<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1999
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
STRIDE & ASSOCIATES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7361 13-3789932
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
222 BERKELEY STREET, SUITE 1620
BOSTON, MASSACHUSETTS 02716
(617) 536-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
MICHAEL C. ROBICHAUD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
STRIDE & ASSOCIATES, INC.
222 BERKELEY STREET, SUITE 1620
BOSTON, MASSACHUSETTS 02116
(617) 536-3800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN J. EGAN III, P.C. PHILIP P. ROSSETTI, ESQ.
KATHLEEN R. BROWNE, ESQ. JOSEPH E. MULLANEY III, ESQ.
GOODWIN, PROCTER & HOAR LLP HALE AND DORR LLP
EXCHANGE PLACE 60 STATE STREET
BOSTON, MASSACHUSETTS 02109-2881 BOSTON, MASSACHUSETTS 02109
(617) 570-1000 (617) 526-6000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share.... 5,002,500 Shares $13.00 $65,032,500 $18,079.04
</TABLE>
(1) Includes 652,500 shares of Common Stock which the underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
The information in this prospectus is not complete and may be changed.
Underwriters may not confirm sales of these securities until the registration
statement filed with the Securities and Exchange Commission becomes effective.
This prospectus is not an offer to sell these securities and it is not
soliciting offers to buy these securities in any state where the offer or sale
is not permitted.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 30, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
UNDERWRITERS MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>
PROSPECTUS
4,350,000 Shares
[LOGO]
Common Stock
This is an initial public offering of common stock by Stride & Associates,
Inc. All of the shares of common stock are being sold by Stride. The estimated
initial public offering price will be between $11.00 and $13.00 per share.
--------------
There is currently no public market for the common stock. We have applied to
have the common stock approved for quotation on the Nasdaq National Market under
the symbol STDA.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- ----------
<S> <C> <C>
Initial public offering price......................................... $ $
Underwriting discounts and commissions................................ $ $
Proceeds to Stride, before expenses................................... $ $
</TABLE>
We have granted the underwriters an option for a period of 30 days to
purchase up to 652,500 additional shares of common stock.
--------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 10.
-------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Hambrecht & Quist BancBoston Robertson Stephens
1999
<PAGE>
[OFFICE AND GROUP MAP]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary................................................................... 4
Risk Factors......................................................................... 10
Forward Looking Statements........................................................... 16
Use of Proceeds...................................................................... 17
Dividend Policy...................................................................... 17
Capitalization....................................................................... 18
Dilution............................................................................. 19
Unaudited Pro Forma Condensed Financial Data......................................... 20
Selected Financial Data.............................................................. 23
Management's Discussion and Analysis of Financial Condition and Results of 25
Operations.........................................................................
Business............................................................................. 35
Management........................................................................... 43
Certain Transactions................................................................. 50
Principal Stockholders............................................................... 53
Description of Indebtedness.......................................................... 55
Description of Capital Stock......................................................... 57
Shares Eligible for Future Sale...................................................... 61
Underwriting......................................................................... 63
Legal Matters........................................................................ 64
Experts.............................................................................. 64
Where You Can Find More Information.................................................. 65
Index to Financial Statements........................................................ F-1
</TABLE>
The information on our Web site is not a part of this prospectus.
STRIDE & ASSOCIATES is a trade name of Stride. The ATLANTIS, BOYLSTON,
MACARTHUR, REMINGTON and STRIDE logos are trademarks of Stride. All other trade
names and trademarks used in this prospectus are the property of their
respective owners.
3
<PAGE>
PROSPECTUS SUMMARY
THIS IS ONLY A SUMMARY AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU
SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION AND OUR FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
STRIDE & ASSOCIATES, INC.
We are a leading provider of placement services for full-time mid-level
information technology professionals. We currently operate 39 practice groups in
15 offices located in seven major metropolitan markets throughout the United
States. To optimize our focus on the rapidly growing market for information
technology professionals, the practice groups in each of our offices generally
specialize in the following three primary areas: Networking and Communications,
Software Development and Implementation, and Management Information Systems. We
employ a highly disciplined and entrepreneurial team-based approach to our
placement operations, which we believe facilitates the placement of qualified
candidates into appropriate job openings. We believe that our team-based process
is a key factor in our ability to hire, develop and retain highly productive
placement counselors. This trained resource base will provide the professional
staff necessary to implement our strategy of rapid growth through the opening of
new offices and the establishment of additional practice groups within existing
offices. We target the rapidly growing market for mid-level information
technology professionals earning between $35,000 and $90,000 per year. We place
candidates on a nonexclusive, contingency basis, receiving fees from employers
based upon a negotiated percentage of a placed candidate's first year salary.
Our total number of placement transactions increased to 2,181 in 1998 from 601
in 1995, with a corresponding increase in total net revenues to $28.8 million in
1998 from $6.6 million in 1995. Our operating margin, before payment of
management fees and other non-recurring charges, was 37.0% for the year ended
December 31, 1998. See "Selected Financial Data."
Businesses increasingly rely on information technology solutions to manage
their operations and information and to enhance their competitiveness. This
increasing reliance has created a strong demand for qualified mid-level
information technology professionals who can maintain and deploy information
technology systems. However, businesses often lack the expertise, resources and
contacts necessary to efficiently identify and attract the information
technology professionals they require. Placement agencies, on the other hand,
are uniquely qualified to fill the growing demand for the limited number of
information technology professionals. Contingency placement firms are
particularly well suited to address the fast-paced immediate demands typical of
the market for information technology professionals. Currently, many of the
contingency firms that focus on the permanent placement of mid-level information
technology professionals are small, owner-operated businesses with annual
revenues of less than $1.0 million.
We believe that we can continue to expand our business across multiple
metropolitan markets by leveraging our fast-paced, transactional business model,
which generates a high volume of placements by relying on a scalable team-based
methodology. Our compensation structure and entrepreneurial culture are designed
to motivate teams of placement counselors to quickly and efficiently process a
high number of placement transactions. Our placement process provides value for
both employers and candidates by rapidly presenting each with a number of
qualified and timely opportunities. The employers served by Stride typically
have included a broad spectrum of business enterprises ranging from start-ups to
Fortune 500 companies.
In recent years, we have rapidly expanded our business, primarily by
establishing new practice groups. Between late 1994 and March 15, 1999, we
established 30 new practice groups in both existing and new offices. We intend
to continue expanding our operations in both existing and new geographic
markets. Our well established operating methodology is designed to develop
experienced placement
4
<PAGE>
counselors who can effectively transition from existing to newly established
practice groups as we expand our operations. This expansion in the past has been
accomplished through relatively modest investments, particularly in connection
with the establishment of new practice groups in existing offices. Our newly
opened offices historically have been able to achieve operating profitability in
less than one year after opening.
Our business objective is to become the leading provider of permanent
placement services for mid-level information technology professionals in the
United States. The key elements of our strategy to achieve this objective are as
follows:
- expand operations with our unique office management approach;
- continue to focus on the rapidly growing market for mid-level information
technology professionals through targeted practice groups;
- maintain our team-based process for placing candidates to ensure the rapid
and effective matching of candidates to appropriate job opportunities;
- foster a fast-paced, performance-driven working environment designed to
identify quickly both job openings and available candidates; and
- motivate our placement counselors by providing a clear, performance-driven
career advancement path.
In June 1998, we effected a leveraged recapitalization of Stride with
investment funds associated with Summit Partners, LLC. As part of the
recapitalization:
- the Summit investors invested $40.0 million to purchase shares of
preferred stock, shares of common stock, warrants to purchase common stock
and subordinated debentures;
- we borrowed $26.0 million in senior bank debt under a senior credit
facility; and
- substantially all of the net proceeds from the recapitalization were used
to redeem shares of common stock held by our founding stockholders for an
aggregate redemption payment of $63.8 million. See "Certain
Transactions--Recapitalization."
Substantially all of the net proceeds of this offering will be used to
redeem the shares of preferred stock and to repay the subordinated debentures
held by the Summit investors and to repay a portion of the senior bank debt. The
Summit investors also will exercise their warrants to purchase common stock in
connection with this offering for an aggregate exercise price of approximately
$3.5 million. Following the completion of this offering, the Summit investors
will own an aggregate of 3,000,010 shares of common stock, or approximately %
of the total outstanding shares of common stock, and our founding stockholders
will own an aggregate of 2,232,560 shares of common stock, or approximately %
of the total outstanding shares of common stock, each on a fully diluted basis.
See "Use of Proceeds" and "Capitalization."
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Stride.................. 4,350,000 shares
Common stock to be outstanding after this
offering...................................... 9,652,348 shares
Use of proceeds................................. We expect to use substantially all of
the net proceeds to repay the
outstanding subordinated debentures and
a portion of the senior bank debt and
to redeem the outstanding preferred
stock. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.......... STDA
</TABLE>
--------------
The number of shares of common stock that will be outstanding after this
offering is an estimate based on the number of shares outstanding as of March
30, 1999. It excludes:
- 293,607 shares of common stock issuable upon exercise of stock options
outstanding as of March 31, 1999, with a weighted average exercise price
of $19.21 per share, of which options to purchase 232,560 shares were then
exercisable, and
- 218,005 shares available for future grant under our stock option plan as
of March 30, 1999.
See "Management--Executive Compensation" and "--1998 Stock Option and Grant
Plan."
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(UNAUDITED)
Listed below is our statement of operations data for the five years ended
December 31, 1998 and our balance sheet data as of December 31, 1998. The data
for the year ended December 31, 1994 reflects the combined operations of our
predecessor entities. Net income per common share and weighted average common
shares outstanding for 1994 have not been presented because that information is
not meaningful. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview." To calculate the "Pro Forma as Adjusted
Statement of Operations Data," we have assumed the following occurred as of
January 1, 1998:
- our June 4, 1998 leveraged recapitalization;
- our conversion of tax status from a subchapter "S" corporation to a
subchapter "C" corporation;
- the conversion of our series A convertible preferred stock into an equal
number of shares of series B redeemable preferred stock and 1,000,000
shares of common stock; and
- the sale of 4,350,000 shares of common stock in the offering at an assumed
initial public offering price of $12 per share, after deducting the
underwriting discounts and estimated offering expenses, and the
application of the net proceeds of the offering to (1) redeem all shares
of our Series B redeemable preferred stock; (2) repay all of our
subordinated debentures; and (3) repay a portion of our senior bank debt.
To calculate the pro forma as adjusted balance sheet data, we have assumed
that each of the above listed events occurred on December 31, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: 1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED
OPERATING DATA)
Net revenues............................................ $ 3,791 $ 6,592 $ 10,614 $ 19,187 $ 28,804
Gross profit............................................ 2,193 3,641 6,872 12,761 18,955
Operating expenses...................................... 993 1,925 2,460 4,655 8,305
Management fees(1)...................................... 435 32 3,719 7,620 2,869
Non-recurring recapitalization costs(2)................. -- -- -- -- 2,239
--------- --------- --------- --------- ---------
Income from operations.................................. 765 1,684 693 486 5,542
Net income.............................................. 760 1,666 732 451 1,859
Preferred stock dividends............................... -- -- -- -- 1,553
--------- --------- --------- --------- ---------
Net income available to common stockholders............. $ 760 $ 1,666 $ 732 $ 451 $ 306
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per common share:
basic............................................... $ 0.33 $ 0.15 $ 0.09 $ 0.07
--------- --------- --------- ---------
--------- --------- --------- ---------
diluted............................................. $ 0.33 $ 0.15 $ 0.09 $ 0.06
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- --------------
(1) Represents management fees paid through the June 4, 1998 leveraged
recapitalization to several entities affiliated with our founding
stockholders in connection with the management of our business. We do not
expect to incur similar management fees in the future. See "Certain
Transactions--Management Fees."
