TECHNISOURCE, INC. AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended MARCH 31, 2000.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 PR 15(D) PF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________________ to _____________________
Commission File Number: 000-24391
TECHNISOURCE, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2786227
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 W. CYPRESS CREEK ROAD, SUITE 200, FORT LAUDERDALE, FL 33309
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(Address of principal executive offices) (Zip Code)
(954) 493-8601
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
The number of shares outstanding of common stock as of March 31, 2000
was 10,354,000.
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
PAGE
Condensed Consolidated Balance Sheets as of March 31, 2000
(Unaudited) and December 31, 1999 1
Condensed Consolidated Statements of Income for the Three Months
Ended March 31, 2000 (Unaudited) and 1999 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 (Unaudited) and 1999 (Unaudited) 3
Notes to Condensed Consolidated Financial Statements (Unaudited) 4-8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-14
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
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(UNAUDITED)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,899,634 $ 17,353,780
Trade accounts receivable, less allowance for doubtful
accounts of $825,283 and $639,933 as of March 31, 2000
and December 31, 1999, respectively 24,691,535 18,558,024
Due from shareholders and employees 333,310 348,606
Prepaid expenses and other current assets 681,475 613,669
Prepaid income taxes 1,217,631 415,350
Deferred tax asset, current 453,011 453,011
------------ ------------
Total current assets 39,276,596 37,742,440
Property and equipment, net 2,417,131 2,353,570
Other assets 369,542 360,340
Goodwill, net 5,139,943 --
Deferred tax asset, noncurrent 128,148 128,148
------------ ------------
Total assets $ 47,331,360 $ 40,584,498
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,164,661 $ 369,199
Accrued liabilities 4,518,953 3,609,392
Line of credit 3,750,000 --
Notes payable 1,000,000 --
------------ ------------
Total current liabilities 10,433,614 3,978,591
Shareholders' equity:
Common stock, $0.01 par value, 50,000,000 shares authorized,
10,385,000 issued as of March 31, 2000 and December 31, 1999 103,850 103,850
Additional paid-in capital 30,161,540 30,129,248
Retained earnings 6,812,919 6,522,809
Less : Treasury stock, 31,000 and 25,000 shares as of March 31, 2000 (180,563) (150,000)
and December 31, 1999, respectively
Total shareholders' equity 36,897,746 36,605,907
------------ ------------
Total liabilities and shareholders' equity $ 47,331,360 $ 40,584,498
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
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2000 1999
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<S> <C> <C>
Revenues
IT Staffing $ 30,047,750 $ 30,000,285
Hardware Sales 674,902 5,601,082
Hardware Commissions 363,160 161,700
------------ ------------
31,085,812 35,763,067
Cost of revenues
IT Staffing 22,397,269 22,744,789
Hardware 573,149 5,150,739
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22,970,418 27,895,528
Gross profit 8,115,394 7,867,539
Selling, general and
administrative expenses 7,789,774 5,710,545
------------ ------------
Operating income 325,620 2,156,994
Other income (expense):
Interest and other income 224,135 224,574
Interest expense (49,177) --
------------ ------------
Income before taxes 500,578 2,381,568
Provision for income taxes 210,468 952,627
------------ ------------
Net income $ 290,110 $ 1,428,941
============ ============
Net income per share - basic $ 0.03 $ 0.14
============ ============
Net income per share - diluted $ 0.03 $ 0.14
============ ============
Weighted average common shares
outstanding - basic 10,359,274 10,385,000
============ ============
Weighted average common shares
outstanding - diluted 10,517,067 10,547,158
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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TECHNISOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 290,110 $ 1,428,941
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 309,276 323,553
Deferred compensation 32,292 32,292
Changes in assets and liabilities:
Increase in accounts receivable (4,538,194) (4,124,891)
Decrease in due from shareholders and employees 15,296 32,475
Increase in prepaid expenses and other assets (2,553) (633,317)
Increase in prepaid income taxes (802,281) --
Increase in accounts payable 493,211 818,607
Decrease in accrued liabilities (307,917) (75,257)
Increase in income tax payable -- 352,627
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (4,510,760) (1,844,970)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (294,450) (392,731)
Acquisitions of business, net of cash acquired (4,368,373) --
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (4,662,823) (392,731)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 3,750,000 --
Purchase of treasury stock (30,563) --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,719,437 --
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,454,146) (2,237,701)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 17,353,780 17,545,183
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,899,634 $ 15,307,482
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 49,177 $ --
============ ============
Taxes paid $ 1,012,749 $ 759,780
============ ============
SUPPLEMENTAL DISCLOSURE OF MDS CONSULTING ACQUISITION:
Total purchase price $ 915,466
Less:
Fixed asset valuation (10,786)
Other asset valuation (3,355)
------------
Amount included in goodwill $ 901,325
============
SUPPLEMENTAL DISCLOSURE OF PRISM ACQUISITION:
Total purchase price, net of cash acquired $ 4,452,907
Less:
Accounts receivable valuation (1,595,317)
Fixed asset valuation (36,369)
Prepaid expenses and other assets valuation (71,100)
Add:
Accounts payable valuation 302,251
Accrued liabilities valuation 1,217,478
------------
Goodwill $ 4,269,850
============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. General
ORGANIZATION AND DESCRIPTION OF BUSINESS
The accompanying condensed consolidated financial statements include
Technisource, Inc. and its wholly owned subsidiaries (the "Company"). The
subsidiaries include Technisource of Florida, Inc., TSRC.net, Inc., TSRC of
Florida, Inc., Technisource Hardware, Inc., and former subsidiaries,
Technisource Midwest, Inc. and DFI Acquisition Corp.
The Company is primarily an information technology ("IT") staffing
services and consulting firm, providing IT, e-commerce and web development
professionals principally on a time and materials basis to organizations with
complex IT needs. As of March 31, 2000, the Company had 32 branch office
locations.
INTERIM FINANCIAL DATA
The interim financial data as of March 31, 2000, and for the three
months ended March 31, 2000 and 1999 is unaudited and has been prepared in
accordance with generally accepted accounting principles for interim financial
reporting purposes and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Certain information and footnote disclosure normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The information reflects all adjustments, consisting only of normal recurring
entries, that, in the opinion of management, are necessary to present fairly the
financial position and results of operations or cash flows of the Company for
the periods indicated. Results of operations and cash flows for the
4
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - (CONTINUED)
interim periods are not necessarily indicative of the results of operations or
cash flows for the full fiscal year. These condensed consolidated financial
statements should be read in conjunction with the Company's Financial Statements
and the notes thereto for the year ended December 31, 1999, included in the
Company's annual report on Form 10-K.
RECLASSIFICATIONS
Certain reported amounts for 1999 have been reclassified to conform to
the 2000 presentation.
2. Acquisitions
ACQUISITION OF MDS CONSULTING SERVICES, INC.
On February 18, 2000, the Company, through a wholly owned subsidiary,
completed the acquisition of the assets of MDS Consulting Services, Inc., an IT
Staffing company for approximately $915,000 in cash. Up to an additional
$975,000 cash consideration may be paid in the form of an earn-out payable over
three years based on certain specified criteria. The transaction was accounted
for under the purchase method of accounting.
ACQUISITION OF PRISM GROUP CONSULTING, LLC AND PRISM GROUP, LLC
On March 1, 2000, the Company acquired substantially all of the assets
and certain liabilities of PRISM Group Consulting, LLC and PRISM Group, LLC, IT
staffing companies for approximately $4,770,000 cash and a promissory note in
the amount of $1,000,000 which matures February 28, 2001. In connection with the
acquisition, the Company utilized $3,750,000 of the bank line of credit. (Note
5) The transaction was accounted for under the purchase method of accounting.
The proforma effect of the acquisition as if it occurred on January 1, 2000 and
January 1, 1999 is as follows:
MARCH 31,
--------------------------------
2000 1999
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Revenue $32,784,370 $37,902,578
Net Income $ 277,293 $ 1,497,924
Net Income per share - basic $ 0.03 $ 0.14
Net Income per share - diluted $ 0.03 $ 0.14
5
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - (CONTINUED)
3. Summary of Significant Accounting Policies
GOODWILL
Goodwill represents the excess of the purchase price over the fair
value of acquired companies and is being amortized on a straight line basis over
fifteen years for the acquisition of PRISM Group Consulting, LLC, PRISM Group,
LLC and MDS Consulting, Inc.
REVENUE RECOGNITION
The Company generally recognizes services revenue at the time services
are performed. The Company generally recognizes product and related service
revenue at the time of shipment to the customer. However, when the Company does
not take title to the product, revenue is recognized as commission revenue when
the product is received by the customer.
BUSINESS RISKS AND CONCENTRATION
The Company's operations depend upon, among other things, the Company's
ability to attract, develop and retain a sufficient number of highly skilled
professional employees. The IT service industry is highly competitive and served
by numerous national, regional, and local firms, all of which are either
existing or potential competitors of the Company. Many of these competitors have
substantially greater financial, technical and marketing resources and greater
name recognition than the Company.
The Company provides IT professional services to customers located in
the United States and Canada. The Company's revenue is generated from a limited
number of clients in specific industries. Future operations may be affected by
the Company's ability to retain these clients and the cyclical and economic
factors that could have an impact on those industries. Financial instruments,
which potentially expose the Company to concentrations of credit risk, consist
primarily of accounts receivable. Additionally, the Company maintained
approximately $11.9 million at March 31, 2000 in one financial institution,
which is in excess of the FDIC insured limits.
4. Contingent Liability
The Company is currently undergoing a review by the Department of
Labor. Although Management believes the ultimate outcome of the review will not
have an adverse material effect on the Company's results of operations or
financial position, the outcome and effect of the review cannot yet be
determined.
6
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - (CONTINUED)
5. Line of Credit
On March 9, 1999, the Company established a line of credit with a bank
that provides for maximum borrowings of up to $25 million, $10 million of which
may be used for acquisitions and $15 million of which may be used for working
capital. Interest is payable monthly at a variable rate of LIBOR plus 1.4%. The
line of credit expires January 31, 2002. In connection with the acquisition of
PRISM Group, LLC and PRISM Group Consulting, LLC the Company utilized $3.75
million of the line of credit which is outstanding at March 31, 2000.
6. Earnings Per Share
Basic earnings per share is computed by dividing net income
attributable to common shares by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing net income attributable to common shares by the weighted average number
of common shares outstanding during the period increased to include the number
of additional common shares that would have been outstanding if the diluted
common shares had been issued. The diluted effect of outstanding options is
reflected in diluted earnings per share by application of the treasury stock
method.
THREE MONTHS ENDED MARCH 31,
------------------------
2000 1999
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Basic:
Weighted average common shares
outstanding 10,359,274 10,385,000
========== ==========
Dilute:
Weighted average common shares
outstanding 10,359,274 10,385,000
Dilutive effect of options 157,793 162,158
---------- ----------
Total 10,517,067 10,547,158
========== ==========
7. Stock Repurchase Plan
On April 22, 1999, the Company's Board of Directors approved a Stock
Repurchase Plan pursuant to which the Company can repurchase up to $1 million of
the Company's common stock on the open market. As of March 31, 2000, the Company
had repurchased 31,000 shares of its common stock at an aggregate cost to the
Company of $180,563.
7
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - (CONTINUED)
8. Reportable Segment
The Company operates in two business segments: IT Staffing and Computer
Hardware Sales. The segment information set forth below is based on the nature
of the services offered. The chief operating decision-makers evaluate each
segment's performance based primarily on their revenues, gross margin and
operating income. The accounting policies of the operating segments are the same
as those of the entire Company.
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
----------- -----------
Revenues 1
IT Staffing $30,047,750 $30,000,285
Hardware Sales 1,038,062 5,762,782
----------- -----------
$31,085,812 $35,763,067
=========== ===========
Income Before Taxes 2
IT Staffing $ 434,372 $ 2,047,535
Hardware Sales 66,206 334,033
----------- -----------
$ 500,578 $ 2,381,568
=========== ===========
9. Subsequent Events
Pursuant to the Stock Repurchase Plan, the Company purchased 10,500
shares for $48,157 through May 12, 2000.
- ---------------
1 Two of the Company's clients accounted for approximately 15.9% and
54.9%, respectively, of the Company's hardware sales for the period
ended March 31, 2000.
2 Since all expenses have not been allocated to the hardware sales
segment, this basis is not necessarily a measure completed in
accordance with generally accepted accounting principles and may not be
comparable to other companies.
8
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THIS FORM 10-Q, PRINCIPALLY IN THIS
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," THAT ARE NOT RELATED TO HISTORICAL RESULTS, INCLUDING STATEMENTS
RELATING TO WORKING CAPITAL, COSTS OF SETTING UP NEW BRANCH OFFICES,
PROFITABILITY OF BRANCH OFFICES, AND THE EFFECT OF LIABILITY, IF ANY, IMPOSED ON
THE COMPANY BY THE DEPARTMENT OF LABOR ARE FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING, WITHOUT LIMITATION, THE COMPANY'S ABILITY TO RECRUIT AND RETAIN
QUALIFIED TECHNICAL PROFESSIONALS; IDENTIFY, ACQUIRE AND INTEGRATE SUITABLE
ACQUISITION CANDIDATES; OBTAIN SUFFICIENT WORKING CAPITAL TO SUPPORT SUCH
GROWTH; COMPETE SUCCESSFULLY WITH EXISTING AND FUTURE COMPETITORS; THE ABILITY
OF NEW BRANCH OFFICES TO ACHIEVE PROFITABILITY AND OTHER FACTORS DESCRIBED
THROUGHOUT THIS FORM 10-Q. THE ACTUAL RESULTS THAT THE COMPANY ACHIEVES MAY
DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS DUE TO SUCH RISKS AND
UNCERTAINTIES. WORDS SUCH AS "BELIEVES," "ANTICIPATES," "EXPECTS," "INTENDS,"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, BUT
ARE NOT THE EXCLUSIVE MEANS OF IDENTIFYING SUCH STATEMENTS. THE COMPANY
UNDERTAKES NO OBLIGATION TO REVISE ANY FORWARD-LOOKING STATEMENTS IN ORDER TO
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF THIS REPORT.
READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS DISCLOSURES MADE
BY THE COMPANY IN THIS REPORT AND IN THE COMPANY'S OTHER REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION THAT ATTEMPT TO ADVISE INTERESTED PARTIES OF
THE RISKS AND FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS.
OVERVIEW
Technisource is a national provider of IT staffing services through 32
offices in the United States and Canada, utilizing over 1,200 highly trained
professionals. The Company has achieved a compound annual revenue growth rate of
56% over the past five years based on years-ended 1994 through 1999. This growth
rate has been generated internally, without the benefit of acquisitions.
The Company's revenues grew from $29.1 million in 1995 to $144.7
million in 1999. The Company's historical revenue growth during this period has
been driven primarily by increases in the number of professionals placed with
existing and new clients. The number of professionals utilized by the Company
grew from 320 as of December 31, 1995, to 1,163 as of December 31, 1999, and to
1,221 as of March 31, 2000. For each of 1999, 1998, and 1997, clients from the
previous year generated at least 70% of the Company's revenues.
Through 1999, the Company generated primarily all of its revenues from
fees for the provision of IT Staffing. For the period ended March 31, 2000, the
Company generated 96.7% of its revenues from fees for the provision of IT
staffing services and 3.3% from hardware sales.
With respect to IT staffing services, clients are typically billed and
professionals paid on a weekly basis. The Company recognizes revenues from IT
staffing services as they are performed. With respect to hardware sales, clients
are typically billed on a weekly basis. The Company recognizes revenues from
hardware sales when the title to the computer hardware passes to the customer.
9
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company's most significant cost is its personnel expense, which
consists primarily of salaries, fees and benefits of the Company's
professionals. To date, the Company has generally been able to maintain its
gross profit margin by offsetting increases in professional salaries and fees
with increases in the hourly billing rates charged to clients. However, there
can be no assurance that the Company will continue to be able to offset
increases in the Company's cost of revenues by increasing the amounts the
Company bills to its clients. The Company attempts to control overhead and
indirect expenses, which are not directly passed through to its clients, by
controlling the rate of its branch office expansion and by maintaining
centralized operations and back-office infrastructure.
The Company increased its administrative, sales, recruiting and
training professionals from 207 employees on December 31, 1997 to 324 employees
on December 31, 1999, and to 331 at March 31, 2000.
Over the last ten years, the Company has developed and refined the
Technisource Growth Model, which is focused on facilitating rapid internal
growth through the replication of Development Triangles. Each Development
Triangle is typically comprised of one Account Manager, two or three recruiting
professionals and a group of IT professionals. The Company has grown from nine
Development Triangles as of December 31, 1995 to 62 Development Triangles as of
December 31, 1999, and to 67 Development Triangles as of March 31, 2000.
Although the Company's operating margins may be adversely affected during
periods following relatively large increases in the number of the Company's
Development Triangles, the Company leverages its initial investment in
infrastructure as Development Triangles mature and the Company's sales and
recruiting personnel achieve greater levels of productivity.
