller, will (A) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or
court to which such Seller is subject or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any part the right to accelerate, terminate, modify, or cancel,
or require any notice under any material contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage
for borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which such Seller is a party or by which he or it is
bound or to which any of his or its assets is subject.
3. BROKER'S FEES. triSpan and/or the Sellers are obligated upon
consummation of the Merger to pay a fee to Salomon Smith Barney, Inc.,
which has acted as Sellers' and triSpan's financial advisor in connection
therewith. The Sellers have no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
4. INVESTMENT. The Sellers are not acquiring Buyer's Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
5. TRISPAN SHARES. Each Seller holds of record and owns beneficially
the number of triSpan Shares set forth next to his or its name in the
EQUITY ALLOCATION
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SCHEDULE, and, except as set forth in ANNEX I, such triSpan Shares are
free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), claims,
Taxes, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities, and demands. Except as set forth in ANNEX I, the
Sellers are not a party to (or have otherwise waived all rights under) any
option, warrant, right, contract, call, put, or other agreement or
commitment providing for the disposition or acquisition of any capital
stock of triSpan (other than this Agreement). The Sellers are not a party
to (or have otherwise terminated) any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock
of triSpan (including without limitation that certain Stockholder's
Agreement dated June 26, 1998, as amended).
B. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO. The Buyer and Newco
represent and warrant to the Sellers that the statements contained in this
SECTION 3.2 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this SECTION 3.2), except as set forth in ANNEX II attached hereto.
1. ORGANIZATION OF THE BUYER AND NEWCO. Each of the Buyer and Newco
is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. The Buyer has
delivered to Sellers correct and complete copies of the charter and bylaws
of Buyer and Newco (as amended to date). Neither Buyer nor Newco is in
default under or in violation of its charter or bylaws.
2. AUTHORIZATION OF TRANSACTION. Each of the Buyer and Newco has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and the other agreements contemplated
hereby and to perform its obligations hereunder, and this Agreement has
been duly executed and delivered by the Buyer and Newco. This Agreement
constitutes the valid and legally binding obligation of the Buyer and
Newco, enforceable in accordance with its terms and conditions except for
the Equitable Exceptions. Neither the Buyer nor Newco needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement (other than as provided
for in ARTICLE 2 of this Agreement).
3. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Buyer or Newco, nor the consummation of the transactions
contemplated hereby by the Buyer or Newco, will (A) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or
court to which the Buyer is subject or any provision of its charter or
bylaws or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyer
or Newco is a party or by which it is bound or to which any of its assets
is subject.
4. BROKERS' FEES. Neither Newco nor the Buyer has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Sellers could become liable or obligated.
5. INVESTMENT. Neither Newco nor the Buyer is acquiring triSpan
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
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6. FILINGS WITH THE SEC. Buyer has made all filings with the SEC
that it has been required to under the Securities Act and the Securities
Exchange Act (collectively the "PUBLIC REPORTS"). Each of the Public
Reports has complied with the Securities Act and the Securities Exchange
Act in all material respects. None of the Public Reports, as of their
respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made,
not misleading.
7. CAPITALIZATION. The entire authorized capital stock of the Buyer
consists of (i) 125,000,000 Buyer Shares, of which 34,009,164 Buyer Shares
are issued and outstanding and zero (0) Buyer Shares are held in treasury,
and (ii) 1,250,000 shares of preferred stock, of which zero (0) shares are
issued and outstanding. All of the Buyer Shares to be issued in the Merger
including any New Buyer Options have been duly authorized and reserved
for, upon consummation of the Merger, will be validly issued, fully paid,
and nonassessable. None of the Buyer's Shares issued to the Sellers will
have been issued in violation of the preemptive rights of any past or
present stockholder, whether contractual or statutory.
8. FINANCIAL STATEMENTS. Attached hereto as EXHIBIT H are the
following financial statements of the Buyer (collectively, the "BUYER
FINANCIAL STATEMENTS"): audited balance sheet and statement of income,
changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1995, 1996 and 1997 and an unaudited consolidated
balance sheet and statement of income as of and for the year ended
December 31, 1998 (the "BUYER MOST RECENT FISCAL YEAR END") for the Buyer.
The Financial Statements have been prepared in accordance with GAAP,
applied on a consistent basis throughout the periods covered thereby,
present fairly in all material respects the financial condition of the
Buyer as of such dates, subject, in the case of the Buyer's Most Recent
Fiscal Year End Financial Statements, to normal adjustments upon audit.
9. UNDISCLOSED LIABILITIES. The Buyer does not have any Material
Liability which would be required by GAAP to be disclosed on the Buyer's
financial statements, except for (i) Liabilities set forth on the face of
the Buyer's Most Recent Fiscal Year End Balance Sheet, and (ii)
Liabilities that have arisen after the Buyer's Most Recent Fiscal Year End
in the Ordinary Course of Business (none of which relates to any breach of
contract, breach of warranty, tort, infringement, or violation of law or
arose out of any charge, complaint, action, suit, proceedings, hearing,
investigation, claim, or demand).
10. TAX-RELATED MATTERS
a. Following the Merger, Newco will hold at least 90% of the
fair market value of triSpan's net assets (if any) held by triSpan
immediately prior thereto and at least 70% of the fair market value
of triSpan's gross assets (if any) held immediately prior to the
Merger. For purposes of this representation, amounts paid to
dissenters, amounts used to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends)
will be included as assets of triSpan immediately prior to the
Merger.
b. Prior to the Merger, Buyer will be in control of Newco
within the meaning of Section 368(c) of the Internal Revenue Code of
1986, as amended ("IRC").
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c. Buyer has no plan or intention to cause Newco to issue
additional shares of its stock that would result in Buyer losing
control of Newco within the meaning of IRC Section 368(c).
d. Buyer has no plan or intention to reacquire any of its
stock issued in the Merger.
e. Buyer has no plan or intention to liquidate Newco, to merge
Newco with or into another corporation, to sell or otherwise dispose
of the stock of Newco, or to cause Newco to sell or otherwise
dispose of any of the assets of triSpan acquired in the Merger,
except for transfers made in the ordinary course of business or
transfers described in IRC Section 368(a)(2)(c).
f. Following the Merger, Newco will continue triSpan's
historic business or use a significant portion of triSpan's historic
business assets in a business.
g. Buyer and Newco will pay their respective expenses, if any,
incurred in connection with the Merger.
h. There is no intercorporate indebtedness existing between
Buyer and triSpan or Newco that was issued, acquired, or will be
settled at a discount.
i. Neither Buyer nor Newco is an "investment company" as
defined in IRC Section 368(a)(2)(F)(iii) and (iv).
11. NO MATERIAL ADVERSE EFFECT. Since the Buyer's Most Recent Fiscal
Year End, there has been no Material adverse effect upon the Buyer's
financial condition.
12. AVAILABILITY OF FUNDS. The Buyer has cash available or
irrevocable commitments from financial institutions to enable it to
consummate the transactions contemplated by this Agreement, including its
ability to discharge the Funded Indebtedness.
13. NO LITIGATION. Buyer is not subject to any unsatisfied Material
judgment, order, decree, stipulation, injunction or charge, and Buyer is
not a party to nor, to the Knowledge of Buyer, is Buyer threatened to be
made a party to any Material charge, complaint, action, suit, proceeding,
hearing, or investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction, or before any arbitrator.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES CONCERNING TRISPAN
Subject to the provisions set forth in SECTION 8.2(A) below in respect of
such Parties' indemnification obligations, triSpan and the Sellers (as
applicable) represent and warrant to the Buyer that, subject to the specific
qualifications and limitations set forth herein, the statements contained in
this ARTICLE 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ARTICLE 4), except as set forth in the Disclosure Schedule
delivered by the Sellers to the Buyer on the date hereof and initialed by the
Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule may be updated one
or more times prior to the Closing Date. Any updated Disclosure Schedule shall
be delivered at or before the Closing. In the event any such updated Disclosure
Schedule indicates a Material adverse change
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from information previously provided to the Buyer, Buyer shall be entitled to
terminate this Agreement (without any liability whatsoever to triSpan) by
written notice delivered to triSpan following receipt of such updated Disclosure
Schedule. An event or matter that causes any representation or warranty
contained in this Section to be inaccurate, incorrect or false will not be
deemed to be "MATERIAL," to have a "MATERIAL" change in or in respect of, to
have a "MATERIAL" adverse effect or to be "MATERIALLY" affected unless the loss
that may reasonably be expected to occur to triSpan with respect to such event
or matter, when taken together with all other related losses that may reasonably
be expected to occur to triSpan as a result of any such events or matters, would
exceed $75,000 in the aggregate or unless such event or matter constitutes a
criminal violation of law. For purposes of this paragraph, the word "loss" shall
mean any and all direct or indirect payments, obligations, assessments, losses,
losses of income, liabilities, costs and expenses paid or incurred, or
reasonably likely to be paid or incurred, or diminutions in value or reductions
in benefits or rights of any kind or character (whether or not known or asserted
before the date of this Agreement, fixed or unfixed, conditional or
unconditional, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise) that are reasonably
likely to occur, including without limitation, penalties, interest on any amount
payable to a third party as a result of the foregoing, and any reasonable legal
or other expenses reasonably expected to be incurred in connection with
defending any demands, claims, actions or causes of action that, if adversely
determined, could reasonably be expected to result in losses, and all amounts
paid in settlement of claims or actions; PROVIDED, HOWEVER, that losses shall be
net of any insurance proceeds entitled to be received from a nonaffiliated
insurance company on account of such loss (after taking into account any cost
incurred in obtaining such proceeds or any increases in insurance premiums as a
direct result thereof). A Customer Contract or Agreement is "MATERIAL" if during
either calendar year 1998 or 1999, such Customer Contract or Agreement produced
or is expected to produce $200,000 of revenues. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail, as the context requires. Without limiting the generality of
the foregoing, the mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other items itself). The Disclosure Schedule
will be arranged in paragraphs or sections corresponding to the lettered and
numbered sections contained in this ARTICLE 4.
A. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. triSpan is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Except as disclosed in SECTION
4.1 of the Disclosure Schedule, triSpan is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction in which the nature
of its businesses or the ownership or leasing of its properties requires such
qualification, except where the lack of such qualification would not have a
Material adverse effect on triSpan. triSpan has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. SECTION 4.1 of the Disclosure Schedule
lists the directors and officers of triSpan. triSpan has delivered to the Buyer
correct and complete copies of the charter and bylaws of triSpan (as amended to
date). triSpan is not in default under or in violation of any provision of its
charter or bylaws.
B. CAPITALIZATION. The entire authorized capital stock of triSpan
consists of 100,000,000 shares of triSpan Common Stock, of which (A) 2,265,529
are issued and outstanding, (B) 453,992 are subject to issuance pursuant to the
Vested triSpan Options, (C) 264,490 are subject to issuance pursuant to Unvested
triSpan Options, and (D) 400,000 are reserved for issuance pursuant to future
option grants. All of the issued and outstanding triSpan Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by those Sellers as set forth in the EQUITY ALLOCATION SCHEDULE. All of
the Vested triSpan Options are duly authorized and validly issued and are held
of record by those Sellers and other holders as set forth in the EQUITY
ALLOCATION SCHEDULE. Except as set forth in the EQUITY ALLOCATION SCHEDULE or
SECTION 4.2 of the Disclosure Schedule, there are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights, or other agreements or commitments to which triSpan is a
party or which are binding upon triSpan providing for the issuance, disposition,
or acquisition of any of its capital stock. Except as set forth in SECTION 4.2
of the Disclosure
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Schedule, there are no (x) outstanding or authorized stock appreciation, phantom
stock, or similar rights with respect to triSpan, or (y) voting trusts, proxies,
or any other agreements or understandings with respect to the voting of the
capital stock of triSpan.