(2) Represents costs associated with the June 4, 1998 leveraged
recapitalization, primarily one-time special compensation bonuses paid to
senior management.
7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (CONTINUED): 1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED
OPERATING DATA)
Weighted average common shares outstanding:
basic...................................................... 5,000 5,000 5,000 4,158
--------- --------- --------- ---------
--------- --------- --------- ---------
diluted.................................................... 5,000 5,000 5,000 4,734
--------- --------- --------- ---------
--------- --------- --------- ---------
Pro forma provision for income taxes(3)...................... $ 326 $ 745 $ 355 $ 270 $ 1,669
Pro forma net income......................................... $ 434 $ 947 $ 400 $ 243 $ 2,125
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income available to common
stockholders............................................... $ 434 $ 947 $ 400 $ 243 $ 610
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
PRO FORMA AS ADJUSTED STATEMENT OF OPERATIONS DATA:
Net revenues................................................. $ 28,804
Income from operations....................................... 10,585
Net income................................................... 5,166
Net income per common share:
basic...................................................... $ 0.54
---------
---------
diluted.................................................... $ 0.54
---------
---------
Weighted average common shares outstanding(4):
basic and diluted.......................................... 9,652
---------
---------
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Number of practice groups at December 31,.................... 9 11 18 20 33
Number of placement transactions............................. 382 601 934 1,582 2,181
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
<S> <C> <C>
PRO FORMA
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Net working capital...................................................................... $ 703 $ 1,168
Total assets............................................................................. 8,348 7,883
Total debt (including current debt)...................................................... 35,200 21,947
Series A convertible preferred stock..................................................... 25,299 --
Common stockholders' equity (deficiency)................................................. $ (55,419) $ (16,867)
</TABLE>
- --------------
(3) From October 7, 1994 until June 4, 1998, we were a subchapter "S"
corporation and, accordingly, federal and state income taxes were paid at
the stockholder level only. Upon consummation of the June 4, 1998 leveraged
recapitalization, we terminated our subchapter "S" corporation status and,
accordingly, became subject to federal and state income taxes. The pro forma
income statement information reflects adjustments to historical net income
as if we had not elected subchapter "S" corporation status for federal and
state income tax purposes.
8
<PAGE>
(4) Pro forma weighted average common shares outstanding assumes that the
following occurred at the beginning of the period indicated:
- the shares of common stock issued and repurchased in connection with the
June 4, 1998 leveraged recapitalization;
- the issuance of 1,000,000 shares of common stock upon the conversion of
the series A convertible preferred stock;
- the issuance of 762,505 shares of common stock upon the exercise of
outstanding warrants; and
- the issuance of 4,350,000 shares of common stock issuable in this
offering.
We were incorporated in Delaware in 1994. Our principal executive offices
are located at 222 Berkeley Street, Suite 1620, Boston, Massachusetts 02116. Our
telephone number is (617) 536-3800.
UNLESS OTHERWISE STATED IN THIS PROSPECTUS, ALL INFORMATION CONTAINED IN
THIS PROSPECTUS ASSUMES NO EXERCISE OF THE OVER-ALLOTMENT OPTION TO PURCHASE UP
TO 652,500 SHARES OF COMMON STOCK GRANTED TO THE UNDERWRITERS AND HAS BEEN
ADJUSTED TO REFLECT A FIVE-FOR-ONE STOCK SPLIT OF THE COMMON STOCK TO BE
EFFECTED AS A DIVIDEND PRIOR TO THE COMPLETION OF THIS OFFERING.
9
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING FACTORS AND ALL OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES
DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE. IF ANY OF THE EVENTS DESCRIBED IN
THE RISK FACTORS BELOW ACTUALLY OCCUR, OUR BUSINESS COULD BE ADVERSELY AFFECTED.
IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD
LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
OUR FAILURE TO IDENTIFY AND PLACE QUALIFIED INFORMATION TECHNOLOGY PROFESSIONALS
WOULD ADVERSELY AFFECT OUR BUSINESS
Because of the specialized nature of the placement market for information
technology professionals, we are highly dependent upon our ability to identify
and successfully place professionals possessing the technical skills and
experience required by employers. If we fail to do so, our business will be
adversely affected. We may have difficulty accessing a sufficient number of
qualified professionals with the skills and experience necessary to meet
evolving market demands because, among other things, these professionals are in
high demand worldwide and are likely to remain a limited resource for the
foreseeable future. This difficulty may become more pronounced as we seek to
expand and may be further complicated by the nature of the information
technology services market, which is characterized by rapid technological
change, evolving industry standards, changing customer preferences and new
product and service introductions.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY INTENSE COMPETITION FOR BOTH
EMPLOYERS AND INFORMATION TECHNOLOGY PROFESSIONALS
The permanent placement industry, particularly firms focused on the
placement of information technology professionals, is extremely competitive, and
there are few, if any, barriers to entry. We compete with national, regional and
local placement firms for access to both hiring employers and candidates. As we
attempt to expand into new geographic markets, we expect to compete with
additional firms. Many of these national and regional firms have greater
financial, technical and marketing resources than we have. Smaller firms are
typically owner-operated, and each market generally has one or more significant
established competitors. We expect increased competition from placement,
staffing and consulting firms which are adopting the Internet to both solicit
hiring employers and candidates, as well as post job openings and candidate
profiles. Currently, hundreds of Web sites offer these services and more can be
expected. We currently do not conduct any material amount of business on the
Internet.
We also compete with providers of non-permanent staffing services and
consulting firms. These competitors offer employers qualified professionals on a
contract basis, often at a fixed price, without the long term commitment of
hiring permanent employees. In addition, we compete directly with employers for
placement candidates who continue to rely on their internal human resource
departments to recruit some, if not all, of the information technology
professionals they require. This is often the case with employers who hire
professionals on an ongoing basis and can justify an investment in developing a
recruiting staff in-house and avoid the direct cost of multiple placement fees
which, at $8,000 to $20,000 per candidate, can be substantial.
Although we have offices in major cities across the United States, we use
multiple operating names. As a result, we do not expect to develop national
brand awareness. This may put us at a competitive disadvantage to regional or
national firms with established identities which are recognizable to employers
and candidates alike.
10
<PAGE>
FLUCTUATIONS IN OUR QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO FALL
Our quarterly operating results have varied in the past and are likely to
vary in the future. It is possible that our revenues and operating results may
be below the expectations of securities analysts and investors in future
quarters. If we fail to meet or surpass the expectations of securities analysts
or investors, the market price of our common stock will most likely fall. This
variability depends on a number of factors, including, but not limited to:
- the timing of new office openings and new practice group additions;
- the length of time required for new offices and groups to become fully
productive and profitable;
- the incurrence of considerable expenses in advance of anticipated revenues
in connection with new office openings;
- the negative impact on the productivity of existing practice groups due to
the transfer of experienced placement counselors to newly established
practice groups;
- any slowdown or other adverse change in the placement market for mid-level
information technology professionals, particularly in industries that
represent a significant portion of our employer customer base;
- any reduction in the level of demand for information technology services
among prospective employers as businesses resolve the "Year 2000"
compliance issue;
- our ability to hire, train and retain personnel;
- any reduction or other adverse change in our placement fee structure or a
decline in the average salary of placed candidates;
- changes in the level of our operating expenses; and
- seasonal fluctuations.
Given that any one or more of these or other factors could have an adverse
effect on our business, the prediction of future quarterly results is difficult
and uncertain. In addition, some of our operating expenses are relatively fixed
in advance of any particular quarter. As a result, we may not be able to reduce
our operating costs in response to unanticipated reductions in our net revenues
or the demand for our services. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE PROCEEDS FROM THIS OFFERING WILL BENEFIT OUR EXISTING STOCKHOLDERS AND WILL
NOT BE AVAILABLE TO FUND WORKING CAPITAL OR CAPITAL EXPENDITURES
Substantially all of the estimated $47.7 million in net proceeds from the
offering will be used for the following purposes:
- to make an aggregate net redemption payment of approximately $32.9 million
on our outstanding preferred stock, plus accrued and unpaid dividends of
approximately $1.6 million at December 31, 1998;
- to repay $10.0 million in principal amount of our outstanding subordinated
debentures, together with accrued and unpaid interest; and
- to repay with any remaining net proceeds a portion, but not less than $2.0
million, of the $25.2 million in principal amount of our senior bank debt,
together with accrued and unpaid interest.
11
<PAGE>
We do not anticipate that any net proceeds from this offering will be
available to fund our working capital or capital expenditure needs. See "Use of
Proceeds" and "Certain Transactions."
WE WILL INCUR NON-RECURRING CHARGES AS A RESULT OF THIS OFFERING
In connection with this offering, we will incur a non-recurring charge
available to common stockholders of approximately $17.8 million, consisting of:
- approximately $16.9 million related to the redemption of the preferred
stock and the related issuance of 1,000,000 shares of common stock; and
- deferred compensation charges, which would equal $882,000 as of March 31,
1999, in connection with the acceleration of vesting of our outstanding
restricted common stock.
See "Use of Proceeds;" "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview;" and "Certain Transactions."
OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED BY ECONOMIC DOWNTURNS
Our results of operations are partially dependent upon general economic
conditions in the United States as well as other factors beyond our control,
including the hiring activity of employers, reductions in hiring budgets and
average salaries. During periods in which overall economic activity slows, our
revenues may fall as a result of a decline in the number of successful
placements or reductions in the amount of our placement fees resulting from a
decline in compensation levels of information technology professionals or the
percentage of this compensation we charge as fees. Therefore, a significant
economic downturn, particularly in regions, or in industries prevalent in those
regions in which our operations are located, could have an adverse effect on our
business. For example, the financial services industry, which has historically
represented a significant portion of our revenues, undergoes periods of
contraction from time to time. In addition, it is possible that the level of
demand for information technology services among prospective employers may
decline.
OUR RAPID GROWTH COULD STRAIN OUR FINANCIAL, MANAGEMENT AND OTHER RESOURCES
Our rapid growth in recent years has placed, and any future expansion will
continue to place, a significant strain on our financial, management and
operational resources. The failure to maintain resources or to hire, train or
manage new personnel could have an adverse effect on our business. Historically,
the successful management of our business has not depended upon sophisticated
management information systems. However, in light of our expansion strategy and
the public company reporting requirements to which we will become subject after
this offering, we will need to continue to improve and expand our management
information systems to network across our company and process financial and
other information on a timely and accurate basis.
OUR FAILURE TO SUCCESSFULLY IMPLEMENT OUR OFFICE EXPANSION STRATEGY COULD
ADVERSELY AFFECT OUR BUSINESS AND THE MARKET PRICE OF OUR COMMON STOCK
We intend to grow our business by expanding existing offices and opening new
offices, both in geographic markets in which we already operate and in new
markets. Our failure to successfully implement our expansion strategy could have
an adverse effect on our business, and the market price of our common stock
would most likely fall. The successful expansion of our existing offices and the
opening of new offices depends on many factors, including our ability to:
- successfully compete with existing placement, staffing and consulting
agencies in existing and new markets;
12
<PAGE>
- attract motivated and productive placement counselors while continuing to
train, develop and promote existing placement counselors;
- minimize the disruption to existing practice groups caused by the transfer
of experienced personnel to new practice groups;
- accurately assess the demand for information technology professionals in
existing and new markets; and
- accurately assess the supply of information technology professionals in
existing and new markets.
When we expand an existing office or open a new office, we incur incremental
capital and operating expenses as a result of the need to purchase additional
office equipment and to hire additional entry-level trainees. As there is always
a delay before a new office reaches full productivity, expenses will exceed
revenues generated by the new office for at least several months, resulting in
initial losses. We may fail to successfully identify new markets for expansion
and to establish new office locations, and new offices may fail to meet growth
and profitability objectives within expected time frames, if at all. Moreover,
we may not be able to identify markets that present sufficient placement
opportunities for expanding or opening new offices.