The Company anticipates that each new branch office will require an
investment of approximately $100,000 to $150,000 in order to begin operations
and fund operating losses for an initial ten-to-twelve month period of
operations, which is the amount of time management believes should generally be
required for a new office to achieve profitability. The Company expenses the
costs of opening a new office as such expenses are incurred. The Company
anticipates continuing to leverage its current network of 32 branch offices, as
the start-up costs have already been expensed and additional start-up branch
office costs will constitute a smaller percentage of revenues as the Company
continues to increase its revenue base. There can be no assurance that new
Development Triangles or branch offices will be profitable within projected time
frames or at all.
The Company's computer hardware sales were approximately $1 million in
the first three months of 2000 compared to approximately $5.8 million in the
same period of 1999. The gross margin on the sale of computer hardware has
increased substantially as a percentage of sales, exclusive of hardware
commissions, to 15.1% in the first three months of 2000 from 8.0% for the same
period in 1999. This increase is directly attributable to the amount of hardware
sales recognized as commission revenue as opposed to direct sales.
10
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The following table set forth for the periods indicated, depicts the
percentage of revenues of certain items reflected in the Company's statements of
income:
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
------- -------
Staffing Revenues 96.7 % 83.9 %
Hardware Revenues 3.3 % 16.1 %
------- -------
Total Revenues 100.0 % 100.0 %
Cost of revenues
Staffing Cost of Revenues 72.1 % 63.6 %
Hardware Cost of Revenues 1.8 % 14.4 %
------- -------
Gross profit 26.1 % 22.0 %
Selling, general and administrative expenses 25.1 % 16.0 %
------- -------
Operating income 1.0 % 6.0 %
Interest and other income 0.7 % 0.7 %
Interest expense (0.1)% 0.0 %
------- -------
Income before income taxes 1.6 % 6.7 %
Income taxes 0.7 % 2.7 %
------- -------
Net Income 0.9 % 4.0 %
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
REVENUES
STAFFING DIVISION. The Company's staffing revenues remained flat at $30
million for the first three months of 2000 as compared to the same period in
1999. This is primarily attributable to the decline in the staffing industry
that occurred after the first quarter of 1999 and continued through to the end
of the year due to the Y2K issue. This decline in the industry caused staffing
revenues to decrease quarter to quarter, with a slight growth occurring between
the fourth quarter of 1999 and the first quarter of 2000. This growth was fueled
by the acquisition of two companies in Hartford, CT and San Francisco, CA, and
the opening of four branch offices throughout the quarter. The offices were
opened in Milwaukee, WI, St. Louis, MO, Santa Clara, CA and Ottawa, Canada. The
total number of client divisions and business units billed increased to 497 in
the first three months of 2000, from 363 in the first three months 1999. The
number of IT, e-commerce and web development professionals working for the
Company increased to 1,221 as of March 31, 2000 from 1,134 as of March 31,1999.
11
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TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
HARDWARE DIVISION. The Company's hardware revenues decreased to $1
million in the first three months of 2000 from $5.8 million for the same period
in 1999. The decrease in revenue is directly attributable to two factors. The
first factor is the one-time sale of $4.4 million of computer hardware the
Hardware Division experienced in the first three months of 1999. The second
factor is that during 2000, the Company experienced a change in the method of
delivery of its products. Increasingly, product is drop-shipped from the
Company's vendors to the Company's clients. Since the Company does not take
title to product which is being drop-shipped, the revenue from this type of sale
is considered to be commission revenue and as such is reported net of related
expenses. The change in the type of revenue recognized reduced gross revenue by
$2 million. The total number of hardware clients increased to 143 from 93 for
the first three months of 2000.
GROSS PROFIT
STAFFING DIVISION. Gross profit consists of revenues less cost of
revenues. The Company's staffing cost of revenues consists primarily of salary,
benefits and expenses for the Company's IT, e-commerce and web development
professionals and other direct costs associated with providing services to
clients. Gross profit increased 3.2% to $7.6 million for the three months ended
March 31, 2000 from $7.9 million for the same period in 1999. As a percentage of
staffing revenue, gross profit increased to 25.5% in the first quarter of 2000
compared to 24.2% for the three months ended March 31, 1999. The Staffing
Division's utilization rate for the first three months of 2000 was 97.7%
compared to 97.8% for the first three months of 1999.
HARDWARE DIVISION. The Company's hardware cost of revenues consists
primarily of direct costs associated with the products provided to the clients.
Gross profit decreased to $464,913 in the first three months of 2000 from
$612,043 in the first three months of 1999. As a percentage of hardware
revenues, gross profit increased to 15.1% in the first quarter of 2000 from 8.0%
for the same period in 1999. Commission revenue increased 125% to $363,000 from
$162,000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
STAFFING DIVISION. Staffing division selling, general and
administrative expenses consist primarily of costs associated with the staffing
division's direct selling and marketing efforts, human resources and recruiting
departments, administration, training and facilities. Staffing selling, general
and administrative expenses increased 37.9% to $7.4 million for the three months
ended March 31, 2000 from $5.4 million for the three months ended March 31,
1999. As a percentage of revenues, selling, general and administrative expenses
increased to 24.0% in the first quarter of 2000, from 15.2% in the same period
of 1999. This increase resulted from expenses incurred to build and enhance the
infrastructure necessary to support the Company's continued growth. This
included the addition of six offices during the first quarter of 2000, and the
addition of six Development Triangles, which increased the number of sales and
recruiting professionals during this period.
HARDWARE DIVISION. Hardware division selling, general and
administrative expenses consist primarily of costs associated with the Hardware
Division's direct selling and marketing efforts,
12
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
human resources and sales departments, administration and facilities. Hardware
selling, general and administrative expenses increased to $340,090 for the
quarter ended March 31, 2000 from $281,270 for the quarter ended March 31, 1999.
As a percentage of revenues, selling, general and administrative expenses
increased to 1.1% for the first quarter of 2000 from 0.8% in the same period of
1999. This increase resulted from the continued growth of the Hardware
Division's personnel and resources.
NET INTEREST INCOME
Net interest income was $174,958 for the three months ended March 31,
2000, as compared to $224,574 for the three months ended March 31, 1999. The
decrease is attributable to the interest payable on the line of credit, the
interest payable on the note payable of $1,000,000 for the acquisition of PRISM
Group Consulting, LLP and PRISM Group, LLP and the decrease in cash outstanding
due to use for acquisitions.
INCOME TAXES
Income taxes for the first three months of 2000 reflect a 42% effective
income tax rate which compares to 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity have been cash flow from
operations and available borrowings under its line of credit. Cash and cash
equivalents and working capital approximated $11.9 million and $28.8 million,
respectively, as of March 31, 2000.
Net cash used by operating activities was approximately $4.5 million
for the period ended March 31, 2000, as compared to $1.8 million during the
three month period ended March 31, 1999. The increase in cash used in operations
is primarily due to an increase in accounts receivable.
Net cash used in investing activities was approximately $5.7 million
during the three month period ended March 31, 2000 as compared to $393,000
during the three months ended March 31, 1999. The increase in cash used in
investing activities is primarily due to the acquisitions of PRISM Group LLC,
PRISM Group consulting, LLC and MDS Consulting, Inc.
For the three-month period ended March 31, 2000, net cash provided by
financing activities was $4.7 million and primarily related to the financing of
acquisitions and the purchase of treasury stock.
On March 9, 1999 the Company established a line of credit with a bank
which provides for maximum borrowings of up to $25 million. As of March 31,
2000, $3.75 million has been used for acquisition purposes, leaving $6.25
million for future acquisitions and $15 million to be used
13
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
for working capital. Under the bank line of credit, interest is payable monthly
at LIBOR plus 1.4%. The line of credit expires January 31, 2002.
On February 18, 2000, the Company acquired substantially all the assets
of MDS Consulting, Inc. of Hartford, Connecticut, for approximately $800,000
cash. On March 1, 2000, the Company used funds from the line of credit to
acquire substantially all of the assets and certain liabilities of PRISM Group,
LLC and PRISM Group Consulting, LLC, both of San Francisco, California. The
total consideration associated with the acquisition of the two companies was
approximately $6.1 million.
On April 22, 1999, the Company's Board of Directors approved a Stock
Repurchase Plan pursuant to which the Company can repurchase up to $1 million of
the Company's common stock on the open market. As of March 31, 2000, the Company
has repurchased 31,000 shares of its common stock at an aggregate cost to the
Company of $180,563.
During the second quarter of 2000, the Company decided to spinoff its
computer hardware sales operations. At that time, the computer hardware sales
segment of the Company was offered for sale. In the event that a buyer is not
found, the computer hardware operation may be discontinued.
The Company anticipates that its primary uses of working capital in
future periods will be for the internal development of new offices, investments
in its management information systems, possible acquisitions and decreases in
working capital. The Company continually reviews and evaluates acquisition
candidates to complement and expand its business. The Company's ability to grow
through acquisitions is dependent on the availability of suitable acquisition
candidates and the terms on which such candidates may be acquired, which may be
adversely affected by competition for such acquisitions. The Company cannot
predict to what extent new offices will be added through acquisitions as
compared to internal development. The Company currently has no commitments with
respect to any potential acquisitions.
The Company believes that the existing cash and cash equivalents, cash
flow from operations and available borrowings under the Credit Facility will be
sufficient to meet the Company's presently anticipated working capital needs for
at least the next twelve months.
Inflation did not have a material impact on the Company's revenues or
income from operations in the first quarter of 2000. The Company cannot predict
what effect, if any, inflation may have on its future results of operations.
14
<PAGE>
TECHNISOURCE, INC. AND SUBSIDIARIES
ITEM 3. QUANTITIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
The Company owns no derivative financial instruments or derivative
commodity instruments. The Company does not derive a significant amount of
revenues from international operations and does not believe that it is exposed
to material risks related to foreign currency exchange rates.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
2.1 Asset Purchase Agreement dated February 18,
2000, among DFI Acquisition Corp. and MDS
Consulting Services, Inc. and Mark D. Solomon
(Filed without exhibits or schedules which will
be furnished supplementally to the Commission
upon request.)
2.2* Asset Purchase Agreement dated March 1,
2000, among PRISM Group, LLC, PRISM Group
Consulting, LLC, Gus Gonzalez and Nancy E.
Agatiello, Revocable Inter-Vivos Trust, Barbara
S. Berk, Nancy E. Agatiello and TSRC.net, Inc.
3.1** Amended and Restated Articles of incorporation
of the Company
3.2** Amended and Restated Bylaws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Articles of Incorporation and Bylaws for the
Company defining the rights of holders of
Common Stock of the Company
4.2** Specimen certificate for the Company's Common
Stock
10.1 Employment Agreement, dated January 1, 2000,
between Thomas Hoshko and the Company
10.2 Technisource, Inc. Nonqualified Stock Option
Agreement, dated January 1, 2000, between
Thomas Hoshko and the Company
10.3 Technisource, Inc. Incentive Stock Option
Agreement dated January 1, 2000, between
Thomas Hoshko and the Company
21 Subsidiaries of the Company
27 Financial Data Schedule
(b) Current Reports on Form 8-K
A report on Form 8-K was filed March 16, 2000 relating to Item
2 - Acquisition or Disposition of Assets.
- --------------------
* Filed with the Company's Form 8-K filed with the Securities and
Exchange Commission on March 16, 2000, and incorporated by reference.
** Filed with the Company's Registration Statement on Form S-1 (File No.
333-50803) filed with the Securities and Exchange Commission on April
23, 1998, and incorporated herein by reference.
16
<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.
TECHNISOURCE INC.
Dated: May 15, 2000
By: /s/ James F. Robertson
-----------------------------------
James F. Robertson
Executive Vice President,
Chief Operating Officer
Dated: May 15, 2000 By: /s/ John A. Morton
-----------------------------------
John A. Morton
Vice-President
Chief Financial Officer
(Principal Financial Officer)
17
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
2.1 Asset Purchase Agreement dated February 18, 2000, among
DFI Acquisition Corp. and MDS Consulting Services, Inc.
and Mark D. Solomon (Filed without exhibits or schedules
which will be furnished supplementally to the Commission
upon request.)
10.1 Employment Agreement, dated January 1, 2000, between
Thomas Hoshko and the Company
10.2 Technisource, Inc. Nonqualified Stock Option Agreement,
dated January 1, 2000, between Thomas Hoshko and the
Company
10.3 Technisource, Inc. Incentive Stock Option Agreement
dated January 1, 2000, between Thomas Hoshko and the
Company
21 Subsidiaries of the Company
27 Financial Data Schedule
EXHIBIT 2.1
EXECUTION COPY
---------------------------------------
ASSET PURCHASE AGREEMENT
among
DFI ACQUISITION CORP.
and
MDS CONSULTING SERVICES, INC.
and
MARK D. SOLOMON
Dated: February 18, 2000
---------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AGREEMENT...................................................................................................1
SUMMARY OF TRANSACTION.........................................................................................1
ARTICLE I......................................................................................................1
SALE OF ASSETS AND TERMS OF PAYMENT............................................................................1
1.01 Assets Being Sold .................................................................................1
(a) Real Property Lease...........................................................................1
(b) Furniture and Equipment.......................................................................1
(c) Inventories...................................................................................1
(d) Contracts and Commitments.....................................................................1
(e) Books and Records.............................................................................2
(f) Governmental Licenses, Permits and Authorizations.............................................2
(g) Deposits, Credits and Prepaid Expenses........................................................2
(h) Proprietary Rights............................................................................2
(i) Intangible Assets.............................................................................2
(j) Other Assets..................................................................................2