C. NONCONTRAVENTION. Except as set forth in SECTION 4.3 of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which triSpan is subject or any provision of the charter or bylaws of triSpan,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
arrangement to which triSpan is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets) except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Security Interest would not have a Material adverse effect on triSpan or on
the ability of the Parties to consummate the transactions contemplated by this
Agreement. triSpan does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement, except where the failure to give notice, to file, or to obtain
any authorization, consent or approval would not have a Material adverse effect
on triSpan or on the ability of the parties to consummate the transactions
contemplated by this Agreement.
D. SUBSIDIARIES. Except as set forth in SECTION 4.4 of the
Disclosure Schedule, triSpan has no Subsidiaries.
E. FINANCIAL STATEMENTS. Attached hereto as EXHIBIT C are the
following triSpan financial statements (collectively, the "FINANCIAL
STATEMENTS"): audited balance sheet and statement of income, changes in
stockholder's equity, and cash flow as of and for the fiscal years ended
December 31, 1995, 1996 and 1997 and an unaudited consolidated balance sheet and
statement of income as of and for the twelve month period ended December 31,
1998 (the "MOST RECENT FISCAL YEAR END") for triSpan. The Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, present fairly in all Material respects
the financial condition of triSpan as of such dates, subject, in the case of the
Most Recent Fiscal Year End Financial Statements, to normal adjustments upon
audit and lack of footnotes and other presentation items.
F. EVENTS SUBSEQUENT TO THE MOST RECENT FISCAL YEAR END. Since the
Most Recent Fiscal Year End, except as set forth on the Disclosure Schedule,
there has not been any Material adverse change in the financial condition of
triSpan. Without limiting the generality of the foregoing since the Most Recent
Fiscal Year End, except as set forth on the Disclosure Schedule:
1. triSpan has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
2. triSpan has not entered into any Material contract, lease,
sublease, license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses) outside the Ordinary Course of
Business;
3. triSpan has not accelerated, terminated, modified, or canceled
any Material contract, lease, sublease, license or sublicense (or series
of related contracts, leases, subleases, licenses and sublicenses) to
which triSpan is a party or by which it is bound other than in the
Ordinary Course of Business;
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4. no party has notified triSpan of any acceleration, termination,
modification or cancellation of any outstanding Customer Contract or any
other Material contract, agreement, lease, sublease, license or sublicense
(or series of related contracts, leases, subleases, licenses and
sublicenses), other than in the Ordinary Course of Business;
5. triSpan has not imposed any Security Interest upon any of its
assets, tangible or intangible;
6. triSpan has not made any capital expenditure (or series of
related capital expenditures) involving more than $75,000 in the
aggregate, or outside the Ordinary Course of Business;
7. triSpan has not made any capital investment in, any loan to, or
any acquisition of, the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) involving
more than $75,000 in the aggregate;
8. triSpan has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) involving more than
$75,000 individually or in the aggregate or outside the Ordinary Course of
Business;
9. triSpan has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than $75,000 or outside the Ordinary Course of Business;
10. there has been no change made or authorized in the charter or
bylaws of triSpan, other than in connection with this Agreement and the
transactions contemplated hereby;
11. triSpan has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion or exercise) any of its
capital stock;
12. triSpan has not declared, set aside, or paid any dividend or
distribution with respect to its capital stock nor redeemed, purchased, or
otherwise acquired any of its capital stock;
13. triSpan has not made any consulting or other payment to the
Sellers;
14. triSpan has not experienced any damage, destruction or loss
involving more than $75,000 (whether or not covered by insurance) to its
property;
15. triSpan has not made any loan to, or entered into any other
transaction with, any of its officers, directors or employees (who are not
Sellers) outside the Ordinary Course of Business giving rise to any claim
or right on its part against the person or on the part of the person
against it;
16. triSpan has not made any loan to, or entered into any other
transaction with, the Sellers other than in the Ordinary Course of
Business giving rise to any claim or right on its part against the person
or on the part of such person against it;
17. triSpan has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified in any
material respect the terms of any existing such contract or agreement with
any of its full-time staff employees;
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18. triSpan has not granted an increase outside the Ordinary Course
of Business in the base compensation of any of its directors, officers and
employees (other than the Sellers);
19. triSpan has not granted an increase in the base compensation,
nor has triSpan made any payments or promises or commitments to pay to the
Sellers to make any other payments (other than salary and reimbursement of
customary expenses) to the Sellers, including without limitation, bonuses;
20. triSpan has not adopted any (i) bonus, (ii) profit-sharing,
(iii) incentive compensation, (iv) pension, (v) retirement, (vi) medical,
hospitalization, life, or other insurance, (vii) severance, or (viii)
other plan, contract or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract or
commitment;
21. triSpan has not made any other economic change in employment
terms for any of its directors, officers, and full-time staff employees;
22. triSpan has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
23. triSpan has not entered into any agreement committing to any of
the foregoing.
G. UNDISCLOSED LIABILITIES. To triSpan's Knowledge, except as set
forth in SECTION 4.7 of the Disclosure Schedule hereto, triSpan does not have
any Liability that is individually or in the aggregate in excess of $75,000 or
which would be required by GAAP to be disclosed on triSpan's financial
statements except for (i) Liabilities set forth on the face of the Most Recent
Fiscal Year End Balance Sheet, (ii) Liabilities described in SECTION 4.7 of the
Disclosure Schedule, and (iii) Liabilities that have arisen after the Most
Recent Fiscal Year End in the Ordinary Course of Business (none of which relates
to any breach of contract, breach of warranty, tort, infringement, or violation
of law or arose out of any charge, complaint, action, suit, proceedings,
hearing, investigation, claim, or demand).
H. TAX MATTERS. Except as set forth in SECTION 4.8 of the Disclosure
Schedule,
1. triSpan has filed all Material Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all Material
respects. All Taxes owed by triSpan (whether or not shown on any Tax
Return) based on operations through the Most Recent Fiscal Year End have
been paid or accrued on the Most Recent Fiscal Year End Balance Sheet.
triSpan currently is not the beneficiary of any extension of time within
which to file any Tax Return. No written claim has been made since
December 22, 1992 by any taxing authority in a jurisdiction where triSpan
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
triSpan that arose in connection with any failure (or alleged failure) to
pay any Tax.
2. triSpan has withheld and paid all Material Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party, and
triSpan has properly reflected the status of all employees and independent
contractors in connection therewith, as required by applicable Tax law and
the Fair Labor Standards Act of 1938, as amended, and the rules and
regulations promulgated thereunder.
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3. Neither Sellers nor any of the officers (or employees responsible
for Tax matters) of triSpan have received any notice that any taxing
authority intends to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any
Tax Liability of triSpan either (i) claimed or raised by any authority in
writing or (ii) as to which the Sellers or the officers of triSpan or
employees responsible for Tax matters of triSpan have Knowledge based upon
personal contact with any agent of such authority. SECTION 4.8 of the
Disclosure Schedule lists those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.
triSpan has made available to the Buyer correct and complete copies of all
federal Income Tax Returns filed, examination reports received, and
statements of deficiencies assessed against or agreed to, by triSpan since
December 31, 1992.
4. triSpan is not currently the beneficiary of a waiver of any
statute of limitations in respect of Taxes and has not agreed to any
extension of time with respect to a Tax assessment or deficiency for any
period for which the statute of limitations remains open.
5. triSpan has not filed a consent under Code Sec. 341(f) concerning
collapsible corporations. triSpan has not made any payments, is not
obligated to make any payments, nor is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not
be deductible to triSpan under Code Sec. 280G. triSpan has not been a U.S.
real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). triSpan is not a party to any Tax allocation or sharing
agreement. triSpan has never been (nor has any Liability for unpaid Taxes
because it once was) a member of an Affiliated Group filing a consolidated
federal Income Tax Return and has never incurred any Liability for the
Taxes of any Person under Treas. Reg.ss.1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise, during any part of any consolidated return year
within any part of which consolidated return year any corporation other
than triSpan also was a member of the Affiliated Group.
6. The unpaid Taxes of triSpan through the Most Recent Fiscal Year
End do not exceed by any Material amount the reserve for Tax Liability set
forth on the face of the Most Recent Fiscal Year End Balance Sheet.
7. triSpan has made a valid election under Section 1362 of the Code
to be an S corporation within the meaning of Section 1361 of the Code for
all taxable years (or portions thereof) beginning on or after December 22,
1992, and no such S election has been terminated (whether voluntarily,
involuntarily or inadvertently, including, without limitation, by taking
any action defined in Section 1362(d) of the Code) since such time, other
than as contemplated on the day prior to the Closing Date.
8. triSpan will not be required to include any Material amount in
taxable income or exclude any Material item of deduction or loss from
taxable income for any taxable period (or portion thereof) ending after
the Closing Date (i) as a result of a change in method of accounting for a
taxable period ending on or prior to the Closing Date, (ii) as a result of
any "closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law) entered into
on or prior to the Closing Date, (iii) as a result of any sale reported on
the installment method where such sale occurred on or prior to the Closing
Date, and (iv) as a result of any prepaid amount received on or prior to
the Closing Date.
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I. TANGIBLE ASSETS. triSpan owns or leases substantially all
material tangible assets necessary for the conduct of triSpan's Business as
presently conducted. To triSpan's Knowledge, each such tangible asset is free
from Material defects (patent and latent), has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for which it
presently is used.
J. OWNED REAL PROPERTY. triSpan does not own, nor does it have any
interest in any real property or improvements thereon (other than the leases
disclosed in SECTION 4.10 of the Disclosure Schedule, and the leasehold
improvements relating to the same), nor does triSpan have any options,
agreements or contracts under which it has the right or obligation to acquire
any interest in any real property or improvements (other than as disclosed in
SECTION 4.10 of the Disclosure Schedule)
K. INTELLECTUAL PROPERTY.
1. Attached hereto as SECTION 4.11 of the Disclosure Schedule is a
list and brief description of all patented or registered Intellectual
Property, applications for patents or registration of other Intellectual
Property and material unregistered Intellectual Property owned or utilized
by triSpan. triSpan has furnished Buyer with copies of all material
license agreements to which triSpan is a party, either as licenser or
licensee, with respect to any Intellectual Property. Except as set forth
in Section 4.11 of the Disclosure Schedule, triSpan has good title to or
the right to use all the Intellectual Property necessary for the conduct
of the triSpan' Business, in its business as presently conducted without
the payment of any royalty or similar payment, and to triSpan's and
Sellers' Knowledge, triSpan is not infringing on any Intellectual Property
right of others, and none of the Sellers nor triSpan has Knowledge of any
infringement by others of any such rights owned by triSpan.
2. All licenses set forth in SECTION 4.11 of the Disclosure Schedule
are valid and binding obligations of triSpan, and to the Knowledge of the
Sellers and triSpan, of the other parties thereto, and to the Knowledge of
the Sellers and triSpan, are enforceable against the other parties thereto
in accordance with their respective terms, except for the Equitable
Exceptions. triSpan owns and possesses all right, title and interest in
and to, or has the right to use pursuant to a valid license, all
Intellectual Property necessary for the operation of the business of
triSpan as presently conducted.