WE MUST HIRE, DEVELOP AND RETAIN PLACEMENT STAFF TO SUSTAIN FUTURE GROWTH
Our future success will depend in large part upon our ability to attract,
develop and retain highly-motivated and capable placement counselors. The loss
of a significant number of our current placement counselors or an inability to
hire and integrate on an on-going basis a sufficient number of additional
trainees or other employees could have an adverse effect on our business. In
addition, any reduction in our current employee compensation levels or a
restructuring of our compensation system, whether as a result of lower than
expected revenues, declining margins, a decline in the market price of our
common stock or any other reason, could impair our ability to retain our
existing placement staff and attract additional employees. Historically, we have
experienced a turnover rate of approximately 68% among our entry-level trainees.
This historical attrition rate at the trainee level could increase or occur at
higher levels.
OUR SUCCESS IS LARGELY DEPENDENT UPON MR. ROBICHAUD AND OUR SENIOR MANAGEMENT
TEAM
Our success will depend largely on the continued availability of our senior
management team, in particular, upon Michael C. Robichaud, our President and
Chief Executive Officer. The loss of the services of Mr. Robichaud or any of the
other members of Stride's senior management team could have an adverse effect on
our business. We maintain a key man life insurance policy on Mr. Robichaud, but
not on any of our other executive officers or significant employees. We do not
have employment agreements with any members of our senior management team,
except Mr. Robichaud, and the existence of an employment agreement with Mr.
Robichaud does not guarantee his continued employment with us. Although we have
entered into noncompetition agreements with our executive officers, there can be
no assurance that these agreements will be enforceable, and these agreements do
not ensure the continued service of our executive officers.
WE MAY FACE LIABILITY CLAIMS FROM EMPLOYERS AND PLACEMENT CANDIDATES
Our business may expose us to liability with respect to the placement of
candidates with employers. An employer could assert a claim against us for
referring a candidate who proves to be unsuitable for the position filled. A
liability claim, even one without merit, could result in significant legal
defense costs and expenditure of executive time, thereby increasing expenses,
lowering earnings and possibly resulting in operating losses. Any failure in an
employer's computer system which is the result of an act or omission by a
candidate referred by us could result in a claim for substantial damages against
us
13
<PAGE>
regardless of the merit of the claim. We generally do not conduct candidate
reference checks unless requested by a particular employer. In addition, a
candidate could assert an action against us for failure to maintain the
confidentiality of his or her employment search, or for discrimination or other
violations of employment laws by us or an employer with whom the candidate was
placed. Our professional liability insurance may not provide adequate coverage
for any claim or continue to be available on acceptable costs and terms.
FUTURE ACQUISITIONS COULD ADVERSELY AFFECT OUR BUSINESS AND HAVE A DILUTIVE
EFFECT ON OUTSTANDING COMMON STOCK
Although we have no current acquisition plans, we may decide to pursue
acquisitions in the future. Risks associated with acquisitions could have an
adverse effect on our business, including the diversion of management's
attention, the loss of key personnel, legal and tax liabilities and exposure to
the Year 2000 issue. Acquisitions also may involve an increase in our debt or
new issuances of equity securities, which could have a dilutive effect on the
then outstanding shares of common stock. Even if we identified suitable
acquisition candidates, we may fail to negotiate favorable terms or successfully
integrate any proposed acquisition into our existing business operations.
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK
Before this offering, there has been no public market for our common stock.
Although the common stock will be quoted on the Nasdaq National Market, we
cannot offer any assurance that an active trading market for these shares will
exist following this offering, or that purchasers in this offering will be able
to resell their shares at prices equal or greater to the initial public offering
price. The initial public offering price will be determined through negotiations
between us and the underwriters and may not be indicative of the market price
for these shares following this offering. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price.
THE MARKET PRICE OF OUR SHARES OF COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND
VOLUME FLUCTUATIONS
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may adversely affect the market price for our
common stock following the offering, including:
- the demand for our common stock;
- the number of market makers for our common stock;
- investor perception of the professional information technology placement
industry;
- general technology or economic trends;
- revenues and operating results failing to meet or surpass the expectations
of securities analysts or investors in any quarter; and
- changes in securities analysts' estimates or general market conditions.
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources
and have an adverse effect on our business.
14
<PAGE>
OUR EXISTING STOCKHOLDERS WILL CONTROL ALL MATTERS REQUIRING A STOCKHOLDER VOTE
AND, AS A RESULT, COULD PREVENT OR DELAY A CHANGE IN CONTROL
Upon the closing of the offering, our existing directors, officers and
stockholders will beneficially own approximately % of our outstanding common
stock. Control by existing stockholders could have the effect of delaying,
deferring or preventing a change in control because these stockholders will be
in a position to control the outcome of all stockholder votes, including votes
concerning director elections, by-law amendments and possible mergers, corporate
control contests and other significant corporate transactions. See "Principal
Stockholders."
PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT
Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed by
our management. Public stockholders who might desire to participate in such a
transaction may not have an opportunity to do so, and the ability of public
stockholders to change our management could be substantially impeded by these
anti-takeover provisions. We have a staggered board of directors and we have the
right under our charter documents to issue preferred stock without further
stockholder approval, which could adversely affect the holders of our common
stock.
THE ESTIMATED INITIAL PUBLIC OFFERING PRICE IS SIGNIFICANTLY HIGHER THAN THE
BOOK VALUE OF OUR COMMON STOCK
Purchasers of common stock in this offering will experience immediate and
substantial dilution of $10.25 per share in the net tangible book value of the
common stock from the initial public offering price. To the extent outstanding
options or warrants to purchase common stock are exercised, there will be
further dilution to the new investors. See "Dilution."
THE FUTURE SALE OF OUR COMMON STOCK COULD AVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK
Substantial sales of common stock in the public market following this
offering, or the perception that sales could occur, could lower the market price
of the common stock or make it difficult for us to raise additional equity
capital in the future. The shares of common stock which are being sold in this
offering will generally be freely tradeable without restriction, and:
- the remaining 5,302,348 shares of common stock outstanding will be
"restricted securities" as defined in Rule 144 under the Securities Act,
and may be sold in the future without registration under the Securities
Act subject to compliance with the provisions of Rule 144 or any other
applicable exemption under the Securities Act;
- our principal stockholders have registration rights requiring us to
register for sale under the Securities Act up to 5,000,010 shares of
common stock currently outstanding and an additional 232,560 shares of
Common Stock issuable upon exercise of outstanding options; and
- all shares of common stock held by our officers, directors and
stockholders, who hold all of the currently outstanding shares of common
stock, are subject to lock-up agreements and may not be sold for 180 days
after the date of this prospectus.
Hambrecht & Quist LLC may, however, in its sole discretion and at any time
without notice, release all or any portion of the shares subject to these
restrictions.
In addition, as of March 30, 1999, there were 813,950 shares reserved for
issuance under our 1998 Stock Option and Grant Plan, of which 293,607 were then
outstanding. Beginning 180 days after the
15
<PAGE>
date of this prospectus, 232,560 shares issuable upon exercise of vested options
will become eligible for sale.
COVENANTS IN OUR DEBT AGREEMENTS WILL RESTRICT OUR BUSINESS
Our existing senior bank debt agreements, which will remain in effect after
this offering, contain a number of significant covenants. Our senior bank debt
agreements, among other matters, require us to maintain certain leverage, debt
service and current ratios and place restrictions on additional indebtedness and
the payment of dividends. If we are unable to meet our debt service obligations
or comply with these covenants, there will be a default under these agreements.
A default, if not waived, could result in acceleration of our repayment
obligations, which would have an adverse effect on our business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Indebtedness."
WE DO NOT INTEND TO PAY DIVIDENDS
Since June 4, 1998, we have neither declared nor paid any cash dividends on
shares of our common stock. We currently intend to retain our earnings for
future growth and, therefore, do not anticipate paying any dividends in the
foreseeable future. In addition, under the terms of our senior bank debt, we are
prohibited from paying any dividends to our stockholders, other than dividends
payable in shares of common stock.
FORWARD LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere in this prospectus are
"forward-looking statements." These forward-looking statements include, but are
not limited to, statements about our plans, objectives, expectations and
intentions and other statements contained in the prospectus that are not
historical facts. When used in this prospectus, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar
expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements, including our
plans, objectives, expectations and intentions and other factors discussed under
"Risk Factors."
16
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the common stock
will be approximately $47.7 million, at an assumed initial offering price of
$12.00 per share and after deducting the estimated underwriting discounts and
commissions and offering expenses payable by us. If the underwriters'
over-allotment option is exercised in full, we estimate that our net proceeds
will be approximately $55.0 million. We expect to use substantially all of the
net proceeds as follows:
- make a mandatory redemption payment due to a group of investment funds
associated with Summit Partners, LLC with respect to our preferred stock
upon consummation of this offering in an aggregate net amount of
approximately $32.9 million, which represents a gross redemption payment
of approximately $36.5 million less an offset of approximately $3.5
million representing the aggregate exercise price of outstanding warrants
that will be exercised in connection with this offering, plus accrued
dividends on the preferred stock, which amounted to approximately $1.6
million as of December 31, 1998;
- repay $10.0 million in principal amount of the subordinated debentures
owed to the Summit investors, together with any accrued and unpaid
interest, which debt bears interest at a rate of 12.0% annually, is
subject to mandatory repayment upon consummation of this offering and
otherwise matures on August 4, 2003; and
- repay with any remaining amount of net proceeds a portion, but not less
than $2.0 million, of the principal amount of senior bank debt owed in
respect of the senior credit facility with a number of lending
institutions, together with accrued and unpaid interest, which senior bank
debt bears interest at a variable rate, which is currently set at 7.03%
per annum and matures on June 4, 2003.
The proceeds from the senior bank debt and the sale to the Summit investors
of subordinated debentures, together with the proceeds from the sale to the
Summit investors of shares of preferred stock and common stock, were used to
redeem shares of common stock held by our founding stockholders in connection
with the leveraged recapitalization of Stride in June 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Certain Transactions."
DIVIDEND POLICY
Before June 4, 1998, we were a subchapter "S" corporation. While maintaining
such status, we declared and paid an aggregate cash dividend of $929,000 to our
stockholders in June 1998. We terminated our subchapter "S" status in connection
with our recapitalization in June 1998. Since June 4, 1998, we have neither
declared nor paid any dividends on our common stock. Under the terms of the
senior bank debt, we are prohibited from paying any dividends to our
stockholders other than dividends payable in shares of common stock. In
addition, we currently intend to retain our earnings for future growth and,
therefore, do not anticipate paying dividends in the foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
(a) on an actual basis, (b) on a pro forma basis after giving effect to the
conversion of the series A convertible preferred stock into an aggregate of
1,000,000 shares of common stock and an aggregate of 24,802.5 shares of series B
redeemable preferred stock and the exercise of outstanding warrants to purchase
762,505 shares of common stock for an aggregate purchase price of $3.5 million
and (c) on a pro forma basis as adjusted to, in addition, give effect to our
receipt of the estimated net proceeds from the sale of the 4,350,000 shares of
common stock offered hereby at an assumed initial public offering price of
$12.00 per share, after deducting the estimated underwriting discounts and
commissions and offering expenses payable by us and the use of the net proceeds
as described in "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes to those statements
included elsewhere in this prospectus.
The table below excludes: 293,607 shares of common stock issuable upon
exercise of outstanding stock options at a weighted average exercise price of
$19.21 per share and 218,005 additional shares of common stock available for
future grant under our 1998 Stock Option and Grant Plan, in each case as of
December 31, 1998. See "Management--Executive Compensation" and "--1998 Stock
Option and Grant Plan."