1.02 Retained Assets....................................................................................2
1.03 Assumed Liabilities; Retained Liabilities..........................................................2
1.04 Purchase Price.....................................................................................3
1.05 Earn-Out Payments..................................................................................3
1.06 Allocation of the Purchase Price...................................................................3
1.07 Absolute Sale......................................................................................3
1.08 Other Contracts....................................................................................4
1.09 Bulk Sales Laws....................................................................................4
1.10 Proration of Certain Items.........................................................................4
ARTICLE II - RELATED AGREEMENTS................................................................................5
2.01 Employment Agreement...............................................................................5
2.02 Intenionally Omitted................................................................................
2.03 Bill of Sale.......................................................................................5
2.04 Assignment and Assumption Agreement................................................................5
2.05 Real Property Lease Assignment.....................................................................5
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDER EXECUTIVE...........................5
3.01 Organization and Good Standing; No Investments.....................................................5
3.02 Authorization; Compliance with Other Instruments and Law...........................................6
3.02A Authority of Executive Shareholder.................................................................7
3.03 Financial Statements...............................................................................7
3.04 Operation of the Business in the Ordinary Course...................................................8
3.05 Tax Matters.......................................................................................10
3.06 Material Contracts and Commitments................................................................10
3.07 Licenses, Permits and Authorizations..............................................................11
3.08 Title to Purchased Assets.........................................................................11
3.09 Proprietary Rights................................................................................12
3.10 Employee Benefit Plans; Labor Matters.............................................................12
3.11 Litigation and Other Claims.......................................................................14
3.12 No Material Adverse Change........................................................................14
3.13 Sufficiency of the Purchased Assets...............................................................14
3.14 Compliance with Laws..............................................................................14
3.15 Real Property Lease...............................................................................15
3.16 Condition of Purchased Assets.....................................................................15
3.17 Environmental Matters.............................................................................15
3.18 Computer and Other Systems........................................................................17
3.19 Insurance.........................................................................................17
3.20 Full Disclosure...................................................................................17
3.21 Corporate Name....................................................................................18
3.22 Guarantees........................................................................................18
3.23 Compensation of Employees.........................................................................18
3.24 Employee Relations................................................................................18
3.25. Labor Agreements..................................................................................18
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER...............................................18
4.01 Organization and Good Standing....................................................................19
4.02 Due Authorization.................................................................................19
ARTICLE V - THE CLOSING.......................................................................................19
5.01 Time and Place of Closing.........................................................................19
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
5.02 Instruments of Transfer, Etc......................................................................19
(a) Seller.......................................................................................19
(b) Buyer........................................................................................20
(c) Stockholder Executive........................................................................20
ARTICLE VI - EMPLOYEES........................................................................................21
6.01 Employment with Buyer.............................................................................21
6.02 Third Parties.....................................................................................21
ARTICLE VII - WORKERS COMPENSATION, PRODUCT LIABILITY RESPONSIBILITY........................................21
7.01 Responsibility for Prior Claims...................................................................21
ARTICLE VIII - POST CLOSING COVENANTS.........................................................................22
8.01 Expenses..........................................................................................22
8.02 Further Assurances................................................................................22
8.03 Commissions and Fees..............................................................................22
8.04 Sales, Transfer and Use Taxes.....................................................................22
8.05 Nondisclosure.....................................................................................22
8.06 Indemnification...................................................................................23
(a) By Seller and Stockholder Executive..........................................................23
(b) By Buyer.....................................................................................24
(c) Survival.....................................................................................24
(d) Set-Off......................................................................................24
8.07 Defense of Claims.................................................................................24
8.08 Access to Records.................................................................................26
8.09 Accounts Receivable...............................................................................26
8.10 Noncompetition Covenant of Stockholder Executive..................................................26
8.11 Cessation of Business of Seller...................................................................26
8.12 Press Releases and Public Announcements............................................................26
ARTICLE IX - MISCELLANEOUS....................................................................................26
9.01 Binding Effect....................................................................................27
9.02 No Assignment.....................................................................................27
9.03 Counterparts......................................................................................27
9.04 Governing Law.....................................................................................28
9.05 Arbitration.......................................................................................28
9.06 Survival..........................................................................................28
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
9.07 Notices...........................................................................................28
(a) To Buyer.....................................................................................29
(b) To Seller and the Stockholder Executive.......................................................29
9.08 Amendment and Modification........................................................................29
9.09 Waiver of Compliance..............................................................................29
9.10 Interpretation....................................................................................29
9.11 Entire Agreement..................................................................................30
9.12 Severability......................................................................................31
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE/SECTION
SCHEDULE DESCRIPTION REFERENCE
- -------- ----------- ---------
<S> <C> <C>
1.01(a) Real Property Lease 1 [1.01(a)]
1.01(b) Furniture and Equipment 1 [1.01(b)]
1.01(d) Assigned Contracts 1 [1.01(d)]
1.01(f) Governmental Licenses, Permits and Authorizations 2 [1.01(f)]
1.01(h) Proprietary Rights 2 [1.01(h)]
1.02(a) Outstanding Accounts Receivable 2 [1.02]
1.02(b) Books and Records of Seller Excluded 2 [1.02]
1.06 Allocation of Purchase Price 3 [1.06]
3.01A Non-Qualified Jurisdictions 6 [3.01]
3.01B Qualified Jurisdictions 6 [3.01]
3.01C Seller's Articles and By-Laws 6 [3.01]
3.03A Year-End Financial Statements 7 [3.03]
3.03B Most Recent Financial Statements 7 [3.03]
3.03C Undisclosed Liabilities 8 [3.03]
3.04(b) Material Changes 8 [3.04(b)]
3.05 Tax Matters 10 [3.05]
3.06 Material Contracts and Commitments 10 [3.06]
3.07 Licenses, Permits and Authorizations 11 [3.07]
3.08 Title to Purchased Assets 11 [3.08]
3.09 Proprietary Rights 12 [3.09]
3.10 Employee Benefit Plans; Labor Matters 12 [3.10]
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE/SECTION
SCHEDULE DESCRIPTION REFERENCE
- -------- ----------- ---------
<S> <C> <C>
3.11 Litigation 14 [3.11]
3.14 Compliance with Laws 14 [3.14]
3.16 Personal Property Leases 15 [3.16]
3.17 Environmental Matters 15 [3.17]
3.19 Insurance 17 [3.19]
3.22 Guarantees 17 [3.22]
3.23 Officers, Employees and Consultants 18 [3.23]
3.24A Employment Matters 18 [3.24]
3.24B Employment Contracts 18 [3.24]
8.03 Broker's Commissions 21 [8.03]
</TABLE>
7
<PAGE>
PAGE/SECTION
EXHIBIT DESCRIPTION REFERENCE
------- ----------- ---------
A Employment Agreement 5 [2.02]
B Intentionally Omitted
C Bill of Sale 6 [2.04]
D Assignment and Assumption Agreement 6 [2.05]
E Real Property Lease Assignment 22 [5.02(a)]
F Intentionally Omitted
G Intentionally Omitted
H Earn-out 3 [1.05]
8
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 18, 2000 among DFI Acquisition
Corp., a Florida Corporation and wholly-owned subsidiary of Technisource, Inc.
("Buyer"), MDS Consulting Services, Inc., a Connecticut corporation ("Seller"),
and Mark D. Solomon (the "Stockholder Executive").
SUMMARY OF TRANSACTION
Seller wishes to sell and Buyer wishes to purchase substantially all of
the assets of Seller. To effect such transaction and in consideration of the
mutual covenants, representations, warranties and agreements hereinafter set
forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
SALE OF ASSETS AND TERMS OF PAYMENT
1.01 ASSETS BEING SOLD (THE "PURCHASED ASSETS"). Seller agrees to sell
and transfer to Buyer and Buyer agrees to purchase, at the Closing (as defined
in Section 5.01 hereof), all of Seller's assets as they shall exist on the
Closing Date (as defined in Section 5.01 hereof), except for the Retained Assets
(as defined in Section 1.02 hereof), which Purchased Assets include, without
limitation, the following assets:
(a) REAL PROPERTY LEASE. All of the right, title and interest of
Seller in, to and under the lease (the "Real Property Lease")
covering Seller's leased premises located at 628 Hebron Avenue,
Building 2, Suite 210, Glastonbury, Connecticut 06033 (the
"Leased Premises") as described on Schedule 1.01(a) hereto and
all of the right, title and interest of Seller in and to all
leasehold improvements in or on the Leased Premises;
(b) FURNITURE AND EQUIPMENT. All the furniture, vehicles,
equipment and other fixed assets of Seller located on the Leased
Premises or elsewhere, substantially all of which are listed in
Schedule 1.01(b) hereto;
(c) INVENTORIES. All inventories of Seller of any kind,
including, but not limited to office supplies;
(d) CONTRACTS AND COMMITMENTS. Subject to the provisions of
Section 1.08 hereof, all of the right, title and interest of
Seller in, to and under all pending and executory contracts,
agreements, commitments and understandings which are specifically
listed in Schedule 1.01(d) hereto ("Assigned Contracts");
9
<PAGE>
(e) BOOKS AND RECORDS. All of Seller's books and records, or
copies thereof, including all sales and credit records,
advertising and sales material, literature, customer lists,
financial records, personnel and payroll records, tax, accounting
and other books and records;
(f) GOVERNMENTAL LICENSES, PERMITS AND AUTHORIZATIONS. To the
extent assignable, all governmental licenses, permits and
authorizations related to the business of Seller, a complete list
of which is set forth in Schedule 1.01(f) hereto;
(g) DEPOSITS, CREDITS AND PREPAID EXPENSES. All of Seller's
deposits, credits, prepaid expenses and other current assets,
including the security deposit for the Leased Premises in the
amount of $3,355.00 ("Lease Security Deposit"), the amount of
which Lease Security Deposit shall be paid to Seller by Buyer as
an adjustment at Closing;
(h) PROPRIETARY RIGHTS. The U.S. and foreign trademarks, service
marks, patents and goodwill appurtenant thereto, and applications
therefor, copyrights, trade names, brand names and licenses,
technology, intellectual property and trade secrets ("Proprietary
Rights") of Seller as listed on Schedule 1.01(h) hereto;
(i) INTANGIBLE ASSETS. The business of Seller as a going concern
and the goodwill thereof; and
(j) OTHER ASSETS. All other assets, properties and rights of
Seller, of every kind and nature, owned or held by Seller or in
which Seller has an interest on the Closing Date, known or
unknown, fixed or unfixed, choate or inchoate, accrued, absolute,
contingent or otherwise, whether or not specifically referred to
in this Agreement, other than the Retained Assets.
1.02 RETAINED ASSETS. Notwithstanding the foregoing, the Purchased
Assets shall not include Seller's cash on hand and outstanding accounts
receivable at Closing as identified on Schedule 1.02(a) or those items
identified on Schedule 1.02(b).
1.03 ASSUMED LIABILITIES; RETAINED LIABILITIES. Buyer shall assume (i)
all liabilities of Seller accruing on or after the Closing Date with regard to
the Real Property Lease (excluding any fee payable to the lessor thereunder in
connection with Buyer's assumption thereof) and all liabilities of Seller
arising or accrued after the Closing Date under the contracts and commitments
listed in Schedule 1.01(d) (the "Assumed Liabilities"). Buyer shall not assume
any of Seller's liabilities or obligations other than the Assumed Liabilities,
including, without limitation, (i) any accounts payable, accrued expenses or
other indebtedness or liabilities incurred, related to, or arising as a result
of operations conducted, actions taken or events occurring on or prior to the
Closing Date, (ii) all indebtedness for money borrowed, (iii) all
10
<PAGE>
environmental liabilities and claims, (iv) all litigations, arbitrations and
other third party claims and proceedings, (v) all employee benefit liabilities
and obligations (including specifically, but without limitation, post-retirement
medical benefits, severance pay, bonuses, incentive pay and deferred
compensation and liabilities arising under the benefit plans listed on Schedule
3.10, (vi) all tax liabilities, including without limitation, all foreign,
federal, state or local income, franchise, gross receipts, property, sales, use
or value added taxes or any interest, additions to tax or penalties thereon, and
(vii) all unknown, contingent and other liabilities (the "Retained
Liabilities"). Seller shall pay and discharge in a timely manner all of Seller's
current and known liabilities and obligations that are Retained Liabilities.
1.04 PURCHASE PRICE. Buyer, in consideration for the Purchased Assets
being sold pursuant to this Agreement, agrees to pay or deliver to Seller an
aggregate purchase price (the "Purchase Price") of (i) $800,000 ("Cash
Consideration") at Closing as contemplated by Section 5.02; (ii) the contingent
payment ("Earn-Out") described in Section 1.05 below; and (iii) the assumption
by Buyer of the Assumed Liabilities. Each payment pursuant to this Section 1.04
and pursuant to Section 1.05 hereto should be made by wire transfer or bank
check, except as otherwise set forth in this Agreement.
1.05 EARN-OUT PAYMENTS. Seller shall be entitled to receive, as
additional Purchase Price, one or more Earn-Out Payments in accordance with
Exhibit H; PROVIDED, HOWEVER, that the aggregate Earn-Out Payments shall not
exceed $325,000 in any one Year (as defined in Exhibit H) or $975,000 in the
Earn-Out Period (as defined in Exhibit H).
1.06 ALLOCATION OF THE PURCHASE PRICE. Seller and Buyer agree to
allocate the Purchase Price for the Purchased Assets as set forth in Schedule
1.06 hereto. The foregoing allocation of the Purchase Price shall be binding on
the parties and shall be used by the parties for all tax reporting purposes.
1.07 ABSOLUTE SALE. Seller agrees that the Purchased Assets shall be
sold, conveyed, transferred and delivered to Buyer free and clear of all title
defects, liabilities, obligations, liens, encumbrances, charges and claims of
any kind, except any liabilities and obligations expressly assumed by Buyer
pursuant to Section 1.03 hereof and any matters described in Schedule 3.08
hereto.
1.08 OTHER CONTRACTS. This Agreement shall not constitute an agreement
to assign, sublease or sublicense, as the case may be, any contracts, leases,
licenses, agreements or arrangements (for purposes of this Section 1.08
collectively called "Contracts") if such attempted assignment, sublease or
sublicense, without the consent of the other party or parties thereto, is not
permitted as a matter of law or in accordance with the terms of the Contracts or
would constitute a breach of the Contracts or would in any way impair the rights
of Seller or Buyer thereunder. Seller will obtain such consents as may be
necessary or appropriate to vest in Buyer all of Seller's right, title and
interest in all such Contracts.
11
<PAGE>
1.09 BULK SALES LAWS. Seller and Buyer hereby waive compliance with the
provisions of any applicable bulk sales law; provided, however, that Seller and
the Stockholder Executive, with respect to the Retained Liabilities, and Buyer,
with respect to Assumed Liabilities, mutually agree to pay and discharge when
due or to contest or litigate all claims of creditors which are asserted against
Buyer or Seller or the Purchased Assets by reason of such noncompliance, to
indemnify, defend and hold harmless the other party from and against any and all
such claims in the manner provided in Section 8.06 hereof, and with respect to
Seller and the Stockholder Executive, to take promptly all necessary action to
remove any lien or encumbrance which is placed on the Purchased Assets by reason
of such noncompliance.
1.10 PRORATION OF CERTAIN ITEMS. Seller shall pay at Closing all
applicable transfer, sales, use, bulk sales and other taxes, and all
documentary, filing, recording and vehicle registration fees payable as a result
of the transfer of the Purchased Assets. All ad valorem and property taxes, and
any similar assessment based upon or measured by Seller's ownership interest in
the Purchased Assets, shall be prorated between Seller and Buyer as of the
Closing Date based upon such taxes assessed against the Purchased Assets for the
tax period in question, or if there is insufficient information for such tax
period, based upon taxes assessed for the immediately preceding tax period. All
such taxes shall be prorated on the basis of a 365-day year and based on the
number of days elapsed in the municipal fiscal year beginning July 1, 1999.
Seller shall be charged for all such taxes and assessments based upon or
measured by Seller's ownership prior to the Closing Date and Buyer shall be
charged for all such taxes and assessments based upon or measured by Buyer's
ownership on or after the Closing Date. There shall be apportioned between
Seller and Buyer as of the Closing Date all rent, utility charges, equipment
lease payments and all other charges customarily apportioned in connection with
a transfer of leased property as well as such payments and obligations received
after the Closing Date by both the Seller and Buyer as necessary to accurately
reflect the terms of this Agreement. All such prorations and payments shall be
made at the Closing.
ARTICLE II
RELATED AGREEMENTS
Simultaneously with the Closing hereunder the following agreements (the
"Related Agreements") will be executed and delivered:
2.01 EMPLOYMENT AGREEMENT. The agreement between Buyer and the
Stockholder Executive in the form of Exhibit A, providing for the employment by
Buyer of the Stockholder Executive.
2.02 INTENTIONALLY OMITTED
12
<PAGE>
2.03 BILL OF SALE. A bill of sale in the form of Exhibit C hereto
transferring title to the Purchased Assets (other than the Real Property Lease)
to Buyer ("Bill of Sale").
2.04 ASSIGNMENT AND ASSUMPTION AGREEMENT. An assignment and assumption
agreement in the form of Exhibit D hereto transferring title of the Purchased
Assets to Buyer ("Assignment and Assumption Agreement").
2.05 REAL PROPERTY LEASE ASSIGNMENT. An Assignment of Lease in the form
of Exhibit E hereto ("Lease Assignment").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDER EXECUTIVE
Seller and the Stockholder Executive, jointly and severally, as a
material inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, represent and warrant to, and covenant with,
Buyer that as of the Closing Date:
3.01 ORGANIZATION AND GOOD STANDING; NO INVESTMENTS. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut and has the corporate power and authority to own,
lease and operate its properties and assets (including the Purchased Assets) and
to conduct its business as it is now being conducted. Seller is duly qualified
to do business in Connecticut and in all other jurisdictions in which Seller
owns, leases or operates property or otherwise conducts business, except that
Seller makes no representation whether qualification is required in other
jurisdictions, in which Seller has not qualified, concerning certain
transactions having a relation to such jurisdictions as set forth on Schedule
3.01A. Schedule 3.01B sets forth all jurisdictions in which Seller is qualified
to conduct business as a foreign corporation. Schedule 3.01B sets forth a list
of all names under which Seller has at any time done business since January 1,
1995. The Seller has fully complied with all of the requirements of any statute
governing the use and registration of fictitious names, and has the legal right
to use the names under which it operates its businesses. Except as set forth on
3.01B, Seller has not changed its name or used any assumed or fictitious name
other than those listed on Schedule 3.01B, or been the surviving entity in a
merger, acquired any businesses or changed its principal place of business or
chief executive office, in each case, since the date of its organization. There
is no pending or threatened proceeding for the dissolution, liquidation,
insolvency or rehabilitation of Seller. Seller has no equity or similar
investments, direct or indirect, in any corporation, partnership, association,
joint venture or other entity. An accurate and complete copy of the Certificate
of Incorporation and Bylaws of Seller, as presently in effect, are included as
an attachment to 3.01C hereto.
3.02 AUTHORIZATION; COMPLIANCE WITH OTHER INSTRUMENTS AND LAW. Seller
has
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full corporate power and authority to enter into this Agreement, the Related
Agreements and any other agreements and documents to be executed and delivered
by it at Closing as contemplated hereby (collectively, the "Closing Documents"),
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Closing Documents and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Seller. This Agreement has been
duly executed and delivered by Seller, and is a valid and binding obligation of
Seller enforceable in accordance with its terms and the Closing Documents will,
when executed and delivered by Seller at Closing, constitute valid and binding
obligations of Seller enforceable in accordance with their terms. The execution,
delivery and performance of this Agreement and the Closing Documents will not
(i) conflict with or result in a breach or violation of any provision of the
Certificate of Incorporation or bylaws of Seller or of any order, writ,
injunction, judgment, decree, law, statute, rule or regulation to which Seller
is a party or by which Seller or the Purchased Assets may be bound or affected;
or (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) or result in the creation of any lien,
encumbrance, security agreement, charge, pledge, equity or other claim or right
of any person in or to the Purchased Assets under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Seller is a party or by which Seller or the
Purchased Assets may be bound. All necessary authorizations of the transactions
contemplated by this Agreement required to be obtained by Seller from any
Federal, state, local or foreign government or agency or any other person or
entity shall have been obtained prior to the Closing, and any filings,
notifications or disclosures required by law or regulation of any such
government or agency shall have been made in such form as is acceptable as
filed. Buyer shall cooperate with Seller with respect to the aforesaid filings,
notifications or disclosures to the extent necessary to obtain said
authorizations. Seller will deliver to Buyer at the Closing true and complete
copies of all resolutions of its board of directors by which the execution,
delivery and performance of this Agreement and the Closing Documents and the
consummation of the transactions contemplated hereby and thereby were
authorized, certified by the Secretary or Assistant Secretary of Seller as of
the Closing Date.