3. All personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception and
development of any Intellectual Property have executed the nondisclosure
agreements listed in SECTION 4.11 of the Disclosure Schedule.
4. With respect to each item of Intellectual Property owned by
triSpan and listed in SECTION 4.11 of the Disclosure Schedule: (A) the
item is not subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge; (B) no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand is pending or,
to the Knowledge of the Sellers and triSpan, is threatened that challenges
the legality, validity, enforceability, use, or ownership of the item; and
(C) triSpan has not agreed to indemnify any person or entity for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
L. REAL PROPERTY LEASES. SECTION 4.12 of the Disclosure Schedule
lists and describes briefly all Material real property leased or subleased to
triSpan. triSpan has delivered to the Buyer correct and complete copies of the
leases and subleases listed in SECTION 4.12 of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in SECTION 4.12
of the Disclosure Schedule:
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1. the lease or sublease is legal, valid, binding, enforceable, and
in full force and effect, subject to the Equitable Exceptions;
2. triSpan is not and, to the Knowledge of the Sellers and triSpan,
no other party to the lease or sublease is in breach or default, and no
event has occurred that, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder; and
3. triSpan has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
M. CONTRACTS. SECTION 4.13 of the Disclosure Schedule lists the
following contracts or agreements, (including without limitation Customer
Contracts or Agreements) and other written arrangements to which triSpan is a
party:
1. any written agreement (or group of related written agreements)
for the lease of personal property from or to third parties providing for
lease payments in excess of $75,000 per annum;
2. any written agreement (or group of related written agreements)
for the furnishing or receipt of services that triSpan reasonably projects
will involve more than the sum of $75,000 per annum or $150,000 over the
life of such agreement;
3. any written agreement concerning a partnership or joint venture;
4. any written agreement (or group of related written agreements)
under which it has created, incurred, assumed, or guaranteed (or may
create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $75,000 or under which it has
imposed (or may impose) a Security Interest on any of its assets, tangible
or intangible;
5. any written arrangement requiring confidentiality or
noncompetition other than agreements with customers, employees or
subcontractors in the Ordinary Course of Business;
6. any written arrangement with any of its directors, officers, or
employees, or any of its Affiliates other than standard contracts for
service as employees or subcontractors in the Ordinary Course of Business;
and
7. any other written arrangement (or group of related written
arrangements) either involving more than $75,000 per annum or not entered
into in the Ordinary Course of Business.
triSpan has delivered to the Buyer a correct and complete copy of each
written arrangement listed in SECTION 4.13 of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed that is
Material: (A) such written arrangement is legal, valid, binding, enforceable,
and in full force and effect, subject to the Equitable Exceptions; (B) except as
set forth in SECTION 4.13 of the Disclosure Schedule, such written arrangement
will continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms immediately following the Closing, subject to the
Equitable Exceptions, (C) triSpan is not, nor to the Knowledge of the Sellers
and triSpan is any other party, in breach or default, and no event has occurred
that with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under such written arrangement; and
(D) triSpan has not, nor to the Knowledge of the Sellers and triSpan has any
other party, repudiated any provision of such written arrangement. To triSpan's
Knowledge, triSpan is not a party to any oral contract, agreement, or other
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arrangement that, if reduced to written form, would be required to be listed in
SECTION 4.13 of the Disclosure Schedule under the terms of this SECTION 4.13. To
triSpan's and the Sellers' Knowledge (based on current belief and
circumstances), no unfilled Customer Contract or Agreement obligating triSpan to
perform services will result in a loss to triSpan upon completion of performance
in excess of the reserves set forth on Sellers' Most Recent Year End Balance
Sheet. Except as set forth in SECTION 4.13 of the Disclosure Schedule, triSpan
has not been notified that any of its customers intends either to dispute
charges under or to terminate early a Material Customer Contract or Agreement.
N. POWERS OF ATTORNEY. To triSpan's and Sellers' Knowledge, there
are no outstanding powers of attorney executed on behalf of triSpan.
O. INSURANCE. SECTION 4.15 of the Disclosure Schedule sets forth the
following information with respect to each material insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which triSpan has been a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past three (3) years:
1. the name, address and telephone number of the agent;
2. the name of the insurer, the name of the policyholder, and the
name of each covered insured;
3. the policy number and the period of coverage;
4. the scope (including an indication of whether the coverage was on
a claims-made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
5. a description of any retroactive premium adjustments or other
loss sharing arrangements.
With respect to each such insurance policy: (i) the policy is legal,
valid, binding, and enforceable and in full force and effect; (ii) the policy
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms immediately following the Closing Date; (iii) triSpan
is not in breach or default (including with respect to the payment of premiums
or the giving of notices), and no event has occurred that, with notice or the
lapse of time, would constitute such a breach or default or permit termination,
modification, or acceleration under the policy; and (iv) triSpan has not and to
the Knowledge of the Sellers and triSpan, no other party to the policy has
repudiated any provision thereof. Except as set forth in SECTION 4.15 of the
Disclosure Schedule, triSpan currently has no and has never had any
self-insurance arrangements.
P. LITIGATION. SECTION 4.16 of the Disclosure Schedule sets forth
each instance in which triSpan (i) is subject to any unsatisfied Material
judgment, order, decree, stipulation, injunction, or charge, or (ii) is a party
or, to the Knowledge of the Sellers and triSpan, is threatened to be made a
party to any Material charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction, or before any arbitrator.
Except as specifically described in SECTION 4.16 of the Disclosure Schedule, no
matter listed thereon could reasonably be expected, individually, to result in a
Material adverse effect to triSpan.
Q. EMPLOYEES. Except as set forth on SECTION 4.17 of the Disclosure
Schedule, to triSpan's and the Sellers' Knowledge, no billable employee or any
full time group of employees has any plans to terminate employment with triSpan.
triSpan is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes, except where such strikes, grievances,
claims or disputes would not have a Material
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adverse effect on triSpan. To triSpan's Knowledge, triSpan has not committed any
unfair labor practices. There are no organizational efforts presently being made
or, to the Knowledge of the Sellers and triSpan, threatened by or on behalf of
any labor union with respect to employees of triSpan.
R. EMPLOYEE BENEFITS. SECTION 4.18 of the Disclosure Schedule lists
all Employee Benefit Plans that triSpan maintains or to which triSpan
contributes for the benefit of any current or former employee of triSpan.
1. To triSpan's Knowledge, each Employee Benefit Plan (and each
related trust or insurance contract) complies in form and in operation in
all Material respects with the applicable requirements of ERISA and the
Code.
2. To triSpan's Knowledge, all required reports and descriptions, if
any (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's
and Summary Plan Descriptions), have been filed or distributed
appropriately with respect to each Employee Benefit Plan and the
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Sec.
4980B have been met in all Material respects with respect to each Employee
Welfare Benefit Plan.
3. All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been paid to
each Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date that are not yet due have been paid
to each Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of triSpan. All premiums or other payments that
are due for all periods ending on or before the Closing Date have been
paid with respect to each Employee Welfare Benefit Plan.
4. Each Employee Benefit Plan that is an Employee Pension Benefit
Plan which is intended to meet the requirements of a "qualified plan"
under Code Sec. 401(a) and has received a currently valid and favorable
determination letter from the Internal Revenue Service, and to triSpan's
Knowledge, nothing has occurred since the receipt of such letter that
would affect the tax qualified status of each such Employee Pension
Benefit Plan.
5. The market value of assets under each Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds the present
value of Liabilities thereunder (determined on an accumulated benefit
obligation basis) as of the last day of the most recent plan year. No
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been instituted or, to the
Knowledge of the Sellers and triSpan, threatened.
6. To triSpan's Knowledge, (i) there have been no Prohibited
Transactions with respect to any Employee Benefit Plan, (ii) no Fiduciary
has any Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the
assets of any Employee Benefit Plans, (iii) no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand with respect to
the administration or the investment of the assets of any Employee Benefit
Plan (other than routine claims for benefits) is pending or, to the
Knowledge of the Sellers and triSpan, threatened and (iv) neither the
Sellers nor triSpan has any Basis for any such charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand.
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7. triSpan has delivered or made available to the Buyer correct and
complete copies of (A) the plan documents and summary plan descriptions,
(B) the most recent determination letter received from the Internal
Revenue Service, (C) the most recent Form 5500 Annual Report, and (D) all
related trust agreements, insurance contracts, and other funding
agreements that implement each Employee Benefit Plan.
triSpan does not contribute to, has never contributed to, nor ever has
been required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal Liability) under any Multiemployer Plan. triSpan has not
incurred, and neither the Sellers nor any of the directors or the officers (or
employees with responsibility for litigation matters) of triSpan has any reason
to expect that triSpan will incur, any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that triSpan and the Controlled Group of Corporations that includes triSpan
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute. triSpan does not maintain,
nor has it ever maintained or contributed to, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing health, accident, or
life insurance benefits to former employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
S. GUARANTIES. triSpan is not a guarantor, nor is it otherwise
liable, for any Liability or obligation (including indebtedness) of any other
person.
T. ENVIRONMENT, HEALTH, AND SAFETY.
1. To triSpan's Knowledge, (i) triSpan and its Affiliates have
complied in all Material respects with all laws (including rules and
regulations thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning the environment, public health and
safety, and employee health and safety, except for such noncompliance as
would not have a Material adverse effect on triSpan, and (ii) no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against triSpan, the subject
of which would have a Material adverse effect on the financial condition
of triSpan.
2. To triSpan's Knowledge, triSpan has no Liability (and there is no
Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against triSpan
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety.
3. To triSpan's Knowledge, triSpan does not have any Material
Liability (and triSpan has not exposed any employee to any substance or
condition that could form the Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand (under the common law or pursuant to statute) against triSpan
giving rise to any Liability) for any illness of or personal injury to any
employee.
4. To triSpan's Knowledge, triSpan has obtained and been in
compliance in all Material respects with all of the terms and conditions
of all permits, licenses, and other authorizations that are required
under, and has complied in all Material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables that are contained
in, all federal, state, local, and foreign laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharge, releases, or threatened
releases of pollutants,
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contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, groundwater, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
U. LEGAL COMPLIANCE. Except as it would not, individually or in the
aggregate, have a Material adverse effect on the financial condition of triSpan,
to triSpan's Knowledge,:
1. triSpan has complied with all laws (including rules and
regulations thereunder) of federal, state, local, and foreign governments
(and all agencies thereof), including, without limitation, the Fair Labor
Standards Act of 1938, as amended, and the rules and regulations
promulgated thereunder. No charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or
commenced against triSpan that is currently pending and alleges any
failure to comply with any such law or regulation.
2. triSpan has complied with all applicable laws (including rules
and regulations thereunder) relating to the employment of labor (including
but not limited to the engagement of independent contractors under the
Fair Labor Standards Act of 1938, as amended, and the rules and
regulations promulgated thereunder), employee civil rights, hiring of
engaging non-United States citizens, and equal employment opportunities.
3. triSpan has not violated in any respect or received a notice or
charge asserting any violation of the Sherman Act, the Clayton Act, the
Robinson-Patman Act, or the Federal Trade Act, each as amended.