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Current portion of term loan................................................ $ 3,577 $ 3,577 $ 3,577
--------- ----------- -----------
Term loan, less current portion............................................. 21,623 21,623 18,370
--------- ----------- -----------
Subordinated debentures..................................................... 10,000 10,000 --
--------- ----------- -----------
Series A convertible preferred stock, $0.01 par value per share: 24,802.5
shares authorized; 24,802.5 shares issued and outstanding, actual; no
shares authorized, issued or outstanding pro forma and pro forma as
adjusted.................................................................. 25,299 -- --
--------- ----------- -----------
Series B redeemable preferred stock, $0.01 par value per share; 24,802.5
shares authorized; no shares issued or outstanding, actual; 24,802.5
shares issued and outstanding, pro forma; no shares authorized, issued or
outstanding pro forma as adjusted......................................... -- 21,099 --
--------- ----------- -----------
Common stockholder's equity (deficiency):
Common stock, $0.01 par value per share; 50,000,000 shares authorized,
3,539,843 shares issued and outstanding actual; 50,000,000 shares
authorized, 5,302,348 shares issued and outstanding on a pro forma basis;
50,000,000 shares authorized, 9,652,348 shares issued and outstanding, pro
forma as adjusted......................................................... 35 53 97
Additional paid-in capital.................................................. 5,718 13,423 44,208(1)
Deferred compensation(2).................................................... (984) (984) --
Note receivable from officer and stockholder................................ (160) (160) (160)
Accumulated deficit......................................................... (60,028) (60,028) (61,012)(3)
--------- ----------- -----------
Total stockholders' equity (deficiency)................................. (55,419) (47,696) (16,867)
--------- ----------- -----------
Total capitalization................................................ $ 5,080 $ 8,603 $ 5,080
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------------
(1) Includes approximately $16.9 million relating to a redemption premium on the
preferred stock which will be paid as a result of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
(2) Upon consummation of this offering, 290,710 shares of restricted common
stock which currently have a three year vesting schedule will accelerate and
become unrestricted. The deferred compensation charge related to these
restricted shares will be recognized as compensation expense upon completion
of this offering.
(3) Includes $984,000 of non-recurring charges to net income available to common
stockholders, consisting of deferred compensation charges related to the
acceleration of the vesting of restricted common stock as a result of this
offering.
18
<PAGE>
DILUTION
As of December 31, 1998, we had a pro forma net deficit in tangible book
value of $47.7 million, or $(9.00) per share, after giving effect to the
conversion of the series A preferred stock and the exercise of the warrant. Pro
forma net deficit in tangible book value per share is equal to our total
tangible assets less total liabilities, divided by the number of shares of
common stock outstanding, after giving effect to the conversion of all
outstanding shares of our series A convertible preferred stock into common stock
and the exercise of the warrant. Without taking into account any other changes
in the deficit in net tangible book value after December 31, 1998, other than to
give effect to our receipt of the estimated net proceeds from the sale of the
4,350,000 shares of common stock offered hereby at an assumed initial public
offering price of $12.00 per share and after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us and
the use of the net proceeds as described in "Use of Proceeds," our pro forma net
tangible book value as of December 31, 1998 would have been $16.9 million, or
($1.75), per share. This represents an immediate increase in pro forma net
tangible book value of $7.25 per share to existing stockholders and an immediate
dilution of $10.25 per share to new investors. If the initial public offering
price is higher or lower than $12.00 per share, the dilution to new stockholders
will be lower or higher, respectively. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 12.00
Pro forma net deficit in tangible book value per share as
of December 31, 1998.................................... $ (9.00)
Increase per share attributable to new investors.......... 7.25
---------
Pro forma net deficit in tangible book value per share after
this offering............................................. (1.75)
---------
Dilution per share to new investors......................... $ 10.25
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1998, the difference between existing stockholders and the new investors with
respect to the number of shares of common stock purchased, the total
consideration paid to Stride and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 5,302,348 54.9% $ 13,096,273 20.0% $ 2.47
New investors....................................... 4,350,000 45.1 52,200,000 80.0 12.00
---------- ----- ------------- -----
Total........................................... 9,652,348 100.0% 65,296,273 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
The foregoing table excludes:
- 293,607 shares of common stock subject to outstanding options as of
December 31, 1998 at a weighted average exercise price of $19.21 per
share;
- 218,005 shares available for future grant under our stock option plan as
of December 31, 1998.
To the extent these options are exercised and the underlying shares are granted,
there will be further dilution to new investors. See "Management" and note 9 of
notes to our financial statements included elsewhere in this prospectus.
19
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA
The following unaudited pro forma condensed financial data has been prepared
by our management from our financial statements and the notes to those
statements included elsewhere in this prospectus. We believe that the accounting
treatment used to prepare the pro forma data provides a reasonable basis on
which to present this unaudited pro forma condensed financial data. The
unaudited pro forma condensed statement of operations for the year ended
December 31, 1998, reflects adjustments as if our leveraged recapitalization in
June 1998 and this offering had occurred on January 1, 1998. The unaudited pro
forma as adjusted condensed balance sheet as of December 31, 1998 gives effect
to the June 1998 recapitalization, this offering and the use of proceeds as
stated in "Use of Proceeds" as if each had occurred on December 31, 1998. The
unaudited pro forma as adjusted condensed statements of operations do not
reflect non-recurring charges of $19.9 million directly related to the June 1998
recapitalization and this offering, consisting of:
- approximately $16.9 million which will be charged against net income
available to common stockholders in connection with the redemption of our
preferred stock and the related issuance of 1,000,000 shares of common
stock as a result of this offering;
- approximately $2.0 million in special non-recurring bonuses paid to senior
management as a result of the June 1998 recapitalization;
- $984,000 of deferred compensation charges which will be expensed in
connection with the acceleration of the vesting of restricted common stock
as a result of this offering; and
- approximately $35,000 of other non-recurring recapitalization costs.
We are providing the unaudited pro forma condensed financial data for
informational purposes only. The pro forma condensed financial data shown below
may not necessarily be indicative of either our financial position or the
results of our operations which would have occurred had the recapitalization and
this offering actually occurred on the dates described above, nor are they
necessarily indicative of the results of operations for any future period. The
unaudited pro forma condensed financial data and accompanying notes should be
read in conjunction with our financial statements and the notes to those
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------------
ADJUSTMENTS ADJUSTMENTS
RELATED TO THE RELATED TO PRO FORMA
ACTUAL RECAPITALIZATION PRO FORMA THIS OFFERING AS ADJUSTED
--------- --------------- ----------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS:
Net revenues............................................. $ 28,804 $ -- $ 28,804 $ -- $ 28,804
Cost of services......................................... 9,849 -- 9,849 -- 9,849
--------- ------- ----------- ------------- -------------
Gross profit............................................. 18,955 -- 18,955 -- 18,955
Operating expenses....................................... 8,305 65(1) 8,370 -- 8,370
Management fees.......................................... 2,869 (2,869)(2) -- -- --
Non-recurring recapitalization costs..................... 2,239 (1,832)(3) 407 (407)(4) --
--------- ------- ----------- ------------- -------------
Income from operations................................... 5,542 4,636 10,178 407 10,585
Other income (expense):
Interest income.......................................... 108 -- 108 -- 108
Interest expense......................................... (1,856) (1,202)(5) (3,058) 1,429(6) (1,629)
--------- ------- ----------- ------------- -------------
Income before provision for income taxes................. 3,794 3,434 7,228 1,836 9,064
Provision for income taxes............................... 1,935 1,173(7) 3,108 790(7) 3,898
--------- ------- ----------- ------------- -------------
Net income............................................... 1,859 2,261 4,120 1,046 5,166
Preferred stock dividends................................ 1,553 1,147(8) 2,700 (2,700)(9) --
--------- ------- ----------- ------------- -------------
Net income available to common stockholders.............. $ 306 $ 1,114 $ 1,420 $ 3,746 $ 5,166
--------- ------- ----------- ------------- -------------
--------- ------- ----------- ------------- -------------
Net income per common share--
basic.................................................. $ 0.07 $ 0.40(10) $ 0.54(10)
--------- ----------- -------------
--------- ----------- -------------
diluted................................................ $ 0.06 $ 0.31(10) $ 0.54(10)
--------- ----------- -------------
--------- ----------- -------------
Pro forma weighted average common shares outstanding--
basic.................................................. 4,158 3,540(11) 9,652(12)
diluted................................................ 4,734 4,540(11) 9,652(12)
</TABLE>
- --------------
(SEE ACCOMPANYING NOTES)
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(1) Represents additional compensation currently payable to Stride's Chief
Executive Officer as required under his employment agreement entered into in
connection with the June 1998 recapitalization, in excess of actual
compensation paid during the respective periods. See "Management--Employment
Agreements and Severance Agreements."
(2) Represents the elimination of management fees paid to entities affiliated
with the founding stockholders of Stride. See "Certain
Transactions--Management Fees."
(3) Represents non-recurring expenses which are directly attributable to the
June 1998 recapitalization as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Special non-recurring bonuses.......................................................... $ (1,967)
Amortization of deferred compensation.................................................. 170
Other non-recurring recapitalization costs............................................. (35)
-------
$ (1,832)
-------
-------
</TABLE>
(4) Represents the elimination of non-recurring expenses with are directly
attributable to the offering as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Amortization of deferred compensation.................................................. $ (407)
-----
-----
</TABLE>
(5) The interest expense adjustment relating to the offering is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Interest expense relating to the bank term loan........................................ $ 679
Interest expense relating to the subordinated debentures............................... 510
Amortization of deferred financing costs relating to borrowings under the term loan.... 13
------
$ 1,202
------
------
</TABLE>
(6) Represents the elimination of interest expense due to the repayment of such
debt with the proceeds of the offering as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
<S> <C>
Elimination of interest expense relating to repayment of approximately $3.3 million of
the term loan........................................................................ $ 229
Elimination of interest expense relating to repayment of subordinated debentures....... 1,200
------
$ 1,429
------
------
</TABLE>
(7) We were a subchapter "S" corporation before closing of the June 1998
recapitalization. The pro forma income statement information reflects
adjustments to historical net income as if we had not elected subchapter "S"
corporation status for federal and state income tax purposes and reflects
the income tax effect of the pro forma adjustments related to the June 1998
recapitalization and offering assuming an effective tax rate of 43%.
(8) Represents dividends accrued on the preferred stock.
(9) Represents the elimination of the dividends accrued on the preferred stock
due to the redemption of the preferred stock in connection with this
offering.
(10) Pro forma net income per common share has been computed by dividing pro
forma net income available to common stockholders by the pro forma weighted
average shares outstanding.
(11) Pro forma weighted average common shares outstanding assumes that the
shares issued and repurchased in connection with the June 1998
recapitalization occurred at the beginning of the period.
(12) Pro forma weighted average shares outstanding assumes that the shares of
common stock issued and repurchased in connection with the June 1998
recapitalization occurred at the beginning of the period and further assumes
the issuance of 1,000,000 shares of common stock upon the conversion of the
series A preferred stock, the issuance of 762,505 shares of common stock
upon the exercise of outstanding warrants and the issuance of 4,350,000
shares of common stock issuable in this offering were outstanding at the
beginning of the period indicated.