3.02A AUTHORITY OF EXECUTIVE SHAREHOLDER This Agreement is (and, when
executed and delivered, each agreement, document or instrument to be executed
and delivered in connection with the transactions contemplated hereby will be)
valid and binding upon the Executive Shareholder, and enforceable against the
Executive Shareholder in accordance with respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or by the principles governing the availability
of equitable remedies.
3.03 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.03A are true
and correct copies of (i) the balance sheets of Seller as at December 31, 1997,
1998 and 1999; and (ii) the related statements of income of Seller for the years
ended December 31, 1997, 1998 and
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1999 ("Year-End Financial Statements"). Attached hereto as Schedule 3.03B are
true and correct copies of (i) the balance sheet of Seller for the period from
January 1, 2000 through January 31, 2000; and (ii) the related statements of
income of Seller for such interim period (the "Most Recent Financial
Statements"; and collectively with the Year-End Financial Statements, the
"Financial Statements"). The balance sheets included in the Financial Statements
(including the related notes thereto) present fairly the financial position of
Seller as of their respective dates, and the related statements of income
included in the Financial Statements present fairly the results of operations of
Seller for the periods then ended, all in conformity with GAAP applied on a
consistent basis. The Financial Statements accurately reflect the transactions,
assets, and liabilities of Seller, as applicable, as of the dates and for the
periods presented. Except as set forth in the Most Recent Financial Statements
or on Schedule 3.03C hereto, Seller has no debts, liabilities or obligations,
whether direct or indirect, accrued, absolute, contingent, matured, known,
unknown or otherwise, and whether or not of a nature required to be reflected or
reserved against in a balance sheet in accordance with GAAP. Neither Seller nor
the Executive Shareholder are aware of any basis for the assertion of any claims
or liabilities of any nature which are not fully reflected or reserved against
in the Most Recent Financial Statements or otherwise disclosed in 3.03C hereto.
3.04 OPERATION OF THE BUSINESS IN THE ORDINARY COURSE.
(a) Since the close of business on the date of the Most Recent
Financial Statements, the Seller's business has been operated, in
the ordinary course, except to the extent that Buyer has
otherwise agreed in writing or as is expressly contemplated by
this Agreement; and Seller has used all reasonable efforts
consistent with normal business practices to preserve and promote
such business and to avoid any act that might have a material
adverse effect upon the value of such business as a going concern
or upon the Purchased Assets. No event has occurred to prevent
Seller's business from operating in a normal and usual manner and
in substantially the same manner as heretofore operated.
(b) Except as set forth in Schedule 3.04(b), since the date of
the Most Recent Financial Statements, there has not occurred:
(i) any casualty losses, whether insured or uninsured,
and whether or not in the control of the Company, in
excess of Twenty Thousand Dollars ($20,000) in the
aggregate;
(ii) any amendment or other agreement with any employee or
agent;
(iii) any amendment of any agreement or lease listed in the
Schedules;
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(iv) any obligation or liability, absolute or contingent,
except in the ordinary course of business;
(v) any (i) increase (other than normal merit or
cost-of-living increases in the ordinary course of
business and consistent with past practices) or
material change: (y) in compensation or bonuses
payable to or to become payable by Seller to its
officers, employees or agents, or (z) in any
insurance, pension or other benefit plan, payment or
arrangement made to, for or with any of such
officers, employees or agents, or (ii) any other
material change in the employment terms of any
officer, employee or agent of Seller;
(vi) any sale, transfer or other disposition of any
tangible or intangible asset, or real or personal
property or interest therein (other than in the
ordinary course of business consistent with Seller's
past practice), or any mortgage, lien or encumbrance
placed thereon;
(vii) any capital expenditures, capital additions, capital
improvements or charitable contributions made, or
committed to be made involving, individually or in
the aggregate, $5,000 or more;
(viii) any failure to maintain Seller's books, accounts and
records in the usual, regular and ordinary manner and
in accordance with GAAP and consistent with Seller's
past practice;
(ix) any action taken or omitted to be taken by Seller
which could cause (with or without the giving of
notice or the passage of time, or both) the breach,
default, acceleration, amendment, termination or
waiver of or under any Material Contract (as
hereinafter defined) or the imposition of any lien,
encumbrance, mortgage or other claim or charge
against the Purchased Assets;
(x) any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, license, real or personal
property leases or other obligations of the type
required to be disclosed in Schedule 3.06 hereto that
are not otherwise disclosed herein;
(xi) any capital investment in, any loan to, or any
acquisition of the securities or assets of any person
or entity;
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(xii) any change made or authorized in the Certificate of
Incorporation or Bylaws of Seller;
(xiii) any issuance, sale or other disposition of any of its
capital stock or granted any options, warrants or
other rights to purchase or obtain any of its capital
stock;
(xiv) any dividend or made any distribution with respect to
its capital stock (whether in cash or in kind) or any
redemption, purchase or other acquisition of any of
its capital stock;
(xv) any loan to, or entered into any other transaction
with, any of its directors, officers or employees;
(xvi) any other event or condition of any character which,
individually or in the aggregate, has had or could
reasonably be expected to have a material adverse
effect on the Purchased Assets or on the business,
financial condition or operations of Seller; or
(xvii) any commitment to do any of the foregoing.
3.05 TAX MATTERS. Except as set forth in Schedule 3.05, (a) all
federal, state, local and foreign tax returns (including information returns)
and reports of Seller required by any applicable law, rule, regulation or
procedure of any federal, state, local or foreign agency, authority or body to
be filed have been duly filed by Seller; (b) Seller has either (i) paid all
federal, state, county, local, foreign and other taxes (hereinafter "Taxes" or
individually a "Tax") required to be paid by it through the Closing Date and all
deficiencies or other additions to Tax, including interest or penalties owed in
connection with any such Taxes or (ii) the Most Recent Financial Statements
include adequate provision for all such Taxes and deficiencies or other
additions to Tax applicable to Seller, respectively; (c) all Taxes and other
assessments and levies required to be collected or withheld by Seller with
respect to the operation of its business from customers with respect to sales of
products or from employees for income taxes, social security taxes and
unemployment insurance taxes have been collected or withheld, and either paid to
the respective governmental agencies, or set aside in an account owned by Seller
and established for that purpose; (d) Seller is not a party to any pending
action or proceeding regarding assessment or collection of Taxes by any
governmental authority; (e) to Seller's or Executive Shareholder knowledge, no
action or proceeding regarding assessment or collection of Taxes is threatened
against Seller; (f) there are no facts or state of facts existing that (with or
without the giving of notice) or the passage of time or both) could form the
basis for any such action or proceeding; and (g) Seller has not executed or
filed any agreement with the Internal Revenue Service or any other taxing
authority extending the period for the assessment or collection of any Taxes.
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3.06 MATERIAL CONTRACTS AND COMMITMENTS. Schedule 3.06 includes a true,
correct and complete list of all material contracts, agreements, commitments,
indentures, mortgages, notes, bonds, licenses, real and personal property leases
and other obligations (whether oral or written) to which Seller is a party, by
which either Seller or its assets or properties are bound or, to the knowledge
of Seller or Stockholder Executive, may be affected or which, to the knowledge
of Seller or Stockholder Executive, otherwise relate to Seller's business (the
"Material Contracts"). Without limiting the generality of the foregoing, the
term Material Contracts includes: (a) any lease or license with respect to any
Purchased Assets, whether Seller is tenant, landlord, licensor or licensee
thereunder; (b) any agreement, contract, indenture or other instrument to which
the Seller is a party relating to the borrowing of money or the guarantee of any
obligation or the deferred payment of the purchase price of any Purchased
Assets; (c) any agreement to which the Seller is a party concerning a
partnership or joint venture; (d) any agreements between Seller on the one hand
and any of its respective shareholders, officers, directors or employees on the
other; (e) any agreement to which the Seller is a party relating to
confidentiality or noncompetition; (f) any preferential purchase right, right of
first refusal or similar agreement to which the Seller is a party; (g) any
agreement entered into outside of the ordinary course of business to which the
Seller is a party; (h) any other agreement (or group of related agreements) to
which the Seller is a party which could involve expenditures (in cash or in
kind) by Seller in excess of $5,000 or which has a remaining term, as of the
date hereof, of over three months in length; or (i) any lease, license or other
agreement or arrangement of any nature to which the Seller is a party relating
to Seller's Intellectual Property (as hereafter defined). Except as indicated on
Schedule 3.06, Seller is not in breach or violation of, or in default under, any
of the Material Contracts and no occurrence or circumstance exists which
constitutes (with or without the giving of notice or the passage of time or
both) such a breach, violation or default; the execution of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
default or breach under or result in the acceleration of the performance of any
obligations or indebtedness under any of the Material Contracts; and, except as
specifically indicated in Schedule 3.06, the execution of this Agreement and the
consummation of the transactions contemplated hereby will not give rise to any
consent requirement under any of the Material Contracts, for which consent has
not already been obtained ("Required Consents"). All of the contracts listed on
Schedule 3.06 are valid, binding and enforceable in accordance with their terms,
are in full force and effect and have not been modified or amended in any
material respect, except as set forth on Schedule 3.06; provided, however, the
preceding representation, covenant and warranty is limited to the extent the
enforceability of any contract is limited by bankruptcy, insolvency and similar
creditors rights laws and principles of equity. No part of Seller's rights or
benefits under any Material Contract has been assigned, transferred or in any
manner encumbered.
3.07 LICENSES, PERMITS AND AUTHORIZATIONS. Seller has all approvals,
authorizations, consents, licenses, franchises, orders, certificates and other
permits of, and has made all filings with, any governmental authority, whether
foreign, Federal,
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state or local, ("Permits") which are required for the
ownership of the Purchased Assets or the conduct of Seller's business as
presently conducted. Except as set forth in Schedule 3.07, all such Permits are
in full force and effect and no suspension or cancellation of such Permits is
threatened. A complete list of all such Permits is included in Schedule 3.07
hereto.
3.08 TITLE TO PURCHASED ASSETS. Seller has legal title to the Purchased
Assets and shall at the Closing deliver to Buyer legal title to the Purchased
Assets free and clear of all title defects, liabilities, obligations, liens,
mortgages, security interests, encumbrances, claims or similar adverse interests
of any kind or character except the title exceptions listed in Schedule 3.08
hereto. All leases pursuant to which Seller leases any of the Purchased Assets
are valid and binding in accordance with their respective terms. Except as
described in Schedule 3.08 hereto, upon consummation of the transactions
contemplated hereby, Seller will have transferred to Buyer good, marketable and
unencumbered title to the Purchased Assets (or with respect to any real or
personal property leases included in the Purchased Assets, a valid leasehold
interest therein), free and clear of all mortgages, security interests, liens,
claims, encumbrances, title defects, pledges, charges, assessments, covenants,
encroachments and burdens of any kind or nature whatsoever. The Purchased Assets
constitute all of the assets that are used in connection with, necessary for, or
beneficial to the operation of the Seller's business.
3.09 PROPRIETARY RIGHTS. Schedule 3.09, sets forth a true and complete
list of all patents, technology, computer software, software licenses,
franchises, know-how licenses, brand names, trade names, trademarks, copyrights,
inventions, service marks, trademark registrations and applications, service
mark registrations and applications, and copyright registrations and
applications, trade secrets or other confidential proprietary information in
which Seller has exclusive rights or which are used in the operation of Seller's
business ("Intellectual Property"), except that, in the case of end-user license
agreements for software acquired by Seller through ordinary commercial
distribution channels, Schedule 3.09 sets forth only the common names of the
principal products used by Seller and the number of copies of each such product
which Seller is licensed to use. The Intellectual Property listed in Schedule
3.09 is owned by Seller with the sole and exclusive right to use the same in
connection with such Seller's business as presently being conducted or
contemplated to be conducted. No other Person has any ownership rights, claims
or rights to use the Intellectual Property. The conduct of the business by
Seller does not infringe upon the Intellectual Property of any person, provided,
however, Seller makes no representations with respect to the rights of any party
in any software acquired by Seller through ordinary commercial distribution
channels (other than the licensor thereof) or any other Purchased Asset acquired
by Seller in good faith except that Seller has no actual notice of any claim of
infringement.
3.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Except as set forth in Schedule 3.10 hereto, Seller does not
maintain,
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administer or otherwise contribute to any bonus, incentive pay,
stock option, stock ownership or "employee benefit plan," as
defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not such
plan is subject to any of the provisions of ERISA, which covers
any employee or beneficiary of any employee or director of the
Seller, whether or not active (any such plan being herein
referred to as an "Employee Plan"). Except as set forth in
Schedule 3.10 hereto, none of such Employee Plans is intended to
be qualified under Section 401 of the Internal Revenue Code of
1986, as from time to time amended (the "Code"), nor has any
Employee Plan been at any time within the five year period prior
to the Closing Date a plan subject to title IV of ERISA. Seller
has no commitment to create any additional Employee Plans.
(b) True and complete copies of each Employee Plan, including all
amendments thereto and related trust or other funding agreements
and the latest financial statements thereof, have been heretofore
delivered to Buyer, together with (i) a true and complete copy of
the three most recent annual reports (if required by law) for
each such plan including any and all schedules, opinions and
attachments thereto prepared in connection with any such reports,
and (ii) a copy of the most recent summary plan description and
summary of material modifications, or similar descriptive
materials, of each such plan. To Seller's knowledge none of
Seller, any Employee Plan or any "party in interest", as defined
in section 3(14) of ERISA, has engaged in a "prohibited
transaction", as defined in section 406 of ERISA, which could
subject any of them or Buyer to liability under section 409 or
502(i) of ERISA.
(c) Seller, and each fiduciary for each of the Employee Plans, is
in compliance with the terms of the Employee Plans and with the
requirements of any and all laws, statutes, orders, decrees,
rules and regulations, including but not limited to ERISA,
applicable to each such plan. Seller has not failed to make any
contribution to, or to pay any amount due and owing, as required
by applicable law or by the terms of any Employee Plan as of the
last day of the most recent fiscal year of each of such plans
ended prior to the Closing Date.
(d) There is no pending or, to the best of Seller's knowledge,
threatened legal action, proceedings or investigations against
Seller or any Employee Plan with respect to any such plan, other
than routine claims for benefits, which could result in liability
to any such plan, or to Seller, and there is no basis for any
such legal action or proceeding.
(e) Except as set forth in Schedule 3.10, (i) Seller is in
compliance with
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all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; (ii)
there is no unfair labor practice complaint against Seller
pending before the National Labor Relations Board or any other
tribunal; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the best of Seller's knowledge,
threatened against or affecting Seller; (iv) Seller has received
no notice that any representation or petition respecting any of
its employees has been filed with the National Labor Relations
Board; (v) no grievance or any arbitration proceeding arising out
of or under any collective bargaining agreements is pending
against Seller; and (vi) Seller has not experienced any strike or
work stoppage or other industrial dispute involving its employees
in the past five years.
3.11 LITIGATION AND OTHER CLAIMS. Except as described in Schedule 3.11,
there are no actions, suits, arbitration proceedings, claims or proceedings
related to the business of Seller or relating to any of the Purchased Assets
pending or, to the knowledge of Seller or Executive Shareholder, threatened
before any foreign, Federal, state, municipal or other court, department,
commission, arbitration panel, board, bureau, agency, body or instrumentality
against Seller or affecting any of Seller's property or assets (including the
Purchased Assets) at law or in equity. To the knowledge of Seller and
Stockholder Executive, there are no facts or state of facts existing that (with
or without the giving of notice or the passage of time or both) could form the
basis for any such action, suit, proceeding a claim. Seller is not a party to
and neither Seller nor any of its assets are subject to the provisions of any
order, writ, injunction, decree or judgment of any court or foreign, Federal,
state, municipal or other governmental or administrative body, department,
commission, board, bureau, any securities exchange or other agency or
instrumentality in connection with the ongoing operations of Seller except as
set forth in Schedule 3.11. Seller is not engaged in any arbitration nor has
either submitted any disputed matter to an arbitrator in connection with the
ongoing operations of the Seller except as set forth in Schedule 3.11.
3.12 NO MATERIAL ADVERSE CHANGE. Since the close of business on the
date of the Most Recent Financial Statements, there has been no material adverse
change in the financial condition, results of operations, business or prospects
of Seller.
3.13 SUFFICIENCY OF THE PURCHASED ASSETS. The Purchased Assets are
sufficient to operate Seller's business as currently operated assuming Buyer
provides the necessary working capital for the operation of such business.
Neither Seller nor any affiliate of Seller is a party to any contract which is
necessary or beneficial in any material respect to Seller's business other than
contracts which will be assigned to Buyer at the Closing as part of the
Purchased Assets and which are listed on Schedule 3.06.