4. triSpan has not:
a. made or agreed to make any contribution, payment, or gift
of funds or property to any governmental official, employee, or
agent where the contribution, payment, or gift or the purpose
thereof was illegal under the laws of any federal, state, local, or
foreign jurisdiction;
b. established or maintained any unrecorded fund or asset for
any purpose, or made any false entries on any books or records for
any reason;
c. made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any
candidate for federal, state, local, or foreign public office in
excess of $500;
5. triSpan has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained
therein was correct and complete in all respects) under all applicable
laws (including rules and regulations thereunder); or
6. triSpan has possession of all records and documents it was
required to retain under all applicable laws (including rules and
regulations thereunder).
V. CERTAIN BUSINESS RELATIONSHIPS WITH TRISPAN. Except as set forth in SECTION
4.22 of the Disclosure Schedule, neither the Sellers nor its Affiliates have
been involved in any Material business arrangement or relationship with triSpan
within the past twelve (12) months other than service relationships in the
Ordinary Course of Business, and neither the Sellers nor its Affiliates own any
Material property or right, tangible or intangible, that is used in triSpan's
Business.
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W. BROKERS' FEES. Except for the fee owed on consummation of the
Merger to Salomon Smith Barney, Inc., triSpan does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or similar
representative with respect to the transactions contemplated by this Agreement.
X. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 3.1 AND THIS ARTICLE 4, TRISPAN AND THE SELLERS
MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN
RESPECT OF TRISPAN, OR ANY OF ITS ASSETS, LIABILITIES OR OPERATIONS, INCLUDING,
WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED. THE BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO
THE EXTENT SPECIFICALLY SET FORTH IN SECTION 3.1 AND THIS ARTICLE 4, THE BUYER
IS PURCHASING TRISPAN SHARES ON AN "AS-IS, WHERE-IS" BASIS.
ARTICLE 5
RESERVED
ARTICLE 6
ADDITIONAL COVENANTS
VI. ADDITIONAL COVENANTS. The Parties further covenant and agree as follows:
A. GENERAL. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under SECTION 8 below). The
Sellers and triSpan acknowledge and agree that from and after the Closing, the
Buyer will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to triSpan (other than the
Sellers' personal records or data); PROVIDED, however, that Sellers may retain
any copies of the foregoing (or originals, as appropriate, with copies being
provided to the Buyer) as shall be necessary to comply with applicable Tax and
other laws, regulations and ordinances.
B. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving triSpan, each of the other Parties will cooperate with him or it and
his, her or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under ARTICLE 8 below).
C. CONFIDENTIALITY. The Sellers will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement for a period of three (3)
years from the Closing, and except as otherwise permitted hereunder or as may be
required by law, deliver promptly to the Buyer or destroy, at the reasonable
request and option of the Buyer, all tangible embodiments (and all copies) of
the Confidential Information that are in its possession. In the event that the
Sellers are requested or required (by request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar legal process) to disclose any Confidential Information, the Sellers
will notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the provisions
of this SECTION 6.3. If, in the absence of a protective order or the receipt of
a waiver hereunder, the Sellers are compelled to
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disclose any Confidential Information or else stand liable for contempt, then
Sellers may disclose the Confidential Information; PROVIDED, HOWEVER, that the
Sellers will reasonably cooperate with the Buyer in it obtaining an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed. The foregoing provisions
shall not apply to any Confidential Information that is generally available to
the public immediately prior to the time of disclosure.
D. LANDLORDS' CONSENTS. On or before the Closing Date, Sellers shall
cause triSpan to use reasonable best efforts to obtain from its landlords (to
the extent required under the pertinent premises lease) written consent to the
assignment of those leases listed on the REQUIRED CONSENT SCHEDULE leases being
assumed by Buyer, which assignments are deemed to have resulted from the
transactions contemplated by this Agreement.
E. ADDITIONAL TAX MATTERS.
1. Subject to Buyer's reasonable right to approve same,
Sellers shall prepare and file (at Sellers' cost and expense) with
the appropriate governmental authorities all Income Tax Returns
required to be filed by it for any taxable period ending prior to
the Closing Date, and Sellers shall remit any Income Taxes due in
respect of such Income Tax Returns (but only to the extent such
Income Taxes are in excess of the reserve, if any, set forth on the
Most Recent Fiscal Year End Balance Sheet). Buyer and Sellers
recognize that each of them will need access, from time to time,
after the Closing Date, to certain accounting and Income Tax records
and information held by the Buyer and/or triSpan to the extent such
records and information pertain to events occurring on or prior to
the Closing Date; therefore, Buyer agrees to cause triSpan to (A)
properly retain and maintain such records for a period of six (6)
years from the date the Income Tax Returns for the year in which the
Closing occurs are filed or until the expiration of the statute of
limitations as may be extended by law from time to time that applies
to the Income Tax Return in question (i.e., including Income Tax
Returns for years preceding the year in which the Closing occurs),
whichever is later, and (B) allow the Sellers and their agents and
representatives at times and dates mutually acceptable to the
Parties, to inspect, review and make copies of such aforementioned
records as the Sellers may deem necessary or appropriate from time
to time, such activities to be conducted during normal business
hours and at the Sellers' expense. The Buyer and the Sellers further
agree, upon request, to use their best efforts to obtain any
certificate or other documents from any governmental authority or
any other Person as may be necessary to mitigate, reduce or
eliminate any Income Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
2. The Sellers shall be liable for any Taxes or other costs
attributable solely to all Tax Liabilities associated with the
conversion from cash to accrual accounting as a result of the
transactions contemplated by this Agreement. The Sellers shall also
be liable to the Buyer for all Income Taxes imposed on triSpan with
respect to any taxable year ended on or before the Closing Date or,
with respect to any period beginning before and ending after the
Closing Date, for the portions of such period occurring on or before
the Closing Date, including without limitation any Income Taxes
incurred in connection with any audit by any governmental authority
for any such period (or portion thereof); PROVIDED, HOWEVER, that
such liability shall be only to the extent such Taxes are in excess
of the reserve, if any, for such Tax Liability set forth on the Most
Recent Fiscal Year End Balance Sheet.
3. All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement shall be paid by the
Sellers when due, and the Party required by applicable law will file
all necessary Tax Returns and other documentation with respect to
all such
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transfer, documentary, sales, use, stamp, registration, and other
such Taxes and fees, and, if required by applicable law, the other
Parties will, and will cause their Affiliates to, join in the
execution of any such Tax Returns and other documentation. The
expense of such filings shall be paid by the Sellers.
F. COVENANT NOT TO COMPETE. For a period of two (2) years from and
after the Closing Date, John P. Louchheim agrees that he will not, directly or
indirectly, as principal, agent, trustee or through the agency of any
corporation, partnership, association or agent or agency, (i) own, manage,
control, participate in, consult with, render services for, or in any manner
engage in any activity or business competing with the businesses of the Buyer,
triSpan or their Affiliates in any country, (ii) request, advise, induce or
attempt to induce any customer, supplier, licensee, or other business relation
of the Buyer, triSpan or any of their Affiliates (each a "CUSTOMER") to
withdraw, curtail, cancel or otherwise cease such Customer's business with the
Buyer, triSpan and/or such Affiliate or in any way interfere with the
relationship between any such Customer and the Buyer, triSpan and/or any of
their Affiliates, (iii) service, canvass, solicit or accept any business from
any Customer for the purpose of competing with the Buyer, triSpan or the
Affiliates, (iv) disclose to any other person, firm, corporation or other
entity, the name or address of any Customer for the purpose of competing with
the Buyer, triSpan or any of their Affiliates, (v) solicit for employment or
employ any person who is or was employed by triSpan, the Buyer or any of their
Affiliates at any time within the one (1) year period immediately preceding such
solicitation of employment to leave the employ of the Buyer, triSpan or such
Affiliate and/or accept employment with the Sellers or with such Person, firm,
association, corporation or other entity, or in any way interfere willfully with
the relationship among the Buyer, triSpan or any of their Affiliates and any
such person, or (vi) initiate or engage in any discussions regarding an
acquisition of, or Sellers' employment (whether as an employee, an independent
contractor or otherwise) by, any businesses with which the Buyer, triSpan or any
of their Affiliates has entertained discussions or has requested and received
information relating to the acquisition of such business by the Buyer, triSpan
or such Affiliate upon or within the one (1) year period prior to the date
hereof; PROVIDED, HOWEVER, that no owner of less than five percent (5%) of the
outstanding stock of any publicly traded corporation shall be deemed to engage
solely by reason thereof in any of its businesses. In addition to the definition
of Affiliate set forth in ARTICLE 1 hereof, for purposes of this SECTION 6.6,
"AFFILIATE" with respect to the Buyer shall include, without limitation, any
corporation or business entity that either controls or is controlled by the
Buyer, The Hackett Group, Inc., Delphi Partners, Inc., Legacy Technology, Inc.
or Infinity Technology, Inc. or is controlled by the shareholders that control
the Buyer (and for this definition, "CONTROL" means the ownership, either
directly or through an unbroken chain of control, of more than fifty percent
(50%) of the equity interests or combined voting or management rights in an
entity).
G. REORGANIZATION INTENT. The Parties agree that the Merger is
intended to be a tax-free reorganization under SECTION 368 of the Code, and this
Agreement is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under such section of the Code. None of the Parties has
taken, shall take or fail to take any action that would jeopardize the
qualification of the Merger as such a tax-free reorganization (other than
actions contemplated by this Agreement or as may be otherwise legally required).
H. POOLING TRANSACTION. None of the Sellers or triSpan, nor any of
their respective affiliates or representatives, shall take or fail to take any
action, which action or failure would jeopardize the treatment of the
acquisition of triSpan contemplated herein as a pooling of interests for
accounting purposes. Further, the Sellers and triSpan each shall take, or cause
to be taken, all reasonable actions necessary in order for the acquisition of
triSpan contemplated herein to be treated as a pooling of interests for
accounting purposes, including without limitation the Sellers' and triSpan's
reasonable actions required to comply with each of the rules set forth on
ATTACHMENT A to the February 3, 1999 Letter of Intent among the Parties.
I. REGISTRATION RIGHTS. Buyer agrees to provide certain piggyback
and "shelf" registration rights to the Sellers in respect of all of such
Sellers' Buyer's Shares held by the Sellers (the
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"REGISTRABLE BUYER SHARES") pursuant to a Registration Rights Agreement in form
and substance as set forth in EXHIBIT G attached hereto (the "REGISTRATION
RIGHTS AGREEMENT"). All registration rights provided in the Registration Rights
Agreement shall (A) provide that the demand or obligation for a "shelf"
registration of the Registrable Buyer Shares and the ability of the
above-referenced holders of registration rights to sell Buyer's Shares
thereunder shall be subject to customary indemnification rights and obligations
of the Parties, stand-by, underwriter lockups and "blackout" arrangements in
respect of any registration statements of which the Buyer has provided notice to
such persons of Buyer's intent to file, (B) be subject to any required consents
and priorities of existing Buyer shareholders who hold registration rights, and
(C) include (without limitation) standard underwriter's "carve back" provisions
with respect to the "piggyback" provisions therein.
J. TRISPAN OPTIONS.
1. Except as otherwise provided herein, all of triSpan's stock
option plans, deferred bonus programs, phantom equity plans and
similar plans, arrangements and understandings shall have been
terminated with respect to future periods, and all options or other
rights under such plans, programs or arrangements, including,
without limitation, all triSpan Options shall be exchanged for
equivalent securities in the form of New Buyer Options in accordance
with SECTIONS 2.7(B) and (C) above and this SECTION 6.10 at the
Closing; PROVIDED, HOWEVER, that the proceeds, if any, received from
the conversion of Vested triSpan Options into triSpan Shares prior
to the Closing shall be retained by triSpan as cash on the Closing
Date Balance Sheet and shall not be included in the calculation of
cash on hand of triSpan as of the closing date for purposes of
calculating the Purchase Price.