21
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
ADJUSTMENTS
RELATED TO
THE PRO FORMA
ACTUAL OFFERING AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET DATA:
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 3,683 $ -- $ 3,683
Accounts receivable, net of allowances for unearned revenue and
doubtful accounts............................................ 2,832 -- 2,832
Prepaid expenses and other current assets...................... 388 -- 388
--------- ----------- -----------
Total current assets........................................... 6,903 -- 6,903
Property, plant and equipment.................................... 838 -- 838
Deferred costs................................................... 465 (465)(1) --
Debt issuance costs.............................................. 142 -- 142
--------- ----------- -----------
Total............................................................ $ 8,348 $ (465) $ 7,883
--------- ----------- -----------
--------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of term loan................................... $ 3,577 $ -- $ 3,577
Accounts payable............................................... 396 -- 396
Accrued expenses and other current liabilities................. 2,152 (465)(1) 1,687
Deferred income taxes.......................................... 75 -- 75
--------- ----------- -----------
Total current liabilities...................................... 6,200 (465) 5,735
Term loan........................................................ 21,623 (3,253)(2) 18,370
Subordinated debentures.......................................... 10,000 (10,000)(2) --
Deferred income taxes............................................ 645 -- 645
--------- ----------- -----------
Total liabilities.............................................. 38,468 (13,718) 24,750
Series A convertible preferred stock............................. 25,299 (25,299)(2) --
Series B redeemable preferred stock.............................. -- -- --
--------- ----------- -----------
Common stockholders' equity (deficiency)
Common stock................................................... 35 62(3) 97
Additional paid-in capital..................................... 5,718 38,490 )(1 44,208
Deferred compensation.......................................... (984) 984(4) --
Note receivable from officer and stockholder................... (160) -- (160)
Accumulated deficit............................................ (60,028) (984)(4) (61,012)
--------- ----------- -----------
Total common stockholders' equity (deficiency)................. $ (55,419) $ 38,552 $ (16,867)
--------- ----------- -----------
Total............................................................ $ 8,348 $ (465) $ 7,883
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ----------------
(1) Represents deferred costs associated with our proposed initial public
offering which will be charged against additional paid-in capital upon the
effective date of the initial public offering.
(2) Represents the application of the net proceeds of this offering to repay the
outstanding subordinated debentures, to repay approximately $3.3 of the
$25.2 million of the principal amount of our outstanding senior bank debt
and to redeem our preferred stock, including a charge against additional
paid-in capital of $16.9 million relating to the redemption premium
associated with our preferred stock.
(3) Represents:
- a $44,000 increase to common stock and an approximate $47.7 million
increase to additional paid-in capital relating to the net proceeds of
this offering;
- a $10,000 increase to common stock and an approximate $4.2 million
increase to additional paid-in capital relating to the issuance of
1,000,000 shares of common stock associated with the conversion of the
series A convertible preferred stock;
- a $8,000 increase to common stock and an approximate $3.5 million increase
to additional paid-in capital relating to the exercise of a warrant to
purchase 762,505 shares of common stock
(4) Represents the amortization of deferred compensation relating to the
acceleration of vesting of restricted common stock as a result of the
offering.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data at December 31, 1994 and for the year
ended December 31, 1994 reflect the operations of the predecessor entities of
Stride and are derived from unaudited financial statements of the predecessor
entities of Stride and the notes to those statements not included in this
prospectus. Net income per common share and weighted average common shares
outstanding for the year ended December 31, 1994 have not been presented because
such information is not meaningful. In the opinion of our management, our
unaudited financial statements have been prepared on the same basis as our
audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, and adjustments necessary to record the
recapitalization discussed in note 1 to our financial statements included
elsewhere in this prospectus, necessary for a fair presentation of our financial
condition and results of operations for such periods. The selected financial
data at December 31, 1995 and 1996 and for the year ended December 31, 1995 have
been derived from our audited financial statements and the notes to those
statements which are not included in this prospectus. The selected financial
data at December 31, 1997 and 1998 and for each of the three years in the period
ended December 31, 1998 have been derived from our audited financial statements
and the notes to those statements included elsewhere in this prospectus. The
selected financial data should be read in conjunction with, and is qualified in
its entirety by, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our audited financial statements and the notes to
those statements and the other financial data included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996 1997
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA
AND SELECTED OPERATING DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................................................................... $ 3,791 $ 6,592 $ 10,614 $ 19,187
Cost of services............................................................... 1,598 2,951 3,742 6,426
--------- --------- --------- ---------
Gross profit................................................................... 2,193 3,641 6,872 12,761
Operating expenses............................................................. 993 1,925 2,460 4,655
Management fees(1)............................................................. 435 32 3,719 7,620
Non-recurring recapitalization costs(2)........................................ -- -- -- --
--------- --------- --------- ---------
Income from operations......................................................... 765 1,684 693 486
Other income (expense):
Interest income................................................................ -- 23 85 38
Interest expense............................................................... (5) (15) (23) (11)
--------- --------- --------- ---------
Income before provision for income taxes....................................... 760 1,692 755 513
Provision for income taxes..................................................... -- 26 23 62
--------- --------- --------- ---------
Net income..................................................................... 760 1,666 732 451
--------- --------- --------- ---------
Preferred stock dividends...................................................... -- -- -- --
--------- --------- --------- ---------
Net income available to common stockholders.................................... $ 760 $ 1,666 $ 732 $ 451
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per common share
basic........................................................................ $ 0.33 $ 0.15 $ 0.09
--------- --------- ---------
--------- --------- ---------
diluted...................................................................... $ 0.33 $ 0.15 $ 0.09
--------- --------- ---------
--------- --------- ---------
Weighted average common shares outstanding
basic........................................................................ 5,000 5,000 5,000
diluted...................................................................... 5,000 5,000 5,000
Pro forma provision for income taxes(3)........................................ $ 326 745 $ 355 $ 270
Pro forma net income........................................................... $ 434 $ 947 $ 400 $ 243
--------- --------- --------- ---------
--------- --------- --------- ---------
Pro forma net income available to common stockholders.......................... $ 434 $ 947 $ 400 $ 243
--------- --------- --------- ---------
--------- --------- --------- ---------
"S" corporation distributions.................................................. $ -- $ -- $ -- $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
SELECTED OPERATING DATA:
Number of practice groups at end of period..................................... 9 11 18 20
Number of placement transactions............................................... 382 601 934 1,582
BALANCE SHEET DATA:
Net working capital............................................................ $ 627 $ 1,482 $ 2,129 $ 2,288
Total assets................................................................... 998 2,072 2,852 3,780
Total debt (including current debt)............................................ 118 90 52 10
Series A convertible preferred stock........................................... -- -- -- --
Common stockholders' equity (deficiency)....................................... $ 749 $ 1,665 $ 2,397 $ 2,848
<CAPTION>
1998
---------
<S> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues................................................................... $ 28,804
Cost of services............................................................... 9,849
---------
Gross profit................................................................... 18,955
Operating expenses............................................................. 8,305
Management fees(1)............................................................. 2,869
Non-recurring recapitalization costs(2)........................................ 2,239
---------
Income from operations......................................................... 5,542
Other income (expense):
Interest income................................................................ 108
Interest expense............................................................... (1,856)
---------
Income before provision for income taxes....................................... 3,794
Provision for income taxes..................................................... 1,935
---------
Net income..................................................................... 1,859
---------
Preferred stock dividends...................................................... 1,553
---------
Net income available to common stockholders.................................... $ 306
---------
---------
Net income per common share
basic........................................................................ $ 0.07
---------
---------
diluted...................................................................... $ 0.06
---------
---------
Weighted average common shares outstanding
basic........................................................................ 4,158
diluted...................................................................... 4,734
Pro forma provision for income taxes(3)........................................ $ 1,669
Pro forma net income........................................................... $ 2,125
---------
---------
Pro forma net income available to common stockholders.......................... $ 610
---------
---------
"S" corporation distributions.................................................. $ 929
---------
---------
SELECTED OPERATING DATA:
Number of practice groups at end of period..................................... 33
Number of placement transactions............................................... 2,181
BALANCE SHEET DATA:
Net working capital............................................................ $ 703
Total assets................................................................... 8,348
Total debt (including current debt)............................................ 35,200
Series A convertible preferred stock........................................... 25,299
Common stockholders' equity (deficiency)....................................... $ (55,419)
</TABLE>
- ------------------
(FOOTNOTES ON NEXT PAGE)
23
<PAGE>
- --------------
(1) Represents management fees paid to entities affiliated with our founders in
connection with the management of our business. In connection with the
recapitalization, we ceased paying management fees. See "Certain
Transactions--Management Fees."
(2) Represents costs associated with the recapitalization, primarily one-time
special compensation bonuses paid to senior management.
(3) Before June 4, 1998, we were a subchapter "S" corporation and, accordingly,
federal and state income taxes were paid at the stockholder level only. Upon
consummation of the June 1998 recapitalization, we terminated our subchapter
"S" corporation status and, accordingly, became subject to federal and state
income taxes. The pro forma income statement information reflects
adjustments to historical net income as if we had not elected subchapter "S"
corporation status for federal and state income tax purposes.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE
NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE CONTAINED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT
ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
We place mid-level information technology professionals on a full-time
permanent basis. We provide placement services on a contingency basis in three
primary areas of focus: Networking and Communications, Software Development and
Implementation, and Management Information Systems. We operate 39 practice
groups of four to five placement counselors each in 15 offices located in seven
major metropolitan markets throughout the United States.
We serve the market segment in which information technology professionals
generally earn salaries between $35,000 and $90,000. Our placement fees
typically range between $8,000 and $20,000. We represent both employers and
candidates on a nonexclusive basis and receive compensation from the employer
through the payment of a contingent fee based on a negotiated percentage of the
candidate's first year compensation. Our placement contracts typically provide a
30-day refundable guarantee under which we refund payment to the employer if the
placed candidate ceases to be employed for any reason at the end of the 30-day
period. We recognize revenue upon a candidate's employment start date, net of a
provision for anticipated refunds based on historical refund rates.
We have experienced 64% annualized compound revenue growth between 1995 and
1998. In 1998, we completed 2,181 placement transactions, as compared to 601
placement transactions in 1995. The principal factor driving this growth has
been the establishment of new practice groups, both in existing and new offices.
Changes in the average annual compensation rate of candidates placed and in the
average contracted placement fee as a percentage of such compensation have
historically not contributed significantly to the rate of growth in net
revenues. Between late 1994 and March 15, 1999, we established 30 new practice
groups, including practice groups in 12 offices opened during this period. In
the four years ended December 31, 1998, net revenues per practice group
increased by 75%, primarily as a result of the maturation of practice groups,
which further contributed to the growth in net revenues. However, as a result of
our method of forming new practice groups with experienced placement
professionals taken from existing practice groups, we anticipate that we will
not experience continued growth in its annualized revenue per practice group but
will rather derive additional revenue principally through the successful
establishment of new practice groups and offices. While we intend to expand
operations by adding practice groups at existing offices, opening new offices in
existing geographic markets and entering new markets, there can be no assurance
that we will be successful in growing in this manner. See "Risk Factors--Our
Rapid Growth Could Strain Our Financial Management and Other Resources;" "--Our
Failure to Successfully Implement Our Office Expansion Strategy Could Adversely
Affect Our Business and the Market Price of Our Common Stock;" and "--Our
Business Could Be Materially Adversely Affected by Economic Downturns."
In general, the least expensive method of opening a new practice group is to
expand the number of practice groups in an existing office from two to three. In
such cases, we incur relatively small capital expenditures and only a modest
investment in working capital. However, the productivity of existing groups may
decline because experienced placement professionals are transferred from
existing practice groups into the newly formed groups. When opening a new
office, we have generally invested less than $250,000 in capital expenditures
and working capital and have incurred operating losses over the first
25
<PAGE>
several months. Typically, we have achieved operating profitability at our newly
opened offices within one year or less of opening the office. As a result of our
growth strategy, we may in the future experience quarterly fluctuations in our
results of operations. See "--Selected Quarterly Data" and "Risk
Factors--Fluctuations in Our Quarterly Results Could Cause the Market Price of
Our Common Stock to Fall."