3.14 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.14,
neither the
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Purchased Assets nor the operations of Seller's business, as conducted on or
prior to the date hereof, violate any foreign, Federal, state or local law,
ordinance, rule or regulation, the violation of which would be detrimental to
the Buyer, Seller's business or the Purchased Assets. Seller has not received
any formal or informal notice, advice, claim or complaint alleging that Seller
has violated or may have violated any law, regulation, ordinance or order and,
to Seller's or Executive Shareholders' knowledge, no such notice, advice, claim
or complaint of any type is threatened. Seller has at all times complied and
presently comply with all applicable federal, state, local and foreign laws,
rules and regulations respecting occupational safety and health standards and
Seller has not received complaints from any employee or any federal, state,
local or foreign agency alleging any violation of any federal, state, local or
foreign laws respecting occupational safety and health standards. To the
knowledge of Seller and Executive Shareholder, neither the Seller nor any
officer, director or employee of the Seller has made any bribes, kickbacks or
other improper payments on behalf of the Seller or received any such payments.
3.15 REAL PROPERTY LEASE. To the Seller's knowledge, the Real Property
Lease is valid and binding upon the lessor and is in full force and effect.
There are no existing defaults by Seller under the Real Property Lease and no
event has occurred which (whether with or without notice, lapse of time, or
both) would constitute a default thereunder by Seller. A true and complete copy
of the Real Property Lease is attached as Schedule 1.01(a). The real property
covered by the Real Property Lease constitutes all of the real property used in
the operation of Seller's business. All building and improvements located
thereon are in good condition and repair subject only to normal wear and tear.
Seller does not own any real property.
3.16 CONDITION OF PURCHASED ASSETS. The Purchased Assets are in good
repair and working condition, normal wear and tear excepted, are suited for the
uses intended, and are in conformity with all applicable laws, ordinances, rules
and regulations. Seller has delivered to Buyer accurate and complete copies of
all leases relating to real or personal property leased by Seller and used in
the operation of the Business and, except as described in Schedule 3.16, all
such leases are in full force and effect, no event of default has been declared
thereunder and, to Seller's and Executive Shareholders' knowledge, no basis for
any default exists. No such lease of real or personal property is subject to
termination or modification as a result of the transactions contemplated hereby.
3.17 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.17
hereto:
a) Seller is in compliance with all environmental laws,
regulations, permits and orders applicable to it, and with all
laws, regulations, permits and orders governing or relating to
asbestos removal or abatement. Seller has not received nor is
Seller the subject of any Environmental Claim with respect to its
business.
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(b) There are no laws, regulations, ordinances, licenses, permits
or orders relating to environmental or worker safety matters
requiring any work, repairs, construction or capital expenditures
with respect to the assets or properties of Seller or otherwise
required to be performed by Seller with respect to any properties
or facilities owned, leased, managed or operated by Seller.
(c) Schedule 3.17 identifies (A) all environmental audits,
assessments or occupational health studies undertaken by Seller
or its agents or by any governmental agencies with respect to the
business or properties of Seller; (B) the results of any
groundwater, soil, air or asbestos monitoring undertaken by or
known to Seller with respect to any real property owned or leased
by it; (C) all written communications of Seller with
environmental agencies; and (D) all citations issued with respect
to Seller under the Occupational Safety and Health Act (29 U.S.C.
Sections 651 ET SEQ.).
(d) To the knowledge of Seller or Stockholder Executive, no
Hazardous Substance has been spilled, released, deposited or
discharged on any of Seller's owned or leased real property, no
such real property has been used as a landfill or waste disposal
site, and such real property is free from Hazardous Substances;
(e) For the purposes of this Agreement, "Environmental Claim"
shall mean any demand, claim, governmental notice or threat of
litigation or the actual institution of any action, suit or
proceeding at any time by a person or entity which asserts that
an Environmental Condition constitutes a violation of or
otherwise may give rise to any liability or obligation under, any
statute, ordinance, regulation, or other governmental requirement
or the common law, including, any such statute, ordinance,
regulation, or other governmental requirement relating to the
emission, discharge, or release of any Hazardous Substance into
the environment or the generation, treatment, storage,
transportation, or disposal of any Hazardous Substance.
"Environmental Condition" shall mean the presence at the premises
demised to Seller in the Real Property Lease on the Closing Date,
or at any time prior to the Closing Date of any storage,
treatment, disposal or Release, whether discovered or
undiscovered on the Closing Date, in surface water, ground water,
drinking water supply, land surface, subsurface strata or ambient
air or any other location, of any pollutant, contaminant,
industrial solid waste or Hazardous Substance, (i) arising out of
the operations or other activities of Seller, or of any
predecessor in interest or line of business of Seller, conducted
or undertaken prior to the Closing Date or (ii) in, on or
emanating from any property or facility owned, leased, managed or
operated by Seller, except for any storage, treatment, disposal
or Release that is in compliance with
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all federal, state and local laws regulating same. "Hazardous
Substance" shall mean any substance defined in the manner set
forth in Section 101(14) of the U.S. Comprehensive Environment
Response, Compensation and Liability Act of 1980, as amended, and
shall include any additional substances designated under Section
102(a) thereof or any other substance which is or contains
asbestos in any form, urea formaldehyde foam insulation, methane,
petroleum, gasoline, diesel fuel or another petroleum hydrocarbon
product, transformers or other equipment which contain dielectric
fluid containing levels of polychlorinated biphenyls in excess of
50 parts per million, or any other chemical material or substance
which is regulated as toxic or hazardous or exposure to which is
prohibited, limited, or regulated by federal, state, local or
other governmental authority or which, even if not so regulated,
may or could pose a hazard to the health or safety of the
occupants of any property or facility at which a release thereof
occurs or the owners or occupants of any property or facility
adjacent thereto.
3.18 COMPUTER AND OTHER SYSTEMS. The computer systems and other
business systems (including but not limited to telephone and voice mail systems)
and associated and peripheral equipment, computer software, technical and other
documentation currently used by the Seller constitute all such items necessary
for the operation of Seller's business as currently conducted and are, in all
material respects, year 2000 compliant. The Seller has valid licenses for all
software used by it for which licenses are required.
3.19 INSURANCE. Schedule 3.19 contains a true and correct list of all
insurance policies maintained by Seller with respect to the Seller's business or
the Purchased Assets. Except as set forth in Schedule 3.19, all such policies of
insurance are in force and shall remain in force as of the Closing Date and will
not lapse or terminate by reason of the transaction contemplated hereby;
provided, however, that Seller is not obligated to keep such policies of
insurance in force after the Closing Date. All outstanding claims with respect
to such insurance are set forth in Schedule 3.19.
3.20 FULL DISCLOSURE. All information furnished to Buyer in accordance
herewith is, and as of the Closing Date shall be, correct and complete in all
material respects. No representation or warranty of Seller or Stockholder
Executive and no information, schedule, certificate or document furnished or to
be furnished by or on behalf of Seller or Stockholder Executive to Buyer, its
affiliates or its agents pursuant to or in connection with this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact known to the Seller or the Stockholder
Executive necessary in order to make the statement contained herein or therein
not misleading.
3.21 CORPORATE NAME. Seller shall file an amendment to its Certificate
of Incorporation changing its name from MDS Consulting Services, Inc. (the
"Corporate
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Name") to such other name as will be reasonably agreeable to Buyer and shall
cooperate with Buyer in its acquiring such Corporate Name for Buyer's use.
3.22 GUARANTEES. Except as set forth in Schedule 3.22 attached hereto,
neither the Seller's business nor any of the Purchased Assets is or will be at
the Closing, directly or indirectly, (i) liable, by guarantee or otherwise, upon
or with respect to, (ii) obligated, by discount or repurchase agreement or in
any other way, to provide funds in respect of, or (iii) obligated to guarantee
or assume, any debt, dividend or other obligation of any person, corporation,
association, partnership or other entity (including, without limitation, Seller
or any of its affiliates).
3.23 COMPENSATION OF EMPLOYEES. Schedule 3.23 contains a complete and
accurate list of all current officers, employees and consultants of Seller,
together with the current job title, aggregate remuneration rate (bonus,
commission and salary) and accrued but untaken vacation for each such
individual.
3.24 EMPLOYEE RELATIONS Seller is not delinquent in payments to any of
its employees or consultants for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them or for amounts
required to be reimbursed to such employees. Except as set forth on Schedule
3.24A, upon termination of the employment of any of its employees, Seller will
not by reason of anything done prior to the Closing, be liable to any of its
employees or consultants for severance pay or any other payments (other than
accrued salary, vacation or sick pay in accordance with Seller's normal
policies). Except as set forth on Schedule 3.24B, Seller does not have any
contracts of employment with any employees or any legal responsibility for the
employees of any other entity.
3.25. LABOR AGREEMENTS.. There are no contracts with labor unions
binding upon Seller and Seller has not agreed to recognize any union or other
collective bargaining unit nor has any union or other collective bargaining unit
been certified as representing any employees of Seller. None of Seller or the
Executive Shareholder has any knowledge of any organization effort currently
being made or threatened by or on behalf of any labor union with respect to
employees of Seller.
ARTICLE IV
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BUYER
Buyer hereby represents and warrants to, and covenants with, Seller
that as of the Closing Date:
4.01 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as proposed to be conducted.
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4.02 DUE AUTHORIZATION. Buyer has full corporate power and authority to
enter into this Agreement, the Related Agreements and any other agreements and
documents to be executed and delivered by it at Closing as contemplated hereby
(collectively, the "Closing Documents"), to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Closing Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer, and
the Related Agreements will, when executed and delivered by Buyer at Closing, be
valid and binding obligations of Buyer enforceable in accordance with their
respective terms, except to the extent that enforcement thereof may be limited
by applicable bankruptcy, reorganization, insolvency or moratorium laws, or
other laws affecting the enforcement of creditors' rights or the principles
governing the availability of equity remedies. The execution, delivery and
performance of this Agreement and the Closing Documents will not conflict with
or result in a breach or violation of any provision of the Certificate of
Incorporation or bylaws of Buyer or of any order, writ, injunction, judgment,
decree, law, statute, rule or regulation to which Buyer is a party or by which
Buyer may be bound or affected. All necessary authorizations of the transactions
contemplated by this Agreement required to be obtained by Buyer from any
Federal, state, local or foreign government or agency or any other person or
entity shall have been obtained prior to the Closing, and any filings,
notifications or disclosures required by law or regulation of any such
government or agency shall have been made in such form as is acceptable as
filed. Seller and Stockholder Executive shall cooperate with Buyer with respect
to the aforesaid filings, notifications or disclosures to the extent necessary
to obtain said authorizations. Buyer will deliver to Seller at the Closing true
and complete copies of all resolutions of its board of directors by which the
execution, delivery and performance of this Agreement and the Closing Documents
and the consummation of the transactions contemplated hereby and thereby were
authorized, certified by the Secretary or Assistant Secretary of Buyer as of the
Closing Date.
ARTICLE V
THE CLOSING
5.01 TIME AND PLACE OF CLOSING. Upon the terms and conditions of this
Agreement, the Closing of the transactions contemplated hereby (the "Closing")
shall take place, at 3:00 p.m., Eastern Standard Time, on February 18, 2000
("Closing Date") at the offices of Seller, 628-2 Hebron Avenue, Glastonbury,
Connecticut 06033 or at such other time and place as the parties hereto may
agree in writing.
5.02 INSTRUMENTS OF TRANSFER, ETC. At the Closing, Seller will deliver
to Buyer such deeds, bills of sale, instruments of assignment and other good and
sufficient
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instruments of transfer, executed by Seller and in a form reasonably
satisfactory to Buyer, as Buyer may reasonably require to vest in Buyer all
right, title and interest of Seller in and to the Purchased Assets, and Buyer
shall pay the Cash Consideration to Seller by bank check or wire transfer and
shall also deliver to Seller the other documents and instruments required of it
at the Closing.
Without limiting the foregoing, the documents to be delivered by the
parties at the Closing shall include the following:
(a) SELLER. Seller shall execute and deliver (i) this Agreement,
(ii) the Assignment and Assumption Agreement, (iii) the
Employment Letters contemplated by Section 2.03 hereof, (iv) the
Bill of Sale, (v) the Lease Assignment, (vi) third party consents
to the assignment of Contracts as contemplated by Section 1.08
hereof, (vii) the Secretary's Certificate contemplated by Section
3.02 hereof, (viii) an opinion of Seller's counsel in form and
substance reasonably satisfactory to Buyer, and (ix) such other
instruments as may reasonably be required of it at the Closing
pursuant to the terms of this Agreement.
(b) BUYER. Buyer shall execute and deliver (i) this Agreement,
(ii) the Employment Agreement, (iii) the Assignment and
Assumption Agreement (iv) the Lease Assignment, (v) the
Secretary's Certificate contemplated by Section 4.02 hereof, (vi)
an opinion of Buyer's counsel in form and substance reasonably
satisfactory to Seller, and (vii) such other instruments and
documents as may reasonably be required of it at the Closing
pursuant to the terms of this Agreement.
(c) STOCKHOLDER EXECUTIVE . The Stockholder Executive shall
execute and deliver to Buyer (i) this Agreement, and (ii) the
Employment Agreement.
Seller shall deliver to Buyer at the Closing possession of the Purchased Assets
being sold pursuant to this Agreement and the entire right, title and interest
of Seller in and to such Purchased Assets shall pass to Buyer at the Closing.
ARTICLE VI
EMPLOYEES
6.01 EMPLOYMENT WITH BUYER. At or prior to the Closing, Seller shall
pay to its employees all amounts owing to such employees for wages and other
compensation, earned vacation, sick leave and other benefits (i.e., all
vacation, sick leave and other benefits through the date of the Closing) in
accordance with Seller's current policies. Buyer agrees to offer employment
immediately after the Closing to all persons who, immediately prior to the
Closing, are employed by Seller and are listed on Schedule
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3.23. Each offer of employment shall include provision for compensation at the
same wage/salary level in effect for such employee immediately prior to the
Closing Date, without regard to employee benefit plans as set forth on Schedule
3.24A. (Those employees of Seller who accept employment with Buyer pursuant to
this Agreement are hereinafter referred to as the "Transferred Employees".)
Transferred Employees shall be eligible for any employee benefits offered, from
time to time, by the Company and its parent company, Technisource, Inc., to
employees of a similar class. It is specifically agreed that Buyer shall not be
responsible or liable for, or otherwise assume, any liability, obligation or
benefit arising under or payable from any employee benefit plan, program or
arrangement sponsored, maintained or administered by Seller (including without
limitation, any plan, program or arrangement providing post-retirement medical
benefits, severance pay, bonuses, incentive pay or deferred compensation).
6.02 THIRD PARTIES. The covenants of Buyer and Seller in this Article
VI are not intended to create any right in any Transferred Employee or his or
her heirs, executors, beneficiaries or personal representatives.
ARTICLE VII
WORKERS COMPENSATION, PRODUCT
LIABILITY RESPONSIBILITY
7.01 RESPONSIBILITY FOR PRIOR CLAIMS. It is understood and agreed that
Buyer does not assume any liability for, and shall not otherwise be responsible
for, any product liability or warranty claims (including warranty claims for
injury to person or property), relating to the business of Seller and arising
from services performed on or prior to the Closing Date. Seller and the
Stockholder Executive agree to indemnify Buyer for all costs and expenses
attributable to claims made with respect to services rendered prior to the
Closing Date in accordance with Section 8.06.
ARTICLE VIII
POST-CLOSING COVENANTS
8.01 EXPENSES. Except as otherwise provided herein, Seller and Buyer
shall each bear their own costs and expenses incurred in connection with this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby, including, without limitation, fees, commissions, expenses and
reimbursements incurred by or required to be paid to their respective
professional advisors.
8.02 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use their best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the
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sale of the Purchased Assets and the other transactions contemplated by this
Agreement and the Related Agreements. From time to time after the date hereof
(including after the Closing Date if requested), Seller and its affiliates will,
at their own expense and without further consideration, execute and deliver such
documents to Buyer as Buyer may reasonably request in order more effectively to
vest in Buyer good title to the Purchased Assets and to more effectively
consummate the transactions contemplated by this Agreement and the Related
Agreements.
8.03 COMMISSIONS AND FEES. Seller and Buyer each represents and
warrants to the other that no broker, finder, financial adviser or other person
is entitled to any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated hereby by reason of any action taken by the
party making such representation, other than The Chesapeake Group which shall be
compensated by Seller and Buyer from their respective funds in accordance with
Schedule 8.03 attached hereto. Seller and Buyer will pay to the other or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees incurred by reason of any action taken by such party.
8.04 SALES, TRANSFER AND USE TAXES. All sales, transfer and use taxes
incurred in connection with this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby will be borne by Seller, and Seller
will, at its own expense, file all necessary Tax Returns and other documentation
with respect to all such sales, transfer and use taxes.