2. At Closing, Buyer shall be satisfied that those Sellers who
are receiving New Buyer Shares are "ACCREDITED INVESTORS," as such
term is defined in the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or, if any such Seller is not an Accredited
Investor, he or she shall have a purchaser's representative
appointed for him or her in connection with the issuance of Buyer's
Shares or other Buyer securities to him or her hereunder; PROVIDED,
HOWEVER, that in no event can there be more than 35 Sellers who are
not "ACCREDITED INVESTORS." Such purchaser's representative must, to
the satisfaction of Buyer, satisfy the requirements of a purchaser's
representative as contemplated under Reg. D promulgated under the
Securities Act.
3. The holders of Vested triSpan Options and Unvested triSpan
Options (such person(s) to be referred to individually as a "TRISPAN
OPTIONEE" and collectively as the "TRISPAN OPTIONEES") shall be
issued, in the aggregate, the "XXX" (as defined below) number of New
Buyer Options (pro rata in accordance with their triSpan Options)
with a strike price for the New Buyer Options issued to each such
triSpan Optionee equal to the product of (A) the "Strike Price
Percentage" (as defined herein) of such triSpan Optionee's triSpan
Options multiplied by (B) the fair market value strike price for the
New Buyer Options equal to the Fair Market Price at Closing of
Buyer's Shares; PROVIDED, HOWEVER, the New Buyer Options issued to
such triSpan Optionee shall be on equivalent terms and conditions
(except as expressly stated herein) as the triSpan Options held by
each such triSpan Optionee, including, without limitation, the
vesting schedule. For purposes of this SECTION 6.10(D), the
following terms shall have the following meanings:
a. the "XXX" number of New Buyer Options shall be the
number equal to the quotient of:
(1) in respect of the Unvested triSpan Options,
the product of (x) the total number of Unvested triSpan
Options (or 264,490) and (y) the "triSpan Stock FMV Per
Share" (as defined
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herein), divided by the Fair Market Price at Closing of
Buyer's Shares; and
(2) in respect of the Vested triSpan Options, the
product of (x) the total number of Vested triSpan
Options (or 565,278) and (y) the "TRISPAN FMV PER SHARE"
(as defined herein) divided, by the Fair Market Price at
Closing of Buyer's Shares;
b. the "STRIKE PRICE PERCENTAGE" shall be equal to the
quotient of the strike price of each triSpan Optionee's
triSpan Option divided by the "triSpan Stock FMV Per Share";
and
c. the "TRISPAN STOCK FMV PER SHARE" shall be $8.60.
PROVIDED, HOWEVER, that each triSpan Optionee shall receive New Buyer Options
that have equal "In The Money Value" as they hold in the triSpan Options. The
"IN-THE-MONEY VALUE" of the triSpan Options for each triSpan Optionee shall mean
the (i) number of shares subject to triSpan Options held by each triSpan
Optionee multiplied by (ii) the difference between (A) the triSpan Stock FMV Per
Share and (B) the current average strike price of the triSpan Options held by
such triSpan Optionee. The "IN-THE-MONEY VALUE" of the New Buyer Options for
each Optionee shall mean such Optionee's number of shares subject to his or her
New Buyer Options upon the conversion of his or her triSpan Options multiplied
by that number which is equal to one (1) minus such triSpan Optionee's Strike
Price Percentage, multiplied by the Fair Market Price at Closing of Buyer's
Shares.
The shares underlying any New Buyer Options received in exchange for
triSpan Options hereunder shall be registered under Buyer's Form S-8 currently
on file.
K. 401(K) PLAN. triSpan will adopt all necessary corporate
resolutions to terminate triSpan's 401(k) Plan, effective as of one day prior to
Closing; PROVIDED, HOWEVER, that triSpan shall not make distributions to
participants pursuant to such plan termination until triSpan receives a
favorable determination letter from the Internal Revenue Service with respect to
such termination. Immediately prior to such termination, triSpan will make all
necessary payments to fund the contributions: (i) necessary or required to
maintain the tax qualified status of the 401(k) Plan and (ii) for elective
deferrals made pursuant to the 401(k) Plan for the period prior to termination.
For purposes of this SECTION 6.11, "401(K) PLAN" means a qualified plan under
Code Section 401(a), which includes a qualified cash or deferred arrangement, as
defined under Section 401(k) of the Code. On or prior to the Closing Date, Buyer
or Newco, as appropriate, shall adopt or amend a 401(k) Plan to provide for the
participation of triSpan employees in such 401(k) Plan on and after the Closing
Date. Buyer agrees to indemnify and hold harmless Sellers with respect to any
liabilities which arise as a result of distributions made on or after the
Closing Date from triSpan's 401(k) plan.
L. TRISUB. Buyer and Newco shall not dissolve, liquidate or merge
out of existence triSpan's wholly-owned Subsidiary, triSub, Inc., until the
earlier of (i) six months from the date of this Agreement, or (ii) the date on
which all of triSub, Inc.'s receivables have been collected or written off as
uncollectible.
ARTICLE 7
CONDITIONS TO OBLIGATIONS TO CLOSE
VII. CONDITIONS TO OBLIGATIONS TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction or waiver of the following conditions:
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1. the representations and warranties set forth in SECTION 3.1 and
ARTICLE 4 above shall be true and correct in all material respects at and
as of the Closing Date;
2. the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
3. triSpan will have procured those third party consents and given
those notices as set forth on the REQUIRED CONSENTS SCHEDULE;
4. no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
5. the Sellers and triSpan shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
SECTION 7.1(A)-(D) is satisfied in all respects;
6. the Buyer shall have received from the Sellers an executed Escrow
Agreement in the form and substance set forth as EXHIBIT A attached
hereto;
7. the Buyer and triSpan shall have received from the Sellers and
from each of the key continuing employees of triSpan listed on ANNEX III
(the "KEY EMPLOYEES") an executed Compliance Agreement in the form of
EXHIBIT D
8. in respect of all of triSpan's other employees, triSpan's rights
under its existing Confidentiality and Nondisclosure Agreements to Buyer
shall be assumed by the Surviving Corporation pursuant to the Merger, and,
as indicated on the list of employees attached to SECTION 4.11 of the
Disclosure Schedule, at least 80% of triSpan's billable employees have
previously executed triSpan's form of Confidentiality and Non-Disclosure
Agreement in the form submitted by triSpan and the Sellers to Buyer as
triSpan's standard form for same;
9. the Buyer shall have received the resignations, effective as of
the Closing, of each director of triSpan prior to the Closing;
10. no Material adverse change shall have occurred in triSpan's
Business;
11. such of the Sellers as are receiving Buyer's Shares pursuant to
the operation of ARTICLE 2 and SECTION 6.3 shall have executed an Equity
Subscription Agreement in the form of EXHIBIT C hereto;
12. triSpan shall have obtained payoff letters with respect to all
Funded Indebtedness in form and substance satisfactory to the Buyer;
13. all appropriate corporate and shareholder authorizations of
triSpan shall have been obtained;
14. the Buyer and Newco shall have received from the Sellers and
triSpan opinions of counsel from Kirkland & Ellis and Stevens & Lee in the
form and
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substance such that, when taken together, such opinions cover such matters
as are set forth as EXHIBIT E hereto;
15. at least ninety-five percent (95%) of all shareholders of
triSpan shall have agreed to participate in the Merger without any
dissenter's rights exercised;
16. Buyer shall have received opinions from PWC and AA confirming
that the business combinations effected by the Merger pursuant to the
terms of this Agreement will qualify for pooling of interests accounting
treatment; and
17. Buyer shall have received evidence in the form of Buyer's
instruction letter to its Transfer Agent that the latter shall issue all
necessary stock certificates representing all of Sellers' triSpan Shares,
endorsed in blank or accompanied by duly executed assignment documents.
The Buyer may waive any condition specified in this SECTION 7.1 if it
executes a writing so stating at or prior to the Closing.
B. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing are subject to satisfaction or waiver of the following
conditions:
1. the representations and warranties set forth in SECTION 3.2 above
shall be true and correct in all Material respects at and as of the
Closing Date;
2. the Buyer shall have performed and complied with all of its
covenants hereunder in all Material respects through the Closing;
3. Buyer will have procured all third party consents needed by Buyer
and given all notices required in connection with this Agreement and the
transactions contemplated hereby, including without limitation all action
necessary in connection with and/or the receipt of any notices to, filings
with, and authorizations, consents and approvals of governments,
governmental agencies, and third parties;
4. no action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
5. the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in SECTION
7.2(A)-(D) is satisfied in all respects;
6. Sellers shall have received from the Buyer and Newco an executed
Escrow Agreement in the form and substance set forth as EXHIBIT A attached
hereto;
7. the Sellers shall have received a fully executed copy of the
Registration Rights Agreement in the form and substance attached hereto as
EXHIBIT G;
8. the Sellers shall have received the certificates evidencing Buyer
Shares to be issued pursuant to this Agreement;
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9. the Sellers' Key Employees who have executed a Compliance
Agreement in the form and substance attached hereto as EXHIBIT D shall
have received from the Buyer an executed Compliance Agreement in the form
and substance attached hereto as EXHIBIT D, and Sellers shall be satisfied
that the Key Employees will receive from Buyer the initial base salaries
set forth in SCHEDULE 7.2(I); and
10. all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this SECTION 7.2 if they
execute a writing so stating at or prior to the Closing.
ARTICLE 8
REMEDIES FOR BREACHES OF THIS AGREEMENT
VIII. REMEDIES FOR BREACHES OF THIS AGREEMENT.
A. SURVIVAL. All of the representations and warranties contained
herein shall survive the Closing hereunder. The representations and warranties
of the Parties contained in ARTICLE 3 and ARTICLE 4 shall continue in full force
and effect for the shorter of (i) the longest period allowable under the rules
related to pooling of interests, which absent a mutual agreement to the contrary
based on advice from AA and PWC, shall be for a period of not less than one (1)
year thereafter.
B. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
1. In the event that either triSpan or the Sellers, as applicable,
breach any of their representations, warranties, agreements, and covenants
contained herein (other than a breach by Sellers of their individual
representations and warranties made in SECTION 3.1 or of any post-Closing
covenants of such Sellers, which are addressed in SECTION 8.2(B) below),
and provided that the particular representation, warranty, agreement, or
covenant survives the Closing and that the Buyer makes a written claim for
indemnification against the Sellers pursuant to SECTION 10.7 below within
the applicable survival period, then the Sellers, severally and not
jointly (i.e., pro rata in accordance with their respective share of the
Sellers' aggregate equity interest in triSpan), agree to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer
may suffer due to any such breach by triSpan or the Sellers; PROVIDED,
HOWEVER, that the Sellers shall not have any obligation to indemnify the
Buyer from and against any Adverse Consequences resulting from, arising
out of, relating to, in the nature of, or caused by the breach of any
representation or warranty or covenant of triSpan or Sellers in this
Agreement (i) until the Buyer has suffered aggregate losses by reason of
all such breaches in excess of $150,000 threshold (after which point the
Sellers will be obligated only to indemnify the Buyer from and against
further such Adverse Consequences), or (ii) in excess of $8,000,000 in the
aggregate (after which point Sellers shall have no obligation to indemnify
Buyer from and against such further Adverse Consequences).