Our employer customer base has historically been very diversified. No one
customer represented more than five percent of net revenues for the years ended
December 31, 1997 or 1998. We provided placement services to 856 different
employers during the year ended December 31, 1997 and 1,247 different employers
during the year ended December 31, 1998. During these same periods, our ten
largest customers in the aggregate represented less than ten percent of net
revenues. However, our business has historically been concentrated in the
financial services industry, the technology industry and the telecommunications
industry, reflecting our presence in Atlanta, Boston, New York City and several
cities in California. In the years ended December 31, 1997 and 1998, placements
in these three industries collectively represented in excess of 50% of net
revenues and placements for such periods, and financial services and related
industries accounted for a majority of such portions of net revenues and
placements for such periods.
For the years ended December 31, 1997 and 1998, the single largest cost item
was compensation expense, which represented approximately 67% and 69% of total
expenses, respectively, excluding management fees and non-recurring charges. A
substantial portion of compensation expense is commission based and varies
directly with net revenues. Commissions are accrued upon a placed candidate's
start date, but are paid to the placement counselor only upon actual receipt of
payment from the candidate's employer. Cost of services consists of salaries and
commissions of personnel whose day to day activity is providing placement
services in one of our practice groups.
Operating expenses include:
- compensation expense of executive management and administrative personnel;
- facility costs, including rent, office costs, communications, and
depreciation and amortization;
- advertising costs; and
- general and administrative costs.
A substantial portion of our operating expenses are relatively fixed as of the
beginning of any period. As a result, our failure to achieve anticipated
placement transaction volume, particularly from any newly formed groups, would
have a disproportionate impact on the results of operations during any such
period. Our operating expenses as a percentage of net revenues may increase over
time as we open new offices, enhance our information technology infrastructure
and expand our senior management team.
From inception until the time of the leveraged recapitalization in June
1998, we compensated our founding stockholders, the founders, principally
through management fees paid to entities affiliated with the founders. In 1997
and 1998, we paid management fees of approximately $7.6 million and $2.9
million, respectively. At the time of the recapitalization, we ceased making
payments of management fees and entered into an employment agreement with our
Chief Executive Officer, Michael C. Robichaud, under which Mr. Robichaud is paid
an annual base salary of $400,000 and is eligible to receive an annual incentive
bonus in an amount determined annually by the compensation committee of the
board of directors if we meet targets set by the compensation committee for
financial performance for the given year. See "Certain Transactions--Management
Fees;" "Unaudited Pro Forma Condensed Financial Data" and
"Management--Employment Agreements and Severance Arrangement."
26
<PAGE>
The founders commenced their placement business operations in 1989 with the
establishment of an office in Boston. Between 1989 and 1994, the founders
conducted operations through several loosely affiliated predecessor entities
with additional offices in New York and Los Angeles. In January 1995, we
consolidated our operations into one legal entity. While each of the founders
has served Stride and its predecessors in various capacities since 1989, Mr.
Robichaud has been the only founder involved in the day-to-day operations of
Stride since March 1996.
During the period beginning October 7, 1994 through June 3, 1998, we elected
to be treated as a subchapter "S" corporation. During that period, all of our
outstanding common stock was owned by our founding stockholders, who received
substantial management fees for their services. On June 4, 1998, a group of
investment funds affiliated with Summit Partners invested an aggregate of $40.0
million in exchange for the following:
- subordinated debentures in an aggregate principal amount of $10.0 million;
- 24,802.5 shares of series A convertible preferred stock, which, upon
consummation of the offering and the conversion of such shares into an
equal number of shares of series B redeemable preferred stock and
1,000,000 shares of common stock, the investment funds affiliated with
Summit are entitled to receive an aggregate redemption payment of
approximately $36.5 million;
- 1,237,505 shares of common stock; and
- warrants to purchase 762,505 shares of common stock, which will be subject
to mandatory exercise upon consummation of the offering for an aggregate
exercise price of approximately $3.5 million.
In connection with the investment by the investment funds affiliated with
Summit Partners, we also borrowed $26.0 million in senior bank debt. The
proceeds from the investment by the Summit investors and the senior bank debt
were used principally to fund the redemption of approximately 60% of the common
stock owned by the founders for an aggregate redemption price of approximately
$63.8 million. We accounted for the transaction using the Leveraged
Recapitalization accounting convention. As a result of the recapitalization, we
incurred non-recurring recapitalization costs totaling approximately $2.2
million in 1998, consisting principally of one-time bonus awards to senior
management.
Upon consummation of the recapitalization, we terminated our subchapter "S"
corporation election, and, effective June 4, 1998, we became obligated to pay
federal and state income taxes as a subchapter "C" corporation. We currently
estimate our combined effective income tax rate will approximate 43% of taxable
income in 1999.
In connection with the sale of shares of common stock in the offering and
the use of the net proceeds therefrom as described in "Use of Proceeds," we
expect to incur a non-recurring charge to earnings of $17.8 million, consisting
of (a) approximately $16.9 million in connection with the redemption of shares
of the preferred stock and the related issuance of 1,000,000 shares of common
stock and (b) deferred compensation charges, which would equal $882,000 as of
March 31, 1999, related to the acceleration of vesting of restricted common
stock as a result of the offering. See "Use of Proceeds" and "Certain
Transactions."
27
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentages of net revenues represented
by specific items reflected in the statement of operations. The information that
follows should be read in conjunction with our financial statements and the
notes to those statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Net revenues.......................................................................... 100.0% 100.0% 100.0%
Cost of services...................................................................... 35.3 33.5 34.2
--------- --------- ---------
Gross profit.......................................................................... 64.7 66.5 65.8
Operating expenses.................................................................... 23.2 24.3 28.8
Management fees(1).................................................................... 35.0 39.7 10.0
Non-recurring recapitalization costs.................................................. -- -- 7.8
--------- --------- ---------
Income from operations................................................................ 6.5 2.5 19.2
Other income (expense):
Interest income..................................................................... 0.8 0.2 0.4
Interest expense.................................................................... (0.2) 0.0 (6.4)
--------- --------- ---------
Income before provision for income taxes.............................................. 7.1% 2.7% 13.2%
</TABLE>
- --------------
(1) Represents management fees paid to entities affiliated with our founders in
connection with the management of our business. In connection with the
recapitalization, we ceased paying management fees. See "Certain
Transactions--Management Fees."
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NET REVENUES
Net revenues increased by $9.6 million, or 50.1%, to $28.8 million in the
year ended December 31, 1998, from $19.2 million in the year ended December 31,
1997. This increase resulted principally from an increase in the overall number
of placement transactions. Growth in the number of placement transactions
reflected the establishment of 13 new practice groups, increasing the total to
33 as of December 31, 1998, from 20 as of December 31, 1997. Of these additional
practice groups, five were established at existing offices and eight were
established in connection with the opening of three new offices in January 1998.
In addition, the average fee per placement increased by approximately $1,100, or
approximately 9.1%, to approximately $13,200 in the year ended December 31,
1998, from approximately $12,100 in the year ended December 31, 1997,
reflecting, in part, an increase in the average compensation of placed
candidates.
GROSS PROFIT
Gross profit increased by $6.2 million, or 48.5%, to $19.0 million in the
year ended December 31, 1998, from $12.8 million in the year ended December 31,
1997. Gross profit as a percentage of net revenues decreased to 65.8% in the
year ended December 31, 1998, from 66.5% in the year ended December 31, 1997.
The decline in gross profit as a percentage of net revenues reflects the
addition of 13 new practice groups during 1998 and the impact on gross margin
associated with the lower initial productivity of these new practice groups, as
well as the disruption to existing practice groups from the transfer of
experienced placement counselors from existing to new practice groups.
28
<PAGE>
OPERATING EXPENSES
Operating expenses increased by $3.6 million, or 78.4%, to $8.3 million in
the year ended December 31, 1998, from $4.7 million in the year ended December
31, 1997. Operating expenses as a percentage of net revenues increased to 28.8%
in the year ended December 31, 1998, from 24.3% in the year ended December 31,
1997. The increase resulted principally from an increase in compensation
expenses related to the expansion of our executive management team in 1998. To a
lesser degree, the increase also reflects higher advertising and recruiting
costs as a percentage of net revenues.
MANAGEMENT FEES--DISCONTINUED AFTER THE RECAPITALIZATION
Management fees paid decreased by $4.8 million, or 62.3%, to $2.9 million in
the year ended December 31, 1998 from $7.6 million in the year ended December
31, 1997 because we ceased paying management fees in the second quarter of 1998.
The payment of such management fees should not be relied upon as an indication
of future results of operations. See "Unaudited Pro Forma Condensed Financial
Data."
NON-RECURRING RECAPITALIZATION COSTS
Non-recurring recapitalization costs of $2.2 million were incurred in the
year ended December 31, 1998, reflecting primarily one-time bonus awards to
senior management. See note 11 of notes to our financial statements included
elsewhere in this prospectus.
OTHER INCOME--EXPENSE
Interest income increased by $70,000 to $108,000 in the year ended December
31, 1998, from $38,000 in the year ended December 31, 1997. Interest expense
increased to $1.9 million in the year ended December 31, 1998, from $11,000 in
the year ended December 31, 1997. This increase reflected the interest on debt
obligations incurred in connection with the June 1998 recapitalization. See note
1 of notes to our financial statements included elsewhere in this prospectus.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NET REVENUES
Net revenues increased by $8.6 million, or 80.8%, to $19.2 million in the
year ended December 31, 1997 from $10.6 million in the year ended December 31,
1996. This increase resulted principally from an increase in the overall number
of placement transactions. This growth in the number of placement transactions
reflects the addition of two new practice groups in 1997, increasing the total
number of practice groups to 20 as of December 31, 1997, from 18 as of December
31, 1996, and an increase in the productivity of the four practice groups
established in the fourth quarter of 1996. The two practice groups added in 1997
were established in connection with the opening of one new office. The average
productivity of our practice groups also improved in 1997, reflecting the
maturation of three offices opened in 1996. In addition, the average fee per
placement increased by approximately $700, or 6.1%, to approximately $12,100 in
the year ended December 31, 1997, from approximately $11,400 in the year ended
December 31, 1996, reflecting, in part, an increase in the average compensation
of placed candidates.
29
<PAGE>
GROSS PROFIT
Gross profit increased by $5.9 million, or 85.7%, to $12.8 million in the
year ended December 31, 1997, from $6.9 million in the year ended December 31,
1996. Gross profit as percentage of net revenues increased to 66.5% in 1997 from
64.7% in 1996. The increase in gross profit reflects the increased profitability
of two new offices opened in late 1996 and the return to higher profitability of
practice groups from which experienced placement counselors had been transferred
to staff new groups.
OPERATING EXPENSES
Operating expenses increased by $2.2 million, or 89.2%, to $4.7 million in
the year ended December 31, 1997, from $2.5 million in the year ended December
31, 1996. Operating expenses as a percentage of net revenues increased to 24.3%
in the year ended December 31, 1997, from 23.2% in the year ended December 31,
1996. The increase in operating expenses was due primarily to additional hiring
in our finance department, expansion of senior management and increases in
facility costs, including rent, office costs, communications, depreciation and
amortization, advertising costs and general and administrative costs associated
with the opening of new offices.
MANAGEMENT FEES--DISCONTINUED AFTER THE RECAPITALIZATION
Management fees paid increased $3.9 million to $7.6 million in the year
ended December 31, 1997, from $3.7 million in the year ended December 31, 1996.
The payment of such management fees should not be relied upon as an indication
of the results of operations for any future period. See "Unaudited Pro Forma
Condensed Financial Data."
OTHER INCOME--EXPENSE
Interest income decreased by $47,000 to $38,000 in the year ended December
31, 1997, from $85,000 in the year ended December 31, 1996. Interest expense
decreased by $12,000 to $11,000 in the year ended December 31, 1997, from
$23,000 in the year ended December 31, 1996.