8.05 NONDISCLOSURE. Seller agrees not to use or disclose at any time
after consummation of the transactions contemplated hereby, except with the
prior written consent of an officer authorized to act in the matter by the Board
of Directors of Buyer, any trade secrets, proprietary information, or other
information that Buyer considers confidential (or which Seller has previously
treated as or claimed to be confidential) relating to designs, suppliers,
subcontractors, inventions, operations, marketing, bidding information, cost and
pricing data, master files or customer lists utilized by Seller prior to the
Closing or by Buyer or any of its affiliates (the "Buyer Group"), or the skills,
abilities and compensation of the Buyer Group's employees, and all other similar
information material to the conduct of the Buyer Group's business, which is not
presently generally known or available to the public; PROVIDED, HOWEVER, that
this provision shall not preclude Seller from (i) the use or disclosure of such
information which presently is known generally to the public or which
subsequently comes into the public domain, other than by way of disclosure in
violation of this Agreement or in any other unauthorized fashion, or (ii)
disclosure of such information required by law or court order, provided that
prior to such disclosure required by law or court order the undersigned will
give Buyer three business days' written notice (or, if disclosure is required to
be made in less than three business days, then such notice shall be given as
promptly as practicable after determination that disclosure may be required) of
the nature of the law or order requiring disclosure and the disclosure to be
made in
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accordance therewith. Seller acknowledges that any breach of the foregoing will
give rise to irreparable injury that is not compensable in damages and agree
that Buyer may seek and obtain equitable relief in the form of specific
enforcement, temporary restraining order, temporary or permanent injunction, or
any other equitable remedy that may then be available to such party against the
breach or threatened breach of such covenants, in addition to any other legal
remedies which may be available.
8.06 INDEMNIFICATION.
(a) BY SELLER AND STOCKHOLDER EXECUTIVE. Seller and the
Stockholder Executive, jointly and severally, agree to save, defend and
indemnify Buyer, and its officers, directors and employees and Buyer's parent
and its officers, directors and employees (each a "Buyer's Indemnitee"), against
and hold them harmless from any and all claims, liabilities, losses, damages,
deficiencies, costs and expenses, of every kind, nature and description, fixed
or contingent (including, without limitation, interest, penalties, costs of
investigation and counsel's fees and expenses) ("Losses"), asserted against,
resulting to, imposed upon or incurred by Buyer or any Buyer's Indemnitee,
directly or indirectly, arising out of (i) any breach of any representation,
warranty, covenant or agreement made by Seller or the Stockholder Executive
under this Agreement, the Related Agreements or any agreement or instrument
executed or delivered in connection with the transactions contemplated hereby or
thereby; (ii) any Retained Liability or any Environmental Claim; (iii) any
failure of Seller to qualify to do business in a jurisdiction outside of
Connecticut or make any payment to a taxing authority in such jurisdiction; (iv)
any liability of the Seller for unpaid Taxes with respect to any Tax year
beginning before and ending after the Closing Date to the extent allocable to
the portion of such period beginning before and ending on the Closing Date; and
(v) any liability of the Seller for the unpaid Taxes of any person under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(b) BY BUYER. Buyer agrees to save, defend and indemnify
Seller, Seller's officers and directors and the Stockholder Executive (each a
"Seller's Indemnitee") against and hold them harmless from any and all Losses
asserted against, resulting to, imposed upon or incurred by Seller or Seller's
Indemnitee arising solely out of (i) any breach of any representation, warranty,
covenant or agreement made by Buyer under this Agreement or the Related
Agreements, or (ii) any activity of Buyer after the Closing Date.
(c) SURVIVAL. The representations, warranties, covenants,
indemnities and agreements of the parties to this Agreement contained herein
shall survive the Closing, PROVIDED, HOWEVER, that the representations,
warranties and indemnities of the parties contained in Articles III and IV of
this Agreement and in this Section 8.06 (other than the indemnities contained in
Sections 3.01, 3.02, 3.02A, 3.05, 3.08, 3.17 and 8.06(a)(ii), (iii), (iv) and
(v) and 8.06(b)(ii) hereof which shall continue in force without any time limit)
shall only survive until the second anniversary of the
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Closing Date and no claim may be brought by any party in respect thereof unless
notice of such claim is properly given on or prior to such date; PROVIDED,
HOWEVER, that in cases of fraud or intentional misrepresentation all of the
representations and warranties shall survive the consummation of the Closing and
shall continue until the expiration of any applicable statute of limitations
period.
(d) SET-OFF. Buyer shall have the right to set-off (i) any
amounts which may become due to Seller under this Agreement (including, without
limitation, any Earn-Out Payments payable pursuant to Section 1.05) or under any
other agreement between Buyer and Seller; and/or (ii) any amounts which may
become due to Stockholder Executive under the Employment Agreement or any other
agreement between Stockholder Executive and Buyer, against any indemnification
amounts to be paid by Seller or Stockholder Executive pursuant to Section
8.06(a) as determined by arbitration or judicial process or otherwise mutually
agreed-upon by Seller and Buyer; provided, however, that the aggregate amount
which may be set-off hereunder shall not exceed the aggregate of the
indemnification amounts which may become due to Buyer.
8.07 DEFENSE OF CLAIMS.
(a) Should any claim, action or proceeding by or involving a
third party arise after the Closing Date for which a party hereto (the
"Indemnifying Party") has an indemnification obligation under the terms of this
Agreement, the other party (the "Indemnified Party") shall notify the
Indemnifying Party within a reasonable time after such claim, action or
proceeding arises and is known to the Indemnified Party (provided that the
failure to give timely notice shall not affect the right to indemnification
hereunder except to the extent that the Indemnifying Party is actually damaged
or prejudiced by such delay).
The expenses of all proceedings, contests or lawsuits with respect to
such claims or actions shall be borne by the Indemnifying Party. If the
Indemnifying Party wishes to assume the defense of such claim or action, it
shall give written notice to the Indemnified Party stating that it intends to
assume such defense within 15 days after notice from the Indemnified Party of
such claim or action (unless the claim or action reasonably requires a response
in less than 15 days after the notice is given to the Indemnifying Party, in
which event it shall notify the Indemnified Party at least five days prior to
such reasonably required response date), and the Indemnifying Party shall
thereafter assume the defense of any such claim or liability, through counsel
reasonably satisfactory to the Indemnified Party, provided that the Indemnified
Party may participate in such defense at its own expense. The Indemnified Party
shall afford the Indemnifying Party's counsel designated by it and other
authorized representatives reasonable access during normal business hours to all
books, records, offices and other facilities and properties of the Indemnified
Party, and to the personnel of the Indemnified Party, and shall otherwise use
all reasonable efforts to cooperate with the Indemnifying Party, such counsel
and such other authorized representatives in connection with the exercise of the
rights of the Indemnifying Party pursuant to this
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Section 8.07. The Indemnifying Party shall not settle or compromise an claim or
action without the written consent of the Indemnified Party (which consent shall
not be unreasonably withheld), unless an unconditional release of the
Indemnified Party has been obtained.
(b) If the Indemnifying Party shall not assume the defense of, or
if after so assuming it shall fail to actively defend, any such claim or action:
(i) the Indemnified Party, after giving written notice to the Indemnifying
Party, may defend against any such claim or action in such manner as it may deem
appropriate, and (ii) the Indemnified Party may settle such claim or litigation
on such terms as it may deem appropriate (but not sooner than 15 days after
notifying the Indemnifying Party of such proposed settlement and the terms
thereof), and the Indemnifying Party promptly shall reimburse the Indemnified
Party for the amount of such settlement and for all expenses, legal and
otherwise, reasonably and necessarily incurred by the Indemnified Party in
connection with the defense against and settlement of such claim or action. If
no settlement of such claim or litigation is made, the Indemnifying Party shall
satisfy any judgment rendered with respect to such claim or in such action,
before the Indemnified Party is required to do so, and pay all expenses, legal
or otherwise, reasonably and necessarily incurred by the Indemnified Party in
the defense against such claim or litigation.
(c) If a judgment is rendered against an Indemnified Party in any
action covered by the indemnification hereunder, or any lien attaches to any of
the assets of an Indemnified Party, the Indemnifying Party, immediately upon
such entry or attachment, shall pay such judgment in full or discharge such lien
unless, at the Indemnifying Party's expense and direction, an appeal is taken
under which the execution of the judgment or satisfaction of the lien is stayed.
If and when a final judgment is rendered in any such action, the Indemnifying
Party shall forthwith pay such judgment or discharge such lien before the
Indemnified Party is compelled to do so.
8.08 ACCESS TO RECORDS. For a period of seven years after the Closing
Date, Buyer shall retain the books of account and other financial and accounting
records relating to the conduct of the Seller's business which are transferred
to it on and as of the Closing Date. At least 30 days prior to the end of such
period, or any subsequent retention period, Stockholder Executive shall notify
Buyer in writing whether it desires the further retention of any such records
for any longer period, and, in the event he desires any of such records to be
retained for any longer period, such records, at the option of Buyer, shall
either be retained by Buyer (in which case Buyer shall notify Stockholder
Executive of the proposed retention period), or promptly be shipped to
Stockholder Executive at Stockholder Executive's expense. Buyer shall permit
Stockholder Executive, from time to time, to inspect and copy such books of
account and other records at reasonable times and after providing written notice
to Buyer of its desire to so inspect.
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8.09 ACCOUNTS RECEIVABLE. In the event that, following the Closing
Date, Buyer receives any payment with respect to any account receivable listed
on Schedule 1.02(a), then Buyer shall immediately remit such payment to Seller.
Buyer shall have no collection responsibility with respect to any accounts
receivable retained by Seller. In case any dispute arises in the determination
of whether a payment in respect of an account receivable is properly the
property of a party hereto, reference shall be made to the invoices in respect
of which such payment was received as indicated on the obligor's check or the
correspondence included with such payments. Any payment received with no
designation of the invoice or invoices in respect of which such payment is to be
applied shall be applied to the invoices outstanding for the longest period of
time. In order to protect Buyer's interest in customer goodwill, Seller and the
Stockholder Executive agree to give notice to Buyer prior to taking legal action
against any customer of Buyer to collect any account receivable.
8.10 NON-COMPETITION COVENANT OF STOCKHOLDER EXECUTIVE. In order to
assure that Buyer realizes the benefits of the transaction contemplated herein,
Stockholder Executive shall fully comply with the non-compete provision set
forth in Section 6.7 of the Employment Agreement.
8.11 CESSATION OF BUSINESS OF SELLER. Seller and the Stockholder
Executive covenant and agree that as of the date immediately following the
Closing Date, Seller shall permanently cease all business activity of any kind,
except for the winding up of its business. Seller covenants and agrees that
during the winding up of its business, Seller shall not, directly or indirectly,
whether as principal, agent, trustee or through the agency of any corporation,
partnership, association or agent engage in a similar business as that of Buyer
or its affiliates within any jurisdiction in which Buyer or any of its
affiliates conducts business.
8.12 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither the Seller, and
Stockholder Executive, on the one hand, or Buyer, on the other hand, shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other party;
provided, however, that Buyer or its parent company may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
8.13 CONSENTS TO ASSIGNMENT OF ASSIGNED CONTRACTS. Seller shall use its
best efforts to obtain such consents as may be necessary or appropriate to vest
in Buyer all of Seller's right, title and interest in and to all of the Assigned
Contracts, including without limitation the consents identified on Schedule
3.06, within thirty days following the Closing.
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ARTICLE IX
MISCELLANEOUS
9.01 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
9.02 NO ASSIGNMENT. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party, provided, however,
that Buyer may assign its rights hereunder, in whole or in part, to any
corporation or other entity controlled by, controlling, or under common control
with Buyer, and Buyer or its assignee may assign their rights hereunder, in
whole or in part, to any purchaser of substantially all of the assets or
business of Buyer or Seller. Any attempted or purported assignment by either
party other than in accordance with this Section 9.02 shall be null and void.
9.03 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which as so
executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party, hereto to produce or account for
more than one such counterpart executed and delivered by such party.
9.04 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the State of Florida
(without regard to conflict of laws principles thereof) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
9.05 ARBITRATION; VENUE; ATTORNEY'S FEES. Any dispute, controversy or
claim arising out of or relating to this Agreement, or the breach, termination
or invalidity thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrators shall have the power to deliver both legal and equitable remedies.
The place of arbitration shall be Miami-Dade County, Florida. Judgment on the
award may be entered in any court having jurisdiction. Notwithstanding the
provisions of this Section 9.05, if the dispute, controversy or claim relates to
the subject matter of Sections 8.05 or 8.10 of this Agreement, Buyer shall the
option of seeking relief through a court of competent jurisdiction located in
Miami-Dade County, Florida and each of the parties hereto expressly agrees to be
bound by such selection of jurisdiction and venue for purposes of such
adjudication. Each party (i) waives any objection which it may have that such
court is not a convenient forum for any such adjudication, (ii) agrees and
consents to the personal jurisdiction of such court with respect to any claim or
dispute arising out of or relating to this Agreement or the transactions
contemplated hereby and (iii) agrees that process issued out of such court or in
accordance with the rules of practice of such court shall be properly served if
served personally or served by certified mail or other form of substituted
service, as provided under the rules of practice of such court. In the event of
any suit, action or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby the prevailing party thereunder shall be
entitled to
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recover reasonable attorneys' and paralegals' fees (for negotiations, trials,
appeals and collection efforts) and court costs incurred in connection therewith
in addition to any other relief to which such party may be entitled. The
prevailing party shall be the party that prevails on its claim whether or not an
award or judgement is entered in its favor.
9.06 SURVIVAL. Except as otherwise expressly set forth herein, the
representations, warranties, covenants, indemnities and agreements of the
parties to this Agreement contained herein or in any document delivered pursuant
to or in connection herewith shall survive the Closing and shall survive any
investigation by the other party.
9.07 NOTICES. All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed to have been duly given: when
delivered by hand; when delivered by facsimile (if written confirmation of
receipt of the facsimile is obtained from the party to be charged with notice);
five (5) days after being deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid; or on the second
business day after being sent (prepaid for next day delivery), via Federal
Express, DHL or other nationally recognized delivery service, as follows:
(a) TO BUYER. If to Buyer addressed to:
DFI Acquisition Corp.
1901 West Cypress Creek Road
Suite 201
Fort Lauderdale, FL 33309
Attn: Joseph Collard
Telecopier No.: 954-958-6880
with a copy to:
Holland & Knight
701 Brickell Avenue
Miami, FL 33131
Attention: Rodney H. Bell, Esq.
Telecopier No.: 305-789-7799
(b) TO SELLER AND THE STOCKHOLDER EXECUTIVE If to Seller
and/or Stockholder Executive addressed to:
Mark D. Solomon
72 Kingswood Drive
South Glastonbury, Connecticut 06073
Telecopier No.: 860-657-2250
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with a copy to:
Updike, Kelly & Spellacy, P.C.
One State Street
P.O. Box 231277
Hartford, Connecticut 06123-1277
Attention: James M. Connor, Esq.
Telecopier No.: 860-548-2680
Either party may designate a change in address at any time upon written
notice to the other party.
9.08 AMENDMENT AND MODIFICATION. The Agreement may be amended, modified
or supplemented only by a written instrument executed by the party against whom
such amendment, modification or supplement is sought to be enforced.
9.09 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party or parties granting such waiver, but any such waiver or the failure to
insist upon strict compliance with any obligation, covenant, agreement or
condition herein, shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure or breach.
9.10 INTERPRETATION. The table of contents and the article and section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a governmental entity or
any department or agency thereof. As used in this Agreement, the term
"subsidiary", when used in reference to any other person, shall mean any
corporation of which outstanding securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation are owned
directly or indirectly by such other person. As used in this Agreement, the term
"generally accepted accounting principles" means generally accepted accounting
principles as in effect and as applied in the United States. As used in this
Agreement, the term "affiliate" of a person means any person directly or
indirectly owning, controlling or holding with power to vote ten (10%) or more
of the outstanding voting securities of such other person; (ii) any person ten
(10%) or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other person; (iii) any
person directly or indirectly controlling, controlled by, or under common
control with such other person; (iv) any officer, director, trustee or general
partner of such other person; (v) if such other person is an officer, director,
trustee or general partner, any person for which such other person acts in any
such
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capacity; and (vi) the spouse of such other person, or any parent, grandparent,
brother, sister, niece or nephew of such other person, or any lineal descendant
of such other person, or the spouse of any such parent, grandparent, brother,
sister, niece, nephew or lineal descendant, or any entity controlled by any of
the foregoing. When used herein, the masculine, feminine or neuter gender and
the singular or plural number shall each be deemed to include the others
whenever the context so indicates or permits.
9.11 ENTIRE AGREEMENT. This Agreement and the Related Agreements,
including the schedules, exhibits, documents, certificates and instruments
referred to herein and therein, embody the entire agreement and understanding of
the parties hereto in respect of any transactions contemplated by this Agreement
and the Related Agreements and supersede all prior agreements and understandings
between the parties with respect thereto.
9.12 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SELLER:
------
DFI ACQUISITION CORP.
By:
---------------------------------
Tom Hoshko
President
BUYER:
-----
MDS CONSULTING SERVICES, INC.
By:
---------------------------------
Mark D. Solomon
President
STOCKHOLDER EXECUTIVE:
---------------------
Mark D. Solomon
38
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of January 3, 2000, is entered
into between Technisource, Inc., a Florida corporation (the "Company"), and Tom
Hoshko (the "Employee").