2. In the event any Seller breaches any of his or its
representations and warranties contained in SECTION 3.1 herein, or any of
his or its post-Closing covenants, and provided that the particular
representation, warranty, or covenant survives the Closing and that the
Buyer makes a written claim for indemnification against such Seller
pursuant to SECTION 10.7 below within the applicable survival period, then
such Seller agrees to indemnify the Buyer from and against the entirety of
any Adverse Consequences the Buyer may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences the
Buyer may suffer after the end of the applicable survival
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period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach, including without limitation any liability of
triSpan or Newco resulting from options that have not been canceled,
whether or not such options are disclosed on the Disclosure Schedules.
3. The Sellers agree to indemnify the Buyer from and against the
entirety of any brokerage fees or investment banking commissions due by
Sellers or triSpan by reason of the transactions contemplated by this
Agreement.
4. The amount of any liability subject to indemnification under
ARTICLE 8 shall be adjusted to give credit to the Indemnifying Party for
any amounts when and as recovered by the Indemnified Party, with respect
to the matter for which the Indemnified Party is being indemnified, under
(i) insurance policies for the benefit of the Indemnified Party, except to
the extent by which the Indemnified Party can demonstrate that the
premiums of such policies have increased as a result of such recovery or
(ii) other collateral sources (such as contractual indemnities of any
Person which are contained outside of this Agreement), and the Indemnified
Party hereby covenants that it will use its reasonable best efforts to
pursue such insurance claims and not release any such collateral sources
from any obligations such parties may have (unless the Indemnifying Party
has permitted the Indemnified Party to not pursue such insurance claims or
to release such collateral sources). In addition, the amount of the
indemnification payment required under this ARTICLE 8 on account of any
Adverse Consequences shall be calculated by taking into account (i) the
present value of any tax benefit that the Indemnified Party will receive
as a result suffering any such Adverse Consequence and (ii) the present
value of any tax detriment the Indemnified Party will bear as a result of
receiving such indemnification payment.
C. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. In the
event the Buyer breaches any of its representations, warranties, and covenants
contained herein (including a breach by the Buyer of its obligations under
SECTIONS 5.9, in respect of triSpan's 401(k) plan, or 6.10, in respect of
Buyer's obligations to deliver an option arrangement to holders of New Buyer
Options on terms equivalent to such holders' current option arrangement), and
that the Sellers make a written claim for indemnification against the Buyer
pursuant to SECTION 10.7 below within the applicable survival period, then the
Buyer agrees to indemnify the Sellers from and against the entirety of any
Adverse Consequences the Sellers may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Sellers may
suffer after the end of the applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach.
D. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "INDEMNIFIED PARTY") with respect to any matter that may give
rise to a claim for indemnification against any other Party (the "INDEMNIFYING
PARTY") under this ARTICLE 8, then the Indemnified Party shall notify in writing
each Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any liability or obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is damaged and
materially prejudiced from adequately defending such claim. In the event any
Indemnifying Party notifies the Indemnified Party within thirty (30) days after
the Indemnified Party has given notice of the matter that the Indemnifying party
is assuming the defense thereof, (A) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice, (B) the
Indemnified Party may retain separate co-counsel at its sole cost and expense,
(C) the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement or compromise with respect to the matter without the written
consent of the Indemnifying Party, and (D) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter into
any settlement or compromise that does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event no Indemnifying
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Party notifies in writing the Indemnified Party within twenty (20) days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof; however, the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate. At any time after commencement of any such
action, any Indemnifying Party may request an Indemnified Party to accept a bona
fide offer from the other Party(ies) to the action for a monetary settlement
payable solely by such Indemnifying Party (which does not burden or restrict the
Indemnified Party nor otherwise prejudice him or her) whereupon such action
shall be taken unless the Indemnified Party determines that the dispute should
be continued, the Indemnifying Party shall be liable for indemnity hereunder
only to the extent of the lesser of (i) the amount of the settlement offer or
(ii) the amount for which the Indemnified Party may be liable with respect to
such action. In addition, the Party controlling the defense of any third party
claim shall deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
E. EXCLUSIVE REMEDY. The Parties acknowledge and agree that the
foregoing indemnification provisions in this ARTICLE 8 shall be the exclusive
remedy of the Parties for any breach of the representations, warranties and
covenants of the Parties contained in this Agreement.
F. PAYMENT; GENERAL RIGHT OF OFFSET. In accordance with this SECTION
8.6, the Indemnifying Parties shall promptly pay to the Indemnified Party as may
be entitled to indemnity hereunder in cash the amount of any Adverse
Consequences to which such Indemnified Party may become entitled to by reason of
the provisions of ARTICLES 2 or 8 of this Agreement. Notwithstanding the
foregoing, in connection with the indemnification of Buyer pursuant to SECTION
8.2, Buyer shall first seek indemnification payments through offset against the
Escrowed Portion of the Purchase Price until exhausted and then against the
Sellers, severally and not jointly after an indemnification claim has been made
therefor, for the amount of any Adverse Consequences or any other payments to
which Buyer may become entitled to by reason of the provisions of this Agreement
or the Escrow Agreement; PROVIDED, HOWEVER, that the aggregate liability of each
Seller hereunder shall not exceed the lesser of (x) such Seller's pro-rata share
of $8,000,000 (based on their respective share of the Sellers' aggregate equity
interest in triSpan) or (y) the Purchase Price received by him or it; PROVIDED,
FURTHER, HOWEVER, that the liability of any Seller under this Agreement shall
not exceed a percentage of the aggregate indemnifiable claims equal to his or
its pro rata share of such claims; and, PROVIDED, FINALLY, HOWEVER, that
Sellers, may, in their sole discretion, deliver Buyer Shares, including
unregistered Buyer Shares (valued at the Fair Market Price at Closing of Buyer's
Shares), as payment in satisfaction of such liabilities.
G. ARBITRATION WITH RESPECT TO CERTAIN INDEMNIFICATION MATTERS. AS
IT RELATES TO CLAIMS FOR MONEY DAMAGES ONLY, THE PARTIES AGREE TO SUBMIT TO
FINAL AND BINDING ARBITRATION, IN ACCORDANCE WITH THESE PROVISIONS, ANY DISPUTED
CLAIM OR CONTROVERSY ARISING FROM OR RELATED TO THE ALLEGED BREACH OF THIS
AGREEMENT OR ANY DISPUTED INDEMNIFICATION CLAIM MADE PURSUANT TO THIS ARTICLE 8.
THE PARTIES FURTHER AGREE THAT THE ARBITRATION PROCESS AGREED UPON HEREIN SHALL
BE THE EXCLUSIVE MEANS FOR RESOLVING MONETARY DISPUTES MADE SUBJECT TO
ARBITRATION HEREIN, BUT THAT NO ARBITRATOR SHALL HAVE AUTHORITY TO EXPAND THE
SCOPE OF THESE ARBITRATION PROVISIONS. ANY ARBITRATION HEREUNDER SHALL BE
CONDUCTED UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION (AAA). EITHER PARTY MAY INVOKE ARBITRATION PROCEDURES HEREIN BY
WRITTEN NOTICE FOR ARBITRATION CONTAINING A STATEMENT OF THE MATTER TO BE
ARBITRATED. THE PARTIES SHALL THEN HAVE FOURTEEN (14) DAYS IN WHICH THEY MAY
IDENTIFY A MUTUALLY AGREEABLE, NEUTRAL ARBITRATOR. AFTER THE FOURTEEN (14) DAY
PERIOD HAS EXPIRED, THE PARTIES SHALL PREPARE AND SUBMIT TO THE AAA A JOINT
SUBMISSION, WITH EACH PARTY TO CONTRIBUTE HALF OF THE APPROPRIATE ADMINISTRATIVE
FEE. IN THE EVENT THE PARTIES CANNOT AGREE UPON A NEUTRAL ARBITRATOR WITHIN
FOURTEEN (14) DAYS AFTER WRITTEN NOTICE FOR ARBITRATION IS RECEIVED, THEIR JOINT
SUBMISSION TO THE AAA SHALL REQUEST ARBITRATORS WHO ARE PRACTICING ATTORNEYS
WITH PROFESSIONAL EXPERIENCE IN THE FIELD OF CORPORATE LAW, AND THE PARTIES
SHALL ATTEMPT
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<PAGE>
TO SELECT AN ARBITRATOR FROM THE PANEL ACCORDING TO AAA PROCEDURES. UNLESS
OTHERWISE AGREED BY THE PARTIES, THE ARBITRATION HEARING SHALL TAKE PLACE IN NEW
YORK, NEW YORK, AT A PLACE DESIGNATED BY THE AAA. ALL ARBITRATION PROCEDURES
HEREUNDER SHALL BE CONFIDENTIAL. EACH PARTY SHALL BE RESPONSIBLE FOR ITS COSTS
INCURRED IN ANY ARBITRATION, AND THE ARBITRATOR SHALL NOT HAVE AUTHORITY TO
INCLUDE ALL OR ANY PORTION OF SAID COSTS IN AN AWARD REGARDLESS OF WHICH PARTY
PREVAILS. ANY ARBITRATION AWARDED SHALL BE FINAL AND BINDING AND SHALL BE
ACCOMPANIED BY A WRITTEN STATEMENT CONTAINING A SUMMARY OF THE ISSUES IN
CONTROVERSY, A DESCRIPTION OF THE AWARD, AND AN EXPLANATION OF THE REASONS FOR
THE AWARD.
ARTICLE 9
RESERVED
ARTICLE 10
MISCELLANEOUS
X. MISCELLANEOUS.
A. PRESS RELEASES AND ANNOUNCEMENTS. Except as may be required by
applicable securities laws or stock exchange requirements, no Party shall issue
any press release or public announcement relating to the subject matter of this
Agreement prior to, at or about the Closing without the prior written approval
of the Buyer and the Sellers, which written approval will not be unreasonably
withheld; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing Party will advise the other Parties prior to making the disclosure).
B. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
C. ENTIRE AGREEMENT. This Agreement (including the documents,
including all Exhibits, referred to herein and executed on the date hereof)
constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the Parties, written
or oral, that may have related in any way to the subject matter hereof;
PROVIDED, HOWEVER, that unless and until the consummation of the purchase and
sale transaction contemplated hereunder occurs, the Confidentiality Agreement
shall remain in full force and effect.
D. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations hereunder without the
prior written approval of the Buyer and the Sellers; PROVIDED, HOWEVER, that the
Buyer or Newco may assign (i) any or all of its rights and interests hereunder
to a wholly owned Subsidiary of Buyer (in any or all of which cases the Buyer
and Newco nonetheless shall remain liable and responsible for the performance of
all of its respective obligations hereunder) or (ii) any or all of its rights
under ARTICLE 8 of the Agreement to any lender providing debt financing to the
Buyer or its Affiliates; PROVIDED, FURTHER, HOWEVER, that Buyer shall not
transfer its obligations to issue Buyer Shares to Sellers and register such
Buyer Shares issued to the Sellers.
E. FACSIMILE/COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or more
parties hereto by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party can be
seen, and such execution and delivery shall be considered valid, binding and
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<PAGE>
effective for all purposes. At the request of any Party hereto, all parties
hereto agree to execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
F. DESCRIPTIVE HEADINGS. The descriptive section headings contained
in this Agreement are inserted for convenience or reference only and shall not
control or affect in any way the meaning, interpretation, or construction of any
of the provisions of this Agreement.
G. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to triSpan or the Sellers:
John Louchheim, COO and Founder
triSpan Inc.
The Clock Tower
1001 Washington Street
Conshohocken, PA 19428
Fax: (610) 995-9005
Phone: (610) 995-9000
with copies to:
George H. Spencer
JK&B Capital
205 North Michigan Avenue, Suite 808
Chicago, IL 60601
Tel: (312) 946-1200
Fax: (312) 946-1103
James L. Learner
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Tel: (312) 861-2000
Fax: (312) 861-2200
David R. Richie, II
Stevens & Lee
111 North Sixth Street
Reading, PA 19603
Tel: (610) 478-2127
Fax: (610) 376-5610
If to the Buyer or Newco:
AnswerThink Consulting Group, Inc.
1001 Brickell Bay Drive, 30th Floor
Miami, Florida 33131
Attn: Ted A. Fernandez and John F. Brennan
Tel: (305) 375-8005
Fax: (305) 379-8810
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<PAGE>
with a copy to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, NW
Washington, D.C. 20004
Attn: J. Hovey Kemp
Tel: (202) 637-5623
Fax: (202) 637-5910
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
H. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
I. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
J. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
K. EXPENSES. Each of the Parties and triSpan will bear his, her or
its own costs and expenses (including legal fees and expenses and investment
banking fees) incurred in connection with this Agreement and the transactions
contemplated hereby.
L. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant relating to the
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<PAGE>
same subject matter as any other representation, warranty or covenant
(regardless of the relative levels of specificity) that the Party has not
breached, it shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.
M. INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
N. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
* * *
[EXECUTION PAGES FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
BUYER:
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ TED A. FERNANDEZ
----------------------------------------
Ted A. Fernandez
President and CEO
NEWCO:
ACG - triSpan SUB, INC.
By: /s/ TED A. FERNANDEZ
----------------------------------------
Ted A. Fernandez
President and CEO
TRISPAN:
triSpan Inc.
By: /s/ JOHN LOUCHHEIM
----------------------------------------
John Louchheim
President and CEO
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<PAGE>
SELLERS:
/s/ JOHN LOUCHHEIM
--------------------------------------------
John Louchheim
/s/ DENNIS M. MCGRATH
--------------------------------------------
Dennis M. McGrath
/s/ MICHAEL GREEN
--------------------------------------------
Michael Green
JK&B CAPITAL L.P.
By: JK&B MANAGEMENT, L.L.C.
General Partner
By: /s/ DAVID KRONFELD
-----------------------------------------
Name: David Kronfeld
Its: Manager
JK&B CAPITAL II, L.P.
By: JK&B MANAGEMENT, L.L.C.
General Partner
By: /s/ DAVID KRONFELD
-----------------------------------------
Name: David Kronfeld
Its: Manager
APEX INVESTMENT FUND III, LP
By: APEX MANAGEMENT III, LLC,
ITS GENERAL PARTNER
By: FIRST ANALYSIS APEX MANAGEMENT
CO. III, LLC, MANAGING
MEMBER
By: /s/ BRET R. MAXWELL
------------------------------------------
Name: Bret R. Maxwell
Its: Member
APEX STRATEGIC PARTNERS, LLC
By: APEX MANAGEMENT III, LLC,
ITS GENERAL PARTNER
By: FIRST ANALYSIS APEX MANAGEMENT
CO. III, LLC, MANAGING
MEMBER
By: /s/ BRET R. MAXWELL
------------------------------------------
Name: Bret R. Maxwell
Its: Member
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<PAGE>
WINSTON PARTNERS, L.P.
By: Chatterjee Fund Management, L.P.
By: /s/ PETER HURWITZ
-----------------------------------------
Name: Peter Hurwitz
Its: Attorney in Fact
WINSTON PARTNERS II LLC
By: Chatterjee Advisors L.L.C.
By: /s/ PETER HURWITZ
-----------------------------------------
Name: Peter Hurwitz
Its: Manager
BOSTON CAPITAL VENTURES III
By: /s/ DAVID KRONFELD
-----------------------------------------
Name: David Kronfeld
Its: General Partner
VELOCITY CAPITAL, LLC
By: /s/ DAVID A. VOGEL
-----------------------------------------
Name: David A. Vogel
Its: Member/Manager
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EXHIBIT 10.37
ESCROW AGREEMENT
THIS ESCROW AGREEMENT dated this 26th day of February, 1999,
is entered into by and among ANSWERTHINK CONSULTING GROUP, INC., a Florida
corporation ("BUYER"), FIRST UNION NATIONAL BANK ("ESCROW AGENT") and those
certain shareholders, vested optionholders and warrantholders of triSpan Inc., a
Pennsylvania corporation (the "COMPANY") listed on the signature page hereof
(collectively, the "SELLERS").
RECITALS
A. Buyer, ACG-triSpan Sub, Inc., a Delaware corporation and
wholly owned subsidiary of Buyer ("NEWCO"), triSpan Inc. ("TRISPAN") and the
Sellers have entered into a Merger Agreement dated as of February 26, 1999 (the
"MERGER AGREEMENT") pursuant to which triSpan will merge with and into Newco,
with Newco being the surviving corporation, and the shares of capital stock of
triSpan being converted into the right to receive the Purchase Price as
specified in SECTION 2.8(A) of the Merger Agreement;
B. Terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Merger Agreement; and
C. This Escrow Agreement is entered into pursuant to ARTICLES
II and VIII of the Merger Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the parties
do hereby agree as follows:
1. DEPOSIT OF BUYER STOCK.
(a) Promptly after the closing contemplated by SECTION
2.10 of the Merger Agreement, Buyer will deposit with the Escrow Agent shares of
Buyer Common Stock, par value $0.01 per share (the "BUYER STOCK"), with the
aggregate of such shares valued at the sum of $948,575 (as determined in
accordance with SECTION 2.8 of the Merger Agreement) and consisting of 34,291
shares of Buyer Stock with a Purchase Price Per Share of $27.6625 (the
"ESCROW").
(b) All shares of the Buyer's Common Stock required to
be held in the Escrow pursuant to SECTION 2.12 of the Merger Agreement that may
be issued to one or more of the Sellers in accordance with the terms of their
respective option arrangements shall be deposited by Buyer with the Escrow Agent
promptly after Buyer receives notice from a Seller that he, she or it is
exercising their rights under their New Buyer Option, and all such shares shall
be treated as Buyer Stock and subject to the restrictions and limitations set
forth herein.
(c) The Escrow is to be retained by the Escrow Agent
pursuant to this Agreement, and the Escrow and income thereon may be disbursed
by the Escrow Agent only in accordance with this Agreement.
2. THE ESCROW.
The Buyer Stock held in the Escrow shall be valued for all
purposes under this Agreement at $27.6625 per share, which is their Fair Market
Price at Closing (as defined in the Merger Agreement). The shares of Buyer Stock
held in the Escrow shall initially be registered in the name of the Escrow
Agent, as attorneys for the benefit
<PAGE>
of Buyer; PROVIDED, HOWEVER, that the Sellers must enter into the Equity
Subscription Agreement in respect of such shares of Buyer Stock held in the
Escrow.
3. DUTIES OF THE ESCROW AGENT.
(a) The Escrow Agent shall receive, hold and invest (as
applicable) the Escrow pursuant to the terms of this Agreement. Except as
hereinafter provided, on the first anniversary of the Closing Date, the balance
of the Escrow not previously claimed by or paid or subject to a pending claim by
Buyer pursuant to an Escrow Claim shall be disbursed to the Sellers (based on
their relative contributions to the Escrow) after being registered in the name
of the appropriate Sellers. The Sellers and Buyer agree that each will execute
and deliver such instruments and documents as are furnished by the other party
to enable such furnishing party to receive those portions of the Escrow to which
the furnishing party is entitled under the provisions of the Merger Agreement
and this Agreement, including without limitation the removal of the Escrow
Legend.
(b) Upon written notice from Buyer to Escrow Agent and
the Sellers of any claim under the Merger Agreement against Sellers and the
Escrow, setting forth a description of the facts upon which the claim is based
and the amount of the claim (a "CLAIM", with the notice thereof referred to as
the "CLAIM NOTICE"), the Escrow Agent immediately shall reserve the number of
shares of Buyer Stock equal in value to the claim specified in the Claim Notice
(the "RESERVED SHARES").
(c) Buyer shall notify the Escrow Agent and the Sellers
of a Claim by mailing a copy of the Claim Notice to both Sellers and the Escrow
Agent by certified mail, return receipt requested or by personal service as
provided in Paragraph 7(e) hereof. In the event that the Sellers do not notify
the Escrow Agent and Buyer and Newco in writing of their objection to the Claim
within thirty (30) days of the receipt by the Escrow Agent of the Claim Notice,
the Escrow Agent shall deliver the Reserved Shares to Buyer.
(d) In the event a Claim Notice is received by the
Escrow Agent and the Escrow Agent receives a written objection to the Claim from
the Sellers within thirty (30) days of the receipt by the Escrow Agent of the
Claim Notice to the Sellers, the Escrow Agent shall continue to hold the
Reserved Shares until it either (i) receives a joint written direction from the
Buyer on the one hand and the Sellers on the other with respect to the
disposition of such reserved portion of the Escrow, (ii) until Buyer and the
Sellers have resolved the claim, or (iii) receives a determination from an
arbitrator pursuant to the dispute resolution procedures outlined in SECTION 8.8
of the Merger Agreement; or (iv) an order from a court of competent
jurisdiction.
(e) Any dividends, interest or other income earned, if
applicable, by the Escrow, net of any transaction costs associated with
investment thereof shall be paid to the Sellers from time to time at the sole
discretion of the Sellers.
(f) The Escrow Agent shall provide Buyer, Newco and the
Sellers with quarterly reports of assets, if applicable, held and income earned
by the Escrow.
(g) The Escrow Agent shall exercise any voting or
consent rights associated with the Buyer's Stock in such manner as may be
directed in writing by the Sellers.
4. REPLACEMENT OF ESCROW AGENT; RESOLUTION OF DISPUTES.
(a) In the event of any conflict of interest in respect
of the Escrow Agent hereunder (as reasonably determined by Buyer), Buyer shall
have the option to replace the Escrow Agent with a neutral third party Escrow
Agent (which shall be a bank or trust company having a capital and surplus of
not less than $50,000,000) designated jointly by Buyer and Sellers.
(b) All disputes between the Sellers and either Buyer or
Newco with respect to (a) the Escrow, (b) the allowance or disallowance of a
Claim by Buyer or Newco, or (c) the terms of this Agreement or the rights and
obligations of the Sellers, Buyer and Newco hereunder, which cannot be resolved
promptly by mutual agreement, will be resolved by binding arbitration in
accordance with the rules of the American Arbitration Association as provided in
SECTION 8.8 of the Merger Agreement.
2
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(c) If any controversy arises between the parties hereto
or with any third person, the Escrow Agent, shall not be required to resolve the
same or to take any action to do so but may, at its discretion, institute such
interpleader or other proceedings as it deems proper. The Escrow Agent may rely
on any joint written instructions as to the disposition of funds, assets
documents, or other assets held in escrow.
5. OPERATIONS.
The Sellers, Buyer and Newco hereby agree with the Escrow
Agent that:
(a) The Escrow Agent shall have no duties or
responsibilities except as expressly provided for in this Agreement.