SELECTED UNAUDITED HISTORICAL QUARTERLY FINANCIAL DATA
The following table sets forth unaudited quarterly operating results for
each of our last eight quarters, as well as a subset of such data expressed as a
percentage of net revenues for the periods indicated. This information has been
prepared by us on a basis consistent with our audited financial statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the data. These quarterly results are not
necessarily indicative of results of operations for any future period. This
information should be read in conjunction with our financial statements and the
notes to those statements included elsewhere in this prospectus. We have
historically experienced and expect to experience in the future, fluctuations in
quarterly operating results as a result of our growth model, including factors
such as the timing of the opening of new offices and the establishment of new
practice groups, the length of time required for new offices and practice groups
to become fully productive, the adverse impact of the transfer of experienced
employees from existing into new practice groups and economic and competitive
changes impacting the availability of, demand for and compensation levels of
information technology professionals.
30
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1997 1997 1997 1997 1998 1998
----------- ----------- --------------- -------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues................................. $ 4,300 $ 4,554 $ 5,178 $ 5,155 $ 5,879 $ 7,261
----------- ----------- ------- ------- ----------- -----------
Gross profit................................. 2,890 3,158 3,407 3,306 3,798 4,864
Operating expenses........................... 1,091 1,194 1,241 1,129 1,749 2,050
Management fees.............................. 497 1,474 2,402 3,247 1,533 1,336
Nonrecurring recapitalization costs.......... -- -- -- -- -- 2,035
----------- ----------- ------- ------- ----------- -----------
Income (loss) from operations................ $ 1,302 $ 490 $ (236) $ (1,070) $ 516 $ (557)
----------- ----------- ------- ------- ----------- -----------
----------- ----------- ------- ------- ----------- -----------
<CAPTION>
AS A PERCENTAGE OF NET REVENUES
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ------- ------- ----------- -----------
Gross profit................................. 67.2 69.3 65.8 64.1 64.6 67.0
Operating expenses........................... 25.4 26.2 24.0 21.9 29.7 28.2
Management fees.............................. 11.6 32.4 46.4 63.0 26.1 18.4
Nonrecurring recapitalization costs.......... 0.0 0.0 0.0 0.0 0.0 28.0
----------- ----------- ------- ------- ----------- -----------
Income (loss) from operations................ 30.3% 10.8% (4.6)% (20.8 )% 8.8% (7.7)%
----------- ----------- ------- ------- ----------- -----------
----------- ----------- ------- ------- ----------- -----------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
--------------- --------------
<S> <C> <C>
Net revenues................................. $ 7,954 $ 7,710
------- -------
Gross profit................................. 5,270 5,023
Operating expenses........................... 1,984 2,522
Management fees.............................. -- --
Nonrecurring recapitalization costs.......... 102 102
------- -------
Income (loss) from operations................ $ 3,184 $ 2,399
------- -------
------- -------
<S> <C> <C>
Net revenues................................. 100.0% 100.0%
------- -------
Gross profit................................. 66.3 65.1
Operating expenses........................... 24.9 32.7
Management fees.............................. 0.0 0.0
Nonrecurring recapitalization costs.......... 1.3 1.3
------- -------
Income (loss) from operations................ 40.0% 31.1%
------- -------
------- -------
</TABLE>
Operating expenses as a percentage of net revenue as shown in the table above
increased to 32.7% in the quarter ended December 31, 1998 from 24.9% in the
quarter ended September 30, 1998. This increase principally came from the
expense of holiday bonuses and gifts to all of our employees, an increase in
advertising spending and development costs for the creation of our Web site and
official logos. We have in the past experienced seasonal fluctuations in revenue
in the fourth quarter due primarily to the fewer number of business days and the
holiday periods occurring in that quarter.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our business through cash provided by
operations. We had cash and cash equivalents of approximately $3.7 million at
December 31, 1998. We believe that cash generated from operations will be
sufficient to meet our anticipated cash requirements for at least the next 12
months.
The major use of cash generated by operations has been to fund management
fees in the years ended December 31, 1996 and 1997, as well as both management
fees and non-recurring recapitalization costs in the year ended December 31,
1998.
Net cash provided by operating activities in the years ended December 31,
1998, 1997 and 1996 was approximately $4.0 million, $556,000 and $441,000,
respectively. Cash provided by operating activities in the year ended December
31, 1998 was generated primarily by net income, as adjusted primarily by an
increase in depreciation and amortization of $507,000, an increase in the
provision for doubtful accounts receivable of $205,000, an increase in deferred
income taxes of $720,000, an increase in accounts payable of $325,000 and an
increase in accrued expenses of $1.3 million, offset primarily by an increase in
accounts receivable of $678,000 and an increase in prepaid expenses and other
assets of $263,000. Cash from operating activities in the year ended December
31, 1997 was generated primarily by net income as adjusted by an increase in
accrued expenses of $562,000, and offset by an increase in accounts receivable
of $676,000. Cash from operating activities in the year ended December 31, 1996
was generated by net income, offset primarily by an increase in accounts
receivable of $377,000.
Cash used in investing activities for each of the years ended December 31,
1998, 1997 and 1996, was $529,000, $463,000 and $152,000, respectively. Cash
used was primarily for the purchase of property and equipment, and we expect to
continue to invest in fixtures and equipment in the ordinary course of business,
including expenditures in the connection with the opening of new offices and the
upgrading of computer equipment and networking in existing offices.
Cash (used in) provided by financing activities for the years ended December
31, 1998, 1997 and 1996 was ($490,000), $640,000 and ($286,000), respectively.
Cash used in financing activities in the year
31
<PAGE>
ended December 31, 1998 was due primarily to the net recapitalization and
redemption and purchase of the founding stockholders' common stock of
approximately $1.7 million net of direct costs, as offset by an increase in
deferred costs of $465,000, the repayment of principal of $800,000 of senior
debt and the payment of S corporation distributions of $929,000. Cash provided
by financing activities in 1997 was primarily due to the repayment of loans by
the founding stockholders to us. Cash used in financing activities in 1996 was
primarily due to loans made to the founders.
The following table compares operating income, before management fees and
non-recurring recapitalization costs, to the cash flows generated from operating
income before management fees, non-recurring recapitalization costs and
non-operating expenses.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income from operations............................................................ $ 693 $ 486 $ 5,542
Management fees................................................................... 3,719 7,620 2,869
Non-recurring recapitalization costs.............................................. -- -- 2,239
--------- --------- ---------
Operating income--before management fees and non-recurring recapitalization
costs........................................................................... $ 4,412 $ 8,106 $ 10,650
--------- --------- ---------
--------- --------- ---------
Net cash provided by operating activities......................................... $ 441 $ 556 $ 3,966
Add back (deduct):
Management fees................................................................. 3,719 7,620 2,869
Cash paid for special non-recurring bonuses..................................... 1,967
Cash paid for other non-recurring recapitalization costs........................ 35
Interest paid................................................................. 23 11 1,837
Interest income received...................................................... (85) (38) (108)
Income tax paid............................................................... 48 62 1,347
--------- --------- ---------
Cash generated by operating income--before management fees, non-recurring
recapitalization costs and other non-operating expenses......................... $ 4,146 $ 8,211 $ 11,913
--------- --------- ---------
--------- --------- ---------
</TABLE>
In connection with the recapitalization on June 4, 1998, we issued
subordinated debentures in an aggregate principal amount of $10.0 million. In
addition, we borrowed $26.0 million in senior bank debt. The proceeds from the
investment by the Summit investors in the recapitalization and the bank
borrowing were used primarily to fund the redemption of approximately 60% of the
common stock owned by the founding stockholders. We expect to use substantially
all of the net proceeds from the offering to redeem outstanding shares of
preferred stock and repay the subordinated debentures and repay with any
remaining net proceeds a portion, but not less than $2.0 million, of the $25.2
million of senior bank debt. As such, the senior bank debt will remain in place
after the completion of the offering and until the term loan matures and the
revolving debt loan expires on June 4, 2003. See "Risks Factors--We will incur
non-recurring charges as a result of this offering" and "--The proceeds from
this offering will benefit our existing stockholders and will not be available
to the fund working capital or capital expenditures;" "Description of
Indebtedness;" and "Certain Transactions-- Recapitalization."
Management does not expect that the effect of inflation on the average
candidate compensation level and associated average placement fee will be
greater for us than for our competitors.
32
<PAGE>
THE YEAR 2000 ISSUE
INTRODUCTION
The term "Year 2000" issue is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems arise from hardware and software unable
to distinguish dates in the "2000's" from dates in the "1900's" and from other
sources such as the use of special codes and conventions in software that make
use of a date field.
OUR STATE OF READINESS
Being a provider of employment services, we do not furnish any of our
customers with date-sensitive devices or computer based services. Consequently,
we believe that we have no need to make any changes to its business practices in
response to the Year 2000 issue.
We do not rely on electronic interaction with customers or vendors. However,
we utilize in our day-to-day operations software, consisting principally of an
off-the-shelf accounting package and an internally customized billing system
developed in Lotus-Registered Trademark- Notes. This software has run on a
personal computer-based network since 1994 and has been upgraded as needed since
then.
We have undertaken an assessment of our vulnerability to the Year 2000 issue
with respect to our internal software. The assessment is based upon
communications with the software vendors, literature supplied with the software
and preliminary test evaluations of the software. The assessment is expected to
be completed, utilizing our existing resources, and is not expected to have a
material adverse effect on our financial results.
We are aware that some of our systems, such as telephone systems, facsimile
machines, heating and air conditioning systems, security systems and other
non-data processing oriented systems, may include embedded chips which process
dates and date sensitive material. Our failure to identify or remedy any
embedded chips, either on an individual or an aggregate basis, in systems on
which significant business operations depend, such as telephone systems, could
have a material adverse impact on our business.
COST TO ADDRESS OUR YEAR 2000 ISSUES
We are not currently able to estimate the final aggregate cost of addressing
the Year 2000 issue because funds may be required as a result of future
findings. We do not expect such costs to have a material effect on our business.
RISKS PRESENTED BY YEAR 2000 ISSUES
We are still in the process of evaluating potential disruptions or
complications that might result from Year 2000 related problems. We believe that
the results of our assessment to date indicate that our accounting software is
Year 2000 compliant, and based on our preliminary review, that our billing
system is Year 2000 compliant. We intend to continue reviewing the Year 2000
compliance of our billing system. Based on our assessment to date, we believe
that the Year 2000 issue is unlikely to have a material impact on our
operations. It is possible, however, that we may identify business functions in
the future that are specifically at risk of Year 2000 related disruption. The
absence of any such determination at this point represents only our current
status of evaluating potential Year 2000 related problems and facts presently
known to us, and should not be construed to mean that there is no risk of Year
2000 related disruption. Additionally, there can be no assurances that the
systems or software of
33
<PAGE>
third parties on which we rely will be timely made Year 2000 complaint, and we
may be adversely affected by the failure of the systems or software of such a
third party to become Year 2000 compliant. We believe that we have a sufficient
base of third party product and service suppliers so that if any supplier is
unable to deliver products or services due to Year 2000 related problems,
alternate sources will be available and that any supply interruption will not be
material to operations. There can be no assurances, however, that we would be
able to obtain all of our product and service requirements from such alternate
sources on terms comparable with that of its current product and service
suppliers.
OUR CONTINGENCY PLANS
Although we have a contingency plan for some business risks that might
result from Year 2000 related events, there can be no assurance that this plan
will cover all risks, and we will continue to evaluate the need for a more
comprehensive contingency plan for all of our business risks.