RECITALS
A. The Company desires to engage Employee as a senior executive
and as an important member of its management team, and
Employee has agreed to be employed by the Company in such
capacity, all on the terms set forth in this Agreement.
AGREEMENT
For and in consideration of the foregoing and of the mutual covenants of the
parties herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby employs Employee to serve in the capacities
described herein and Employee hereby accepts such employment and agrees to
perform the services described herein upon the terms and conditions hereinafter
set forth.
2. TERM. The term of Employee's employment pursuant to this Agreement shall
commence as of the date hereof and shall continue for a period of three (3)
years, subject to earlier termination in accordance with Section 9 hereof and
the other terms, provisions, and conditions set forth herein. Sixty days prior
to the end of the term of the Agreement (or any renewal term), either the
Company or the Employee may give notice to the other of its determination not to
renew this Agreement. If a notice of non-renewal is not delivered, this
Agreement will automatically continue in effect for successive one (1) year
renewal terms. If such notice of non-renewal is given by any party, then
Employee's employment will terminate at the end of such term (or on such other
date as the parties mutually agree).
3. DUTIES. Employee shall serve as and have the title of President of the
Company. Employee agrees to devote substantially all of his time, energy, and
skills to such employment while so employed.
4. COMPENSATION.
(a) BASE COMPENSATION. The Company shall pay Employee, and Employee
agrees to accept, base compensation at the rate of $200,000 per year in equal,
monthly installments from the effective date hereof through the end of the term
of this Agreement ("Base Compensation"). The Base Compensation specified in this
Section 4(a) may be adjusted at any time during the term of this Agreement in
the discretion of the Board of Directors and will be reviewed no less frequently
than during the first quarter of each calendar year.
(b) BONUS COMPENSATION. Employee shall be eligible for an annual bonus
("Bonus Compensation") payable within 90 days following the end of each fiscal
year of the Company during the
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term of Employee's employment under this Agreement. The amount of Employee's
annual Bonus Compensation shall be equal to 5% of the growth in the Company's
earnings without including interest payments and taxes ("EBIT") during such
year. The Bonus Compensation payable by the Company for any partial year of
employment of Employee shall be prorated based on the number of complete months
Employee was employed by the Company during such year.
(c) ANNUAL STOCK OPTIONS. Employee shall be eligible to receive an
annual stock option award (the "Annual Stock Options") following each fiscal
year of the Company in amounts, at such exercise prices, and on such terms as
the Board of Directors determines, based upon the performance of the Employee
and the Company during such fiscal year.
(d) STOCK OPTION AWARD. The Company has awarded Employee stock options
on the terms and in the form attached hereto as Exhibit A and Exhibit B.
Employee will receive a total of 150,000 stock options. Employee will receive
$100,000.00 worth of Incentive Stock Options and the balance of stock options
will be non-qualified.
5. FRINGE BENEFITS.
(a) GENERALLY. Employee shall be eligible for fringe benefits pursuant
to any health insurance, other insurance, pension or other employee fringe
benefit plan approved by the Board of Directors that now or hereafter may be
made available to employees of the Company and for which Employee will qualify
according to his eligibility under the provisions thereof; provided, however,
that such eligibility specifically does not apply to matters relating to
Employee's vacation, disability benefits, automobile and compensation, which
matters shall be governed exclusively the by terms hereof.
(b) VACATION. During the term of this Agreement, Employee shall be
entitled to four weeks paid vacation per calendar year and any vacation time not
taken during any calendar year shall not be carried over into subsequent
calendar years.
(c) AUTOMOBILE. The Company agrees to provide Employee with an
automobile allowance in the amount of $500 per month during the term of this
Agreement.
(d) BOARD SEAT. Employee will be granted a seat on the Board of
Directors subject to the approval of the current board.
6. EXPENSES.
(a) GENERAL. During the period of his employment, Employee shall be
reimbursed for his business-related expenses, including mobile phone charges and
Tower Club membership fees, incurred on behalf of the Company in accordance with
the travel and entertainment expense policy of the Company in accordance with
the travel and entertainment expense policy of the Company as adopted by the
Board of Directors from time to time and in effect at the time the expense was
incurred. Employee agrees to maintain such records and documentation of all such
expenses to be reimbursed by the Company hereunder, as the Company shall require
and in such detail as the Company may reasonably request.
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(b) RELOCATION. The Company agrees to pay Employee's reasonable
relocation expenses not to exceed $25,000. Employee will seek at least two
competitive bids in order to minimize such expenses.
7. TERMINATION.The term of Employee's employment under this Agreement may be
terminated prior to expiration of the term provided in Section 2 hereof in
accordance with the following paragraphs. Any termination of the Employee's
employment by the Company for Cause or otherwise shall be communicated by Notice
of Termination to the Employee given in accordance with Section 14 hereof. A
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide so indicated,
and (iii) if the termination date is other than the date of receipt of such
notice, specifies the termination date, which date shall not be more than sixty
(60) calendar days after the giving of such notice.
(a) MUTUAL. Employee's employment under this Agreement may be
terminated upon the mutual written agreement (which may include, if so agreed to
by the Board of Directors and Employee, severance payments and/or benefits) of
the Company and Employee.
(b) DEATH. In the event of the death of the Employee, Employee's
employment under this Agreement shall be deemed terminated.
(c) DISABILITY. If, during Employee's employment under this Agreement,
Employee shall become disabled and unable to perform his duties as required
herein ("Disability") for a consecutive period of one hundred twenty (120) days,
then the Company may, upon thirty (30) days written notice to Employee,
terminate Employee's employment under this Agreement.
(d) CAUSE. Employee's employment under this Agreement may be terminated
by the Company, with or without Cause as herein defined upon giving Employee
thirty (30) days written notice. For purposes of this Agreement, the term
"Cause" shall mean the termination of the Employee by the Board of Directors of
the Company as a result of the existence or occurrence of one or more of the
following conditions or events:
(i) An act or acts of fraud, misappropriation, or embezzlement
on the Employee's part that results in or are intended to result in his personal
enrichment at the expense of the Company or its subsidiaries or affiliates. (ii)
Commission of a felony involving moral turpitute or violation of securities
laws.
(iii) The Employee's willful or intentional failure to perform
his duties as required under this Agreement; provided, that the Company shall
provide Employee with written notice of such failure and Employee shall have ten
(10) days from the date Employee receives such notice to remedy such failure to
perform.
(iv) Any material breach of the terms of this Agreement by
Employee.
(v) Substantial and continuing neglect or inattention by
Employee of or to the duties subscribed in Section 3 hereof.
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8. DEATH AND DISABILITY. In the event of the termination of Employee's
employment under this Agreement by reason of the Employee's death or Disability,
the Company shall pay Employee (or his heirs and/or personal representatives)
the payments and benefits indicated below:
(a) TERMINATION DUE TO DEATH. In the event of Employee's death, this
Agreement shall terminate immediately, and the Company shall pay to Employee's
estate or legal representative Employee's Base Compensation through the date of
Employee's death. Subject to Section 5(b), this Agreement does not obligate the
Company to make any other payment to Employee's estate or legal representative
in the event of the Employee's death.
(b) DISABILITY. In the event of Employee's Disability, from and after
the Disability Date, Employee shall receive, instead of his Base Compensation or
any other compensation payable by the Company under this Agreement, the
disability benefits to which Employee is entitled under any and all disability
benefit plans provided by or made available to Employee by the Company.
9. SEVERANCE. In the event of the termination of Employee's employment under
this Agreement for any reason other than Employee's death or disability, the
Company shall provide the payments and benefits to Employee as indicated below:
(a) WITH CAUSE OR VOLUNTARY RESIGNATION. If Employee is terminated for
Cause (as defined in Section 7(d) of this Agreement), or if Employee voluntarily
terminates his employment by the Company, the Company shall pay Employee, within
five (5) business days after the date of termination, Employee's Base
Compensation and unused vacation entitlement through such date of termination,
and the Company shall have no further obligation to provide compensation or
benefits to Employee under this Agreement; except that, to the extent that the
Company's insurance, stock option and other benefit plans provide certain rights
and benefits after an employee's termination, Employee may continue to receive
such rights and benefits in accordance with the terms of such plans.
(b) WITHOUT CAUSE. If terminated by the company without Cause, Employee
shall receive the Base Compensation and Bonus Compensation until the later to
occur of the date twelve (12) months from the date of such termination and the
end of the term (or any renewal term) of this Agreement.
10. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that he will
have access to certain confidential information of the Company and of
corporations with whom the Company does business, and that such information
constitutes valuable, special and unique property of the Company and such other
corporations. During the term of this Agreement and for a period of five (5)
years immediately following the date of termination of this Agreement, Employee
agrees not to disclose or use any confidential information, including without
limitation, information regarding research, developments "know-how," prices,
suppliers, customers, costs or any knowledge or information with respect to
confidential or trade secrets of the Company, it being understood that such
confidential information does not include information that is publicly available
unless such information became publicly available as a result of a breach of
this Agreement. Employee acknowledges and agrees that all notes, records,
reports, sketches, plans, unpublished memoranda or other documents belonging to
the Company, but held by Employee, concerning any information relating to the
Company's business,
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whether confidential or not, are the property of the Company and will be
promptly delivered to it upon Employee's leaving the employ of the Company.
Employee also agrees to execute such confidentiality agreements that the Board
may adopt, and may modify from time to time, as a standard form to be executed
by all employees of the Company, to the extent such standard forms are not
materially more restrictive than the provisions of this Agreement.
Employee shall not disclose to the Company or induce the Company to use any
secret or confidential information or material belonging to others, including
former employers. Employee agrees to defend, indemnify and hold harmless the
Company from all claims, actions, losses or damages (including reasonable
attorney's fees) arising out of any restrictive covenants or confidentiality
obligations of Employee to any third party.
11. INTELLECTUAL PROPERTY. Employee acknowledges and agrees that all
discoveries, inventions, designs, improvement, ideas, writings, copyrights,
publications, computer data or programs, or other intellectual property, whether
or not subject to patent or copyright laws, which Employee shall conceive solely
or jointly with others, in the course or scope of his employment with the
Company or in any other way related to the Company's business, whether during or
after working hours, or with the use of the Company's equipment, materials or
facilities (collectively referred to herein as ("Intellectual Property"), shall
be the sole and exclusive property of the Company without further compensation
to Employee. As used in this Section 11 and the following Section 12, it is
understood that the Company's principal "business" is providing IT consultant
staffing and services and sales of computer hardware and equipment. Employee
shall take such steps as are deemed necessary to maintain complete and current
records of the Intellectual Property conceived by the Employee, and Employee
shall assign to the Company or its designees, the entire right, title and
interest in said Intellectual Property.
12. NON-COMPETITION. Employee acknowledges that his services to be rendered
hereunder are of a special and unusual character that have a unique value to the
Company and the conduct of its business, the loss of which cannot adequately be
compensated by damages in an action at law. In view of the unique value to the
Company of the services of Employee for which the Company has contracted
hereunder, and because of the confidential information to be obtained by or
disclosed to Employee as herein above set forth, and as a material inducement to
the Company to enter into this Agreement and to pay and make available to
Employee the compensation and other benefits referred to herein, Employee
covenants and agrees that Employee will not, directly or indirectly, whether as
principal, agent, trustee or through the agency of any corporation, partnership,
association or agent (other than as the holder of not more than 5% of the total
outstanding stock of any company the securities of which are traded on a regular
basis on recognized securities exchanges):
(a) while employed under this Agreement and for any period during which
Employee is receiving payments from the Company (pursuant to Section 8 hereof)
following a termination as a result of Employee's Disability, (i) work for (in
any capacity, including without limitation director, officer or employee) and
other business or IT staffing or consulting company that competes with the
Company and is located in the United States or operates within 50 miles of any
branch office of the Company, or (ii) recruit, or otherwise influence or attempt
to induce employees of the Company to leave the employment of the Company; and
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(b) for the one-year period immediately following the termination of
this Agreement due to the expiration of the term of this Agreement, termination
of Employee for Cause, or Employee's voluntary resignation; and for the one year
period immediately following the last date on which Employee shall receive
payments from the Company pursuant to Section 8 hereof following a termination
of employment as a result of Employee's Disability, work for a company or
business (in any capacity, including without limitation as director, officer, or
employee) that is in the business of providing IT staffing or consultant
services that competes with the Company and is located in the Unites States or
operates within 50 miles of any branch office of the Company.
Employee has carefully read and considered the provisions of Sections
10, 11, and 12 hereof and agrees that the restrictions set forth in such
sections are fair and reasonable and are reasonably required for the protection
of the interests of the Company, its officers, directors, shareholders, and
other employees, for the protection of the business of the Company, and to
ensure that Employee devotes his full-time and efforts to the business of the
Company. Employee acknowledges that he is qualified to engage in businesses
other than those that are subject to this Section 12. It is the belief of the
parties, therefore, that the best protection that can be given to the Company
that does not in any way infringe upon the rights of Employee to engage in any
unrelated businesses is to provide for the restrictions described above. In view
of the substantial harm which would result form a breach by Employee of Sections
10, 11 and 12, the parties agree that the restrictions contained therein shall
be enforced to the maximum extent permitted by law. In the event that any said
restrictions shall be held unenforceable by any court of competent jurisdiction,
the parties hereto agree that it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in place of any
limitation deemed unenforceable and that as so modified, the covenant shall be
as fully enforceable as if it had been set forth herein by the parties.
13. REMEDIES. The provisions in sections 10, 11 and 12 of this Agreement shall
survive the termination of this Agreement as set forth therein, regardless of
the circumstances or reasons for such termination, and inure to the benefit of
the Company. The restrictions set forth in Sections 10, 11 and 12 are considered
to be reasonable for the purposes of protecting the business of the Company. The
Company and Employee acknowledge that the Company would be irreparably harmed
and that monetary damages would not provide an adequate remedy to the Company if
the covenants contained in Sections 10, 11 and 12 were not complied with in
accordance with their terms. Accordingly, Employee agrees that the Company shall
be entitled to injunctive and other equitable relief to secure the enforcement
of these provisions, in addition to any other remedy which may be available to
the Company, and that the Company shall be entitled to receive from Employee
reimbursement for reasonable attorneys' fees and expenses incurred by the
Company in enforcing these provisions.
14. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail to the
addresses below or to such other address as either party shall designate by
written notice to the other:
IF TO THE EMPLOYEE: To the address set forth below his signature on the
signature pager hereof.
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IF TO THE COMPANY:
Technisource, Inc.
1901 W. Cypress Creek Road
Suite 202
Ft. Lauderdale, FL 33309
Attention : CEO
15. ENTIRE AGREEMENT; MODIFICATION.
(a) This Agreement contains the entire agreement of the Company and
Employee, and the Company and Employee hereby acknowledges and agrees that this
Agreement supersedes any prior statements, writings, promises, understandings or
commitments.
(b) No future oral statements, promises or commitments with respect to
the subject matter hereof, or other purported modification hereof, shall be
binding upon the parties hereto unless the same is reduced to writing and signed
by each party hereto.
16. ASSIGNMENT. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company. The Employee may not assign his rights and obligations
under this Agreement.
17. FULL SETTLEMENT. The Employee shall not be obligated to seek other
employment by way of mitigation of the amounts payable to the Employee under any
such provisions of this Agreement. The amounts payable to Employee under this
Agreement shall not be reduced by any compensation payable to Employee from
employment by another employer after the date of Employee's termination provided
such employment does not violate the terms of Section 12 hereof.
18. MISCELLANEOUS.
(a) This agreement shall be subject to and governed by the laws of the
State of Florida, without regard to the conflicts of laws principles thereof.
(b) The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or the interpretation of this
Agreement.
(c) The failure of any party to enforce any provision of this Agreement
shall in no manner affect the right to enforce the same, and the waiver by any
party of any breach of any provision of this Agreement shall not be construed to
be a waiver by such party of any succeeding breach of such provision or a waiver
by such party of any breach of any other provision.
(d) All written notices required in this Agreement shall be sent
postage prepaid by certified or registered mail, return receipt requested.
(e) In the event any one or more of the provisions of this Agreement
shall for any reason
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be held invalid, illegal or unenforceable, the remaining provisions of this
Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, and enforceable
provision which comes closest to the intent of the parties.
(g) This Agreement may be executed in any number of counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument.
NOW THEREFORE, the parties have executed this Employment Agreement as
of the day and year first above written.
TECHNISOURCE, INC., a Florida Corporation
By:
------------------------------------
Its:
---------------------------------------
Tom Hoshko
4900 N. Ocean Boulevard, #406
Ft. Lauderdale, FL 33308
8
EXHIBIT 10.2
TECHNISOURCE, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the "Agreement"), effective as of
January 3, 2000 (the "Date of Grant"), is made by and between Technisource,
Inc., a Florida corporation (the "Company"), and Thomas Hoshko (the
"Participant").
BACKGROUND
The Company has established the Technisource, Inc. Long-Term Incentive Plan (the
"Plan"). The Company wishes to grant to the Participant a Nonqualified Stock
Option pursuant to the terms of the Plan.