(b) The Escrow Agent shall not be responsible for the
identity, authority or rights of any person, firm or corporation executing or
delivering or purporting to execute or deliver this Agreement or any document or
security deposited hereunder or any endorsement thereon or assignment thereof.
(c) The Escrow Agent shall not be responsible for the
sufficiency, genuineness or validity of or title to any document or security
deposited or to be deposited with it pursuant to this Agreement or of any
endorsement thereon or assignment thereof.
(d) The Escrow Agent may rely upon any instrument or
writing believed by it to be genuine and sufficient and properly presented, and
shall not be liable or responsible for any action taken or omitted in accordance
with the provisions thereof.
(e) The Escrow Agent shall not be liable or responsible
for any act it may do or omit to do in the exercise of reasonable care.
(f) In case any property held by the Escrow Agent
hereunder shall be attached, garnished or levied upon under any order of any
court or the delivery thereof shall be stayed or enjoined by any order of any
court, or any other order, judgment or decree shall be made or entered by any
court affecting such property or any part thereof or any acts of the Escrow
Agent, the Escrow Agent is hereby authorized, in its exclusive discretion, to
obey and comply with all writs, orders, judgments, or decrees so entered or
issued, whether with or without jurisdiction, and, if the Escrow Agent obeys and
complies with any such writ, order, judgment or decree, it shall not be liable
to any of the parties hereto, their successors, heirs or personal
representatives or to any other person, firm or corporation, by reason of such
compliance notwithstanding such writ, order, judgment or decree be subsequently
reversed, modified, annulled, set aside or vacated.
(g) The Escrow Agent shall be entitled to reasonable
compensation for its services and may employ agents and attorneys for (i) the
reasonable protection of the property held hereunder; or (ii) representation in
any dispute resolution process or court proceeding as a stockholder.
(h) Buyer, Newco and the Sellers jointly and severally
agree to indemnify and hold Escrow Agent harmless from any and all costs,
expenses, claims, losses, liabilities and damages (including reasonable
attorneys' fees) that may arise out of or in connection with Escrow Agent's
acting as Escrow Agent under the terms of this Escrow Agreement, except in those
instances where Escrow Agent has been guilty of gross negligence or willful
misconduct.
6. FEES AND EXPENSES. All fees and expenses of the Escrow
Agent shall be paid the Buyer, except that any expenses of the Escrow Agent in
connection with any litigation hereunder shall be paid by the party obligated
for the cost of such litigation. The Escrow Agent shall be compensated for its
services in accordance with SCHEDULE A attached hereto and, in addition, the
Escrow Agent shall be reimbursed for all of its reasonable out-of-pocket
expenses, including attorney's fees, travel expenses, telephone and facsimile
transmission costs, postage (including express mail and overnight delivery
charges), copying charges and the like. All of the compensation and
reimbursement obligations set forth in this SECTION 6 shall be payable upon
demand by the Escrow Agent.
3
<PAGE>
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns, and no other persons shall have any rights herein. No transferee,
successor or assign of any Seller or Newco or Buyer shall have any rights
hereunder until each notice thereof has been given and evidence of each
transfer, assignment or succession is provided to Escrow Agent. This Agreement,
together with the Merger Agreement and related exhibits and schedules, contains
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby and may be amended, modified, supplemented or altered only
by a writing duly executed by the Escrow Agent, the Sellers and Buyer, and any
prior agreements or understandings, whether oral or written, are entirely
superseded hereby.
(b) This Agreement may be executed and endorsed in one
or more counterparts and each of such counterparts shall, for all purposes, be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. Signatures sent to the other parties by facsimile
transmission shall be binding as evidence of acceptance of the terms hereof by
such signatory party.
(c) A successor Escrow Agent may be appointed at any
time as provided in SECTION 4 hereof.
(d) The Escrow Agent agrees to hold the assets of the
Escrow in a segregated and separate account or vault, if applicable, outside the
reach of its general creditors.
(e) Any notice, statement or other communication which
is required may be given, including Claim Notices, hereunder shall be in writing
and shall be sufficient in all respects if delivered personally or by certified
United States mail, postage prepaid, return receipt requested as follows:
THE ESCROW AGENT:
First Union National Bank
Corporate Trust Administration, VA 3279
800 East Main Street, Lower Mezzanine
Richmond, Virginia 23219
Attention: Gregory N. Jordan
Fax No. (804) 343-6699
Tel No.: (804) 343-6058
SELLER OR NEWCO:
AnswerThink Consulting Group, Inc.
1001 Brickell Bay Drive, 30th Floor
Miami, Florida 33131
Attention: Ted A. Fernandez and John F. Brennan
Fax No.: (305) 379-8810
Tel No.: (305) 375-8005
WITH A COPY TO:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, D.C. 20004-1109
Attention: J. Hovey Kemp
Fax No.: (202) 637-5910
Tel No.: (202) 637-5623
4
<PAGE>
THE SELLERS:
John Louchheim, COO and Founder
triSpan Inc.
The Clock Tower
1001 Washington Street
Conshohocken, PA 19428
Fax No.: (610) 995-9005
Tel No.: (610) 995-9000
George H. Spencer
JK&B Capital
205 North Michigan Avenue, Suite 808
Chicago, IL 60601
Tel: (312) 946-1200
Fax: (312) 946-1103
WITH COPIES TO:
James L. Learner
Kirkland & Ellis
200 E. Randolph Drive
Chicago, IL 60601
Tel No.: (312) 861-2000
Fax No.: (312) 861-2200
David R. Richie, II
Stevens & Lee
111 North Sixth Street
Reading, PA 19603
Tel No.: (610) 478-2127
Fax No.: (610) 376-5610
The address of a party may be changed from time to time by giving notice in the
manner prescribed in this paragraph. All such notices or communications will be
effective upon mailing, if mailed, and upon receipt, if personally delivered.
(f) The validity, enforcement and construction of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the conflict of laws principles thereof.
(g) Each of the parties hereto agrees to cooperate with
the other parties hereto in effectuating this Agreement and to execute and
deliver such further documents or instruments and to take such further actions
as shall be reasonably requested in connection therewith.
(h) If any one or more provisions in this Agreement, for
any reason, shall be determined to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of any such provision in any
other respect and the remaining provisions of this Agreement shall not be in
anyway impaired.
(i) The Escrow Agent may resign as such by delivering
written notice to that effect at least thirty (30) days prior to effective date
of such resignation to Buyer and the Sellers. Buyer and the Sellers, acting
jointly, may terminate the Escrow Agent from its position as such by delivering
to the Escrow Agent written notice to that effect executed by Buyer and the
Sellers at least thirty (30) days prior to the effective date of such
termination. In the event of such resignation or termination of the Escrow
Agent, a successor Escrow Agent shall be appointed by mutual agreement between
Buyer and the Sellers. From and after the appointment of a successor Escrow
5
<PAGE>
Agent pursuant to this SECTION 7(J), all references herein to the Escrow Agent
shall be deemed to be to such successor Escrow Agent.
[THIS SPACE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the day and year first above written.
BUYER:
ANSWERTHINK CONSULTING GROUP, INC.
By: /s/ TED A. FERNANDEZ
------------------------------------------
Name: Ted A. Fernandez
Title: President and CEO
AGENT:
FIRST UNION NATIONAL BANK
By: /s/ GREGORY N. JORDAN
------------------------------------------
Name: Gregory N. Jordan
Title: Corporate Trust Officer
SELLERS:
/s/ JOHN LOUCHHEIM
------------------------------------------
John Louchheim
/s/ DENNIS M. MCGRATH
------------------------------------------
Dennis M. McGrath
JK&B CAPITAL L.P.
By: JK&B MANAGEMENT, L.L.C.
General Partner
By: /s/ DAVID KRONFELD
-----------------------------------------
Name: David Kronfeld
Its: Manager
7
<PAGE>
JK&B CAPITAL II, L.P.
By: JK&B MANAGEMENT, L.L.C.
General Partner
By: /s/ DAVID KRONFELD
-----------------------------------------
Name: David Kronfeld
Its: Manager
APEX INVESTMENT FUND III, LP
By: APEX MANAGEMENT III, LLC,
ITS MANAGER
By: FIRST ANALYSIS MANAGEMENT CO. III, LLC
MANAGING MEMBER
By: /s/ BRET R. MAXWELL
----------------------------------------
Name: Bret R. Maxwell
Its: Member
APEX STRATEGIC PARTNERS, LLC
By: APEX MANAGEMENT III, LLC,
ITS MANAGER
By: FIRST ANALYSIS MANAGEMENT CO. III, LLC
MANAGING MEMBER
By: /s/ BRET R. MAXWELL
-----------------------------------------
Name: Bret R. Maxwell
Its: Member
WINSTON PARTNERS, L.P.
By: Chatterjee Fund Management, L.P.
By: /s/ PETER A. HURWITZ
-----------------------------------------
Name: Peter A. Hurwitz
Its: Attorney in Fact
WINSTON PARTNERS II LLC
By: Chatterjee Advisors L.L.C.
By: /s/ PETER A. HURWITZ
-----------------------------------------
Name: Peter A. Hurwitz
Its: Manager
8
<PAGE>
BOSTON CAPITAL VENTURES III
By: /s/ DAVID KRONFELD
-----------------------------------------
Name: David Kronfeld
Its: General Partner
VELOCITY CAPITAL, LLC
By: /s/ DAVID A. VOGEL
----------------------------------------
Name: David A. Vogel
Its: Member/Manager
9
<PAGE>
SCHEDULE A
ESCROW COMPENSATION
The ESCROW AGENT shall receive the following fees from ACQUIRER and TRANSFERORS:
1. WAIVED - Set-up Fee:
Includes the preparation and review of documents and establishment of the escrow
account.
2. $1,500 Annual Advance Administration Fee:
3. $25.00 Investment Transactions:
For purchases, sales and maturities of securities
** THIS FEE DOES NOT APPLY TO FUNDS INVESTED IN ONE OF ESCROW AGENT'S
PROPRIETARY MONEY MARKET VEHICLES.
4. Disbursement Charges:
$25.00 per Wire Transfer
$15.00 per Check
5. Recovery of out-of-pocket expenses will be billed at cost.
6. Tax Reporting
$10.00 per Form 1099-INT
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and the statement of operations for the three-month period ended April 2,
1999 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-02-1999
<PERIOD-END> APR-02-1999<F1>
<CASH> 15,432,717
<SECURITIES> 0
<RECEIVABLES> 40,165,494
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,509,972
<PP&E> 7,563,683
<DEPRECIATION> 3,331,259
<TOTAL-ASSETS> 92,997,580
<CURRENT-LIABILITIES> 21,371,855
<BONDS> 0
0
0
<COMMON> 34,699
<OTHER-SE> 71,591,026
<TOTAL-LIABILITY-AND-EQUITY> 71,625,725
<SALES> 0
<TOTAL-REVENUES> 44,805,186
<CGS> 0
<TOTAL-COSTS> 26,809,217
<OTHER-EXPENSES> 15,287,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 290,487
<INCOME-PRETAX> 2,616,502
<INCOME-TAX> 2,110,754
<INCOME-CONTINUING> 505,748
<DISCONTINUED> 0
<EXTRAORDINARY> 2,112,591
<CHANGES> 0
<NET-INCOME> (1,606,843)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.04)
<FN>
<F1>The three month period ended April 2, 1999 has been restated to reflect the
effect of the merger with triSpan, Inc. which was accounted for as a
pooling-of-interest.
</FN>
</TABLE>