Therefore, in consideration of the mutual covenants contained in this Agreement
and other good and valuable consideration, the Company and the Participant agree
as follows:
1. GRANT OF OPTION. In consideration of service to the Company and for
other good and valuable consideration, the Company grants to the
Participant a Nonqualified Stock Option (the "Option") to purchase
98,940 shares of the Company's common stock. The Company grants the
Option in accordance with the terms and conditions of the Plan and this
Agreement.
2. OPTION PRICE. The purchase price of the shares of stock covered by the
Option shall be $5.875.
3. ADJUSTMENTS IN OPTION. If the outstanding shares of stock subject to
the Option are changed into or exchanged for a different number or kind
of shares of the Company or other securities of the Company by reason
of merger, consolidation, recapitalization, reclassification, stock
split, stock dividend or combination of shares, the shares subject to
the Option and the price per share shall be equitably adjusted to
reflect such changes. Such adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion
of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share. Any such
adjustment made by the Committee shall be final and binding upon the
Participant, the Company and all other interested persons.
4. PERSON ELIGIBLE TO EXERCISE OPTION. During the lifetime of the
Participant, only the Participant may exercise the Option or any
portion of the Option. After the death of the Participant, any
exercisable portion of the Option may, prior to the time when the
Option becomes unexercisable under the terms of the Plan, be exercised
by the Participant's personal representative or by any other person
empowered to do so under the Participant's will, trust or under then
applicable laws of descent and distribution.
5. MANNER OF EXERCISE. The Option, or any portion of the Option, shall be
exercised only in accordance with the provisions of the Plan and this
Agreement. The person exercising the Option shall give to the Company a
written notice that shall: (i) state the number of Shares with respect
to which the Option is being exercised; and (ii) specify a date (other
than a Saturday,
<PAGE>
Sunday or legal holiday) not less than five nor more than ten days
after the date of such written notice, as the date on which the Shares
will be purchased. Such tender and conveyance shall take place at the
principal office of the Company during ordinary business hours, or at
such other hour and place agreed upon by the Company and the person or
persons exercising the Option. On the date specified in such written
notice, the Company shall accept payment for the Option Shares in cash,
by bank or certified check, by wire transfer, or by such other means as
may be approved by the Committee and shall deliver to the person or
persons exercising the Option in exchange therefor an appropriate
certificate or certificates for fully paid nonassessable Shares or
undertake to deliver certificates within a reasonable period of time.
In the event of any failure to take up and pay for the number of Shares
specified in such written notice on the date set forth therein (or on
the extended date as above provided), the right to exercise the Option
shall terminate with respect to such number of Shares, but shall
continue with respect to the remaining Shares covered by the Option and
not yet acquired pursuant thereto.
The person who exercises the Option shall warrant to the Company that,
at the time of such exercise, such person is acquiring his or her
Option Shares for investment and not with a view to, or for or in
connection with, the distribution of any such Shares, and shall make
such other representations, warranties, acknowledgments, and
affirmations, if any, as the Committee may require. In such event, the
person acquiring such Shares shall be bound by the provisions of an
appropriate legend which shall be endorsed upon the certificate(s)
evidencing his or her Option Shares issued pursuant to such exercise.
The Company may delay issuance of the Shares until completion of any
action or obtaining any consent that the Company deem necessary under
any applicable law (including without limitation state securities or
"blue sky" laws).
6. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof,
may be either previously authorized but unissued shares or issued
shares which have been reacquired by the Company. Such shares shall be
fully paid and nonassessable.
7. RIGHTS OF SHAREHOLDERS. The Participant shall not be, nor have any of
the rights or privileges of, a shareholder of the Company in respect of
any shares purchasable upon the exercise of any part of the Option
unless and until certificates representing such shares shall have been
issued by the Company to the Participant.
8. VESTING AND EXERCISABILITY. A Participant's interest in the Option
shall vest according to the provisions of this Section 8 and shall be
exercisable as to not more than the vested percentage of the shares
subject to the Option at any point in time. To the extent the Option is
either unexercisable or unexercised, the unexercised portion shall
accumulate until the Option both becomes exercisable and is exercised,
subject to the provisions of Section 9 of the Agreement.
The Option shall become vested as follows:
ANNIVERSARY OF DATE OF GRANT VESTED PERCENTAGE OF OPTION
---------------------------- ---------------------------
1 year 33.33%
2 year 66.66%
3 year 100%
<PAGE>
The Committee, in its sole and absolute discretion, may accelerate the vesting
of the Option at any time.
9. DURATION OF OPTION. Except as specified below, the Option shall expire on
January 3, 2010. Notwithstanding the foregoing, the Option may expire prior to
January 3, 2010 in the following circumstances:
a. In the case of the Participant's death, the Option shall
expire on the one-year anniversary of the Participant's death.
b. If the Participant's employment or affiliation with the
Company terminates as a result of his total and permanent
disability, the Option will expire on the one-year anniversary
of the Participant's last day of employment.
c. If the Participant ceases employment or affiliation with the
Company for any reason other than death or disability, the
Option shall expire 90 days following the last day that the
Participant is employed by the Company.
d. Notwithstanding any provisions set forth above in this Section
9, if the Participant shall (i) commit any act of malfeasance
or wrongdoing affecting the Company or its affiliates, (ii)
breach any covenant not to compete or employment agreement
with the Company or any affiliate, or (iii) engage in conduct
that would warrant the Participant's discharge for cause, any
unexercised part of the Option shall expire immediately upon
the earlier of the occurrence of such event or the last day
the Participant is employed by the Company.
10. ADMINISTRATION. The Committee shall have the power to interpret this
Agreement and to adopt such rules for the administration,
interpretation and application of the Agreement as are consistent
herewith and to interpret or revoke any such rules. All actions taken
and all interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Participant, the Company
and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made
in good faith with respect to this Agreement or any similar agreement
to which the Company is a party.
11. TRANSFER OF OPTION. Unless otherwise permitted by applicable laws and
approved in advance by the Committee, the Option shall not be
transferable by the Participant and shall be exercisable, during the
Participant's lifetime, only by such Participant or, in the event of
the Participant's incapacity, his guardian or legal representative.
Except as otherwise permitted herein, the Option shall not be assigned,
pledged, or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or
similar process and any attempted transfer, assignment, pledge,
hypothecation or other disposition of
<PAGE>
the Option or of any rights granted thereunder contrary to the
provisions of this Section 11, or the levy of any attachment or similar
process upon an option or such rights, shall be null and void. This
Section 11 shall not prevent transfers by will or by the applicable
laws of descent and distribution.
12. SHARES TO BE RESERVED. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of stock
as will be sufficient to satisfy the requirements of this Agreement.
13. NOTICES. Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary
and any notice to be given to the Participant shall be addressed to him
at the address given beneath his signature below. By a notice given
pursuant to this Section 13, either party may hereafter designate a
different address for notices to be given to him. Any notice which is
required to be given to the Participant shall, if the Participant is
then deceased, be given to the Participant's personal representative if
such representative has previously informed the Company of his status
and address by written notice under this Section 13. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope
addressed as aforesaid, deposited (with postage prepaid) in a United
States postal receptacle.
14. TITLES. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
15. INCORPORATION OF PLAN BY REFERENCE. The Option is granted in accordance
with the terms and conditions of the Plan, the terms of which are
incorporated herein by reference, and the Agreement shall in all
respects be interpreted in accordance with the Plan. Any term used in
the Agreement that is not otherwise defined in the Agreement shall have
the meaning assigned to it by the Plan.
The Company and the Participant have executed this Agreement effective as of the
date first written above.
TECHNISOURCE, INC.
By:
---------------------------------
Joseph W. Collard
---------------------------------
Thomas Hoshko
EXHIBIT 10.3
TECHNISOURCE, INC.
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (the "Agreement"), effective as of January
3, 2000 (the "Date of Grant"), is made by and between Technisource, Inc., a
Florida corporation (the "Company"), and Thomas Hoshko (the "Participant").
BACKGROUND
The Company has established the Technisource, Inc. Long-Term Incentive Plan (the
"Plan"). The Company wishes to grant to the Participant an Incentive Stock
Option pursuant to the terms of the Plan.
Therefore, in consideration of the mutual covenants contained in this Agreement
and other good and valuable consideration, the Company and the Participant agree
as follows:
1. GRANT OF OPTION. In consideration of service to the Company and for
other good and valuable consideration, the Company grants to the
Participant an Incentive Stock Option (the "Option") to purchase 51,060
shares of the Company's common stock. The Company grants the Option in
accordance with the terms and conditions of the Plan and this
Agreement. The Company and the Recipient intend the Option to be an
"incentive stock option" as such term is defined under Section 422 of
the Internal Revenue Code of 1986, as amended.
2. OPTION PRICE. The purchase price of the shares of stock covered by the
Option shall be $5.875.
3. ADJUSTMENTS IN OPTION. If the outstanding shares of stock subject to
the Option are changed into or exchanged for a different number or kind
of shares of the Company or other securities of the Company by reason
of merger, consolidation, recapitalization, reclassification, stock
split, stock dividend or combination of shares, the shares subject to
the Option and the price per share shall be equitably adjusted to
reflect such changes. Such adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion
of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share. Any such
adjustment made by the Committee shall be final and binding upon the
Participant, the Company and all other interested persons.
4. PERSON ELIGIBLE TO EXERCISE OPTION. During the lifetime of the
Participant, only the Participant may exercise the Option or any
portion of the Option. After the death of the Participant, any
exercisable portion of the Option may, prior to the time when the
Option becomes unexercisable under the terms of the Plan, be exercised
by the Participant's personal representative or by any other person
empowered to do so under the Participant's will, trust or under then
applicable laws of descent and distribution.
<PAGE>
5. MANNER OF EXERCISE. The Option, or any portion of the Option, shall be
exercised only in accordance with the provisions of the Plan and this
Agreement. The person exercising the Option shall give to the Company a
written notice that shall: (i) state the number of Shares with respect
to which the Option is being exercised; and (ii) specify a date (other
than a Saturday, Sunday or legal holiday) not less than five nor more
than ten days after the date of such written notice, as the date on
which the Shares will be purchased. Such tender and conveyance shall
take place at the principal office of the Company during ordinary
business hours, or at such other hour and place agreed upon by the
Company and the person or persons exercising the Option. On the date
specified in such written notice, the Company shall accept payment for
the Option Shares in cash, by bank or certified check, by wire
transfer, or by such other means as may be approved by the Committee
and shall deliver to the person or persons exercising the Option in
exchange therefor an appropriate certificate or certificates for fully
paid nonassessable Shares or undertake to deliver certificates within a
reasonable period of time. In the event of any failure to take up and
pay for the number of Shares specified in such written notice on the
date set forth therein (or on the extended date as above provided), the
right to exercise the Option shall terminate with respect to such
number of Shares, but shall continue with respect to the remaining
Shares covered by the Option and not yet acquired pursuant thereto.
The person who exercises the Option shall warrant to the Company that,
at the time of such exercise, such person is acquiring his or her
Option Shares for investment and not with a view to, or for or in
connection with, the distribution of any such Shares, and shall make
such other representations, warranties, acknowledgments, and
affirmations, if any, as the Committee may require. In such event, the
person acquiring such Shares shall be bound by the provisions of an
appropriate legend which shall be endorsed upon the certificate(s)
evidencing his or her Option Shares issued pursuant to such exercise.
The Company may delay issuance of the Shares until completion of any
action or obtaining any consent that the Company deem necessary under
any applicable law (including without limitation state securities or
"blue sky" laws).
6. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof,
may be either previously authorized but unissued shares or issued
shares which have been reacquired by the Company. Such shares shall be
fully paid and nonassessable.
7. RIGHTS OF SHAREHOLDERS. The Participant shall not be, nor have any of
the rights or privileges of, a shareholder of the Company in respect of
any shares purchasable upon the exercise of any part of the Option
unless and until certificates representing such shares shall have been
issued by the Company to the Participant.
8. VESTING AND EXERCISABILITY. A Participant's interest in the Option
shall vest according to the provisions of this Section 8 and shall be
exercisable as to not more than the vested percentage of the shares
subject to the Option at any point in time. To the extent the Option is
either unexercisable or unexercised, the unexercised portion shall
accumulate until the Option both becomes exercisable and is exercised,
subject to the provisions of Section 9 of the Agreement.
<PAGE>
The Option shall become vested as follows:
ANNIVERSARY OF DATE OF GRANT VESTED PERCENTAGE OF OPTION
---------------------------- ---------------------------
First 33.33%
Second 66.66%
Third 100%
The Committee, in its sole and absolute discretion, may accelerate the vesting
of the Option at any time.
9. DURATION OF OPTION. Except as specified below, the Option shall expire
on January 3, 2010. Notwithstanding the foregoing, the Option may
expire prior to January 3, 2010 in the following circumstances:
a. In the case of the Participant's death, the Option shall
expire on the one-year anniversary of the Participant's death.
b. If the Participant's employment or affiliation with the
Company terminates as a result of his total and permanent
disability, the Option will expire on the one-year anniversary
of the Participant's last day of employment.
c. If the Participant ceases employment or affiliation with the
Company for any reason other than death or disability, the
Option shall expire 90 days following the last day that the
Participant is employed by the Company.
d. Notwithstanding any provisions set forth above in this Section
9, if the Participant shall (i) commit any act of malfeasance
or wrongdoing affecting the Company or its affiliates, (ii)
breach any covenant not to compete or employment agreement
with the Company or any affiliate, or (iii) engage in conduct
that would warrant the Participant's discharge for cause, any
unexercised part of the Option shall expire immediately upon
the earlier of the occurrence of such event or the last day
the Participant is employed by the Company.
10. ADMINISTRATION. The Committee shall have the power to interpret this
Agreement and to adopt such rules for the administration,
interpretation and application of the Agreement as are consistent
herewith and to interpret or revoke any such rules. All actions taken
and all interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Participant, the Company
and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made
in good faith with respect to this Agreement or any similar agreement
to which the Company is a party.
11. TRANSFER OF OPTION. Unless otherwise permitted by applicable laws and
approved in advance by the Committee, the Option shall not be
transferable by the Participant and shall be
<PAGE>
exercisable, during the Participant's lifetime, only by such
Participant or, in the event of the Participant's incapacity, his
guardian or legal representative. Except as otherwise permitted herein,
the Option shall not be assigned, pledged, or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment, or similar process and any attempted transfer,
assignment, pledge, hypothecation or other disposition of the Option or
of any rights granted thereunder contrary to the provisions of this
Section 11, or the levy of any attachment or similar process upon an
option or such rights, shall be null and void. This Section 11 shall
not prevent transfers by will or by the applicable laws of descent and
distribution.
12. SHARES TO BE RESERVED. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of stock
as will be sufficient to satisfy the requirements of this Agreement.
13. NOTICES. Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary
and any notice to be given to the Participant shall be addressed to him
at the address given beneath his signature below. By a notice given
pursuant to this Section 13, either party may hereafter designate a
different address for notices to be given to him. Any notice which is
required to be given to the Participant shall, if the Participant is
then deceased, be given to the Participant's personal representative if
such representative has previously informed the Company of his status
and address by written notice under this Section 13. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope
addressed as aforesaid, deposited (with postage prepaid) in a United
States postal receptacle.
14. TITLES. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
15. INCORPORATION OF PLAN BY REFERENCE. The Option is granted in accordance
with the terms and conditions of the Plan, the terms of which are
incorporated herein by reference, and the Agreement shall in all
respects be interpreted in accordance with the Plan. Any term used in
the Agreement that is not otherwise defined in the Agreement shall have
the meaning assigned to it by the Plan.
The Company and the Participant have executed this Agreement effective as of the
date first written above.
TECHNISOURCE, INC.
By:
--------------------------------
Thomas Hoshko
EXHIBIT 21
NAME OF SUBSIDIARY STATE OF INCORPORATION
------------------ ----------------------
TSRC.net, Inc. Florida
Technisource of Florida, Inc. Florida
TSRC of Florida, Inc. Florida
Technisource Hardware, Inc. Florida
Technisource Midwest, Inc. Florida
DFI Acquisition Corporation Florida
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TECHNISOURCE, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,899,634
<SECURITIES> 0
<RECEIVABLES> 25,516,818
<ALLOWANCES> 825,283
<INVENTORY> 0
<CURRENT-ASSETS> 39,276,596
<PP&E> 5,137,768
<DEPRECIATION> 2,720,637
<TOTAL-ASSETS> 47,331,360
<CURRENT-LIABILITIES> 10,433,614
<BONDS> 0
0
0
<COMMON> 103,850
<OTHER-SE> 36,793,896
<TOTAL-LIABILITY-AND-EQUITY> 47,331,360
<SALES> 31,085,812
<TOTAL-REVENUES> 31,085,812
<CGS> 22,970,418
<TOTAL-COSTS> 22,970,418
<OTHER-EXPENSES> 7,789,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,177
<INCOME-PRETAX> 500,578
<INCOME-TAX> 210,468
<INCOME-CONTINUING> 290,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290,110
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