34
<PAGE>
BUSINESS
OVERVIEW
We are a leading provider of placement services for full-time mid-level
information technology professionals. To optimize our focus on the rapidly
growing market for information technology professionals, we generally organize
each of our offices into practice groups in the following three primary areas:
Networking and Communications, Software Development and Implementation, and
Management Information Systems. We currently operate 39 practice groups in 15
offices located in seven major metropolitan markets throughout the United
States. We employ a highly disciplined and entrepreneurial team-based approach,
which we believe facilitates the efficient placement of qualified candidates
into appropriate job openings. We believe that our team-based process for
placement operations is a key factor in our ability to hire, develop and retain
highly productive placement counselors. This trained resource base will provide
the professional staff necessary to implement our strategy of rapid growth
through the opening of new offices and the establishment of new practice groups
within existing offices. The total number of placement transactions we completed
increased to 2,181 in 1998 from 601 in 1995, with a corresponding increase in
total net revenues to $28.8 million in 1998 from $6.6 million in 1995. Our
operating margin, before payment of management fees and other non-recurring
charges, was 37.0% for the year ended December 31, 1998. See "Selected Financial
Data" and our financial statements and the notes to those statements included
elsewhere in this prospectus.
INDUSTRY BACKGROUND
Businesses increasingly rely on information technology solutions to manage
their operations and information and to enhance their competitiveness. As
information technology systems have become more cost-effective, easier to use
and more readily available, they have enabled businesses to streamline
operations, increase responsiveness to clients and customers, reduce costs and
improve profitability. As more and more businesses are rapidly adopting
comprehensive information technology solutions, businesses find themselves
compelled to develop, deploy and maintain robust information technology
solutions that connect an increasing number of end-users across multiple
hardware platforms, operating systems, networking and telecommunications
protocols and architectures.
This increasing reliance on information technology systems has created a
growing demand for qualified mid-level information technology professionals who
can deploy and maintain information technology systems. Compounding the demand
for information technology professionals are continuous changes brought about by
technological advancements coupled with a continuing shortage of information
technology professionals skilled in the latest technologies. As a result,
information technology professionals have a broad range of job opportunities
available to them and have become increasingly mobile as they seek out higher
pay, broader experience and faster career advancement. These factors make it
increasingly difficult for businesses to identify, recruit and retain qualified
information technology professionals as quickly as they require. Nearly 190,000
information technology job openings went unfilled in 1997, which increased to
approximately 340,000 unfilled information technology jobs in the first half of
1998, according to the Information Technology Association of America.
Businesses often lack the expertise, resources and contacts necessary to
efficiently identify and attract information technology professionals with the
desired skills and experience. In response to these challenges, many businesses
are turning to placement agencies, professional search firms and information
technology professional service companies to obtain qualified personnel rapidly
and on a cost-effective basis. The increasing use of placement agencies and
professional search firms to satisfy recruiting and hiring requirements also
represents part of an overall trend in business to outsource non-core activities
to reduce costs and increase efficiency. Worldwide executive search industry
revenue
35
<PAGE>
has grown at a 20% compound annual growth rate, from approximately $3.5 billion
in 1993 to approximately $7.3 billion in 1997, according to Kennedy Information,
LLC, a leading industry source.
Placement agencies and professional search firms are particularly well
qualified to meet the growing demand for information technology professionals.
Placement agencies and professional search firms can offer employers not only
industry contacts, but also access to qualified candidates, expertise in
qualifying and judging candidates and experience in understanding skill
requirements for open positions. Those placement agencies that specialize in
particular industries also benefit from their knowledge of current industry
trends, skill requirements and pay scales. Placement agencies and professional
search firms therefore can create an efficient selection process, with the
result that employers can consider several candidates for an open position, and
a candidate can interview with several employers before accepting an offer.
Placement agencies and professional search firms usually operate under
either an exclusive retainer-based model or a non-exclusive contingency-based
model. We believe that retainer-based firms, which are paid regardless of
whether a search is successful, are not particularly well suited to meet the
fast-paced and high turnover market for mid-level information technology
professionals. Retained search firms generally work on searches to fill senior
executive positions with annual compensation of $150,000 or more. These searches
can take a long time to complete and require that the search firm have in-depth
knowledge of the employer, its industry and the particular requirements of the
open position. Moreover, the exclusive nature of its employer relationships
often limit a retained firm's available candidate pool and the job opportunities
that it can offer to candidates. As a result, employers tend to engage search
firms on a retainer basis only for hard-to-fill executive positions.
Contingency-based firms, on the other hand, generally conduct searches on a
non-exclusive basis for positions with annual compensation of less than
$150,000. These firms are paid only upon the successful placement of a
candidate. Contingency-based firms are particularly well suited to handle a high
volume of hiring activity because contingency firms generally do not enter into
exclusive arrangements with employers and are not limited in their ability to
approach potential candidates. Due to the high transaction volume in mid-level
positions, industry-focused contingency firms are generally better able to
rapidly train and develop qualified placement staff, eliminating one of the
constraints to growth in high volume markets, such as the market for mid-level
information technology professionals. We believe that relatively few
contingency-based firms have built nationwide practices, resulting in a highly
fragmented market. While contingency-based firms accounted for almost two-thirds
of the 4,000 search firms which were in business in 1997, the vast majority of
them had revenues below $1.0 million according to Kennedy Information, LLC. As a
result, we believe that a focused contingency-based placement firm can
successfully achieve market penetration across multiple metropolitan markets by
leveraging a proven operating process and a systematic growth methodology.
THE STRIDE SOLUTION
We provide non-exclusive contingency-based placement services targeted
toward mid-level information technology professionals seeking full-time
employment. Our focus on the mid-level information technology market and our
disciplined team-based placement process enables us to quickly and effectively
match candidates with the appropriate skills to available job opportunities and
thereby serve the needs of both hiring employers and placement candidates. The
benefits to employers include our ability to produce for consideration a number
of candidates with the skills required for an employer's particular information
technology needs, frequently within a matter of days. In addition, we believe
that our contingency-based placements are a more cost-effective solution for
employers because they only pay for our services if a candidate is hired and
stays with the employer for at least 30 days. Our process also benefits
candidates by quickly identifying a range of available job opportunities among
multiple employers.
36
<PAGE>
The Networking and Communications practice groups place professionals
capable of providing networking and hardware maintenance support and other
related services. The Software Development and Implementation practice groups
focus on professionals with expertise in software tools development and
proficiency in a wide range of software languages. The Management Information
Systems practice groups place individuals into positions requiring business data
processing and business applications development skills.
Our compensation structure and entrepreneurial culture motivate each of the
practice group's professionals to leverage their combined efforts to process as
many placement transactions as quickly and effectively as possible. We believe
that our team-based placement group process is a key factor in our ability to
hire, develop and retain highly productive placement professionals. We believe
that this trained resource base will provide the professional staff necessary to
implement our strategy of rapid growth through the opening of new offices and
the establishment of new practice groups within existing offices. In addition,
we believe that reproducing our high volume placement strategy in additional
markets will allow us to effectively scale our business. The chart below sets
forth the total number of candidates placed by us and the number of different
employers with which such candidates were placed for the periods presented
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
<S> <C> <C> <C> <C>
1995 1996 1997 1998
----- --------- --------- ---------
Number of Placement Transactions.................................................. 601 934 1,582 2,181
Number of Different Employers Served.............................................. 353 531 856 1,247
</TABLE>
STRATEGY
Our business objective is to become the leading provider of permanent
placement services for mid-level information technology professionals in the
United States. The key elements of our business strategy include:
EXPAND WITH OUR UNIQUE OFFICE MANAGEMENT APPROACH. We intend to expand our
operations aggressively by adding practice groups at existing offices, opening
new offices in existing markets and entering new markets. Stride has
historically formed a new practice group or opened a new office with experienced
placement professionals taken from existing practice groups. Our unique approach
of transitioning experienced employees from existing practice groups to newly
established practice groups is designed to maximize the effectiveness of the new
practice group while minimizing the disruptive impact on existing practice
groups. We believe that this systematic expansion process can reduce both the
costs and risks associated with expanding the number of practice groups and
provide a career path for successful placement counselors. We increased the
number of practice groups to 33 at December 31, 1998 from 18 at December 31,
1996.
SPECIALIZE IN MID-LEVEL INFORMATION TECHNOLOGY MARKET. We believe that the
rapidly growing market for mid-level information technology professionals
affords an extremely attractive opportunity. Mid-level information technology
professionals in the United States have been limited in number and in high
demand, command salaries in a range well-suited for contingency placement and
often seek positions that employers must fill immediately.
MAINTAIN TEAM-BASED PLACEMENT PROCESS. We believe that our team-based
placement process can result in more efficient placements involving fewer
candidate interviews by the hiring companies and the rapid placement of
qualified candidates whose skills match the needs of the employers served by us.
In each office, our placement counselors are organized into two or three
practice groups consisting of one group manager, one senior placement counselor
and two to four placement counselors, including trainees. Practice groups handle
placements as team transactions, with any member of a group initially
identifying either a candidate or hiring company and the team as a whole working
to quickly match
37
<PAGE>
available candidates and job orders. We believe that this team-based process
provides a rigorous and structured mechanism for training and developing
employees and has been a significant factor in our growth as newly trained
employees have advanced to more senior positions in conjunction with the
establishment of new practice groups within existing offices and the opening of
new offices.
FOSTER TRANSACTION-DRIVEN PLACEMENT ENVIRONMENT. The transactional nature
of our business model requires a fast-paced, performance-driven working
environment. Our practice groups are organized to identify job openings rapidly
and to promote the quick evaluation and placement of candidates with the
available openings. Our placement counselors regularly contact the information
technology line managers of employers in the region to determine immediate and
future hiring needs. At the same time, each practice group conducts skill-set
screening interviews on a daily basis with candidates who have responded to our
advertisements or have been referred to us by other information technology
professionals. The combination of the flow of evaluated candidates and the
direct contact with corporate customer information technology line managers with
immediate hiring needs allows a practice group to quickly match available
candidates with relevant skills to new job openings. Nearly all of our
successfully filled job orders are filled within two to three weeks of the
initial contact with the information technology line manager.
PROVIDE PERFORMANCE-BASED CAREER ADVANCEMENT OPPORTUNITIES. To motivate our
employees and attract new trainees, we provide the opportunity for rapid career
advancement and significant increases in compensation. We hire entry-level
placement counselors and provide "hands-on" training on an on-going basis in our
team-based operating environment. Experienced counselors are promoted in
conjunction with the establishment of new practice groups. With each promotion,
a counselor takes on an increased level of responsibility for training junior
counselors and, at the higher levels, responsibility for the business generated
by a practice group, office or district. We believe that our methodology of
hiring and training entry-level employees and providing career growth
opportunities through practice group and office expansion will enable us to grow
while still maintaining the effectiveness and profitability of our existing
practice group operations.
PLACEMENT SERVICES
The mid-level information technology professionals placed by us generally
have two to three years of experience and typically earn annual salaries ranging
from $35,000 to $90,000 a year. We operate on a non-exclusive contingency basis
and receive fees from employers based upon a negotiated percentage of the placed
candidate's first year salary. Our fees are refundable if a candidate does not
remain employed for at least 30 days. Stride currently operates 15 offices
located in seven major metropolitan markets throughout the United States. We
operate more than one office in several markets under various names to maximize
market penetration. Our offices within the same market compete with each other
for qualified candidates and job orders. We believe that this multiple office
strategy has allowed us to target numerous business operations in our markets
and address the preferences of hiring managers to choose candidates from
multiple sources. The following table lists each of our current offices,
together with the name under which it operates and when it was opened.
38
<PAGE>
<TABLE>
<CAPTION>
LOCATION OFFICE NAME QUARTER OPENED
- ----------------------------------- ---------------------------- ------------------------
<S> <C> <C>
Atlanta, GA Atlantis Partners First Quarter 1999
Remington International First Quarter 1997
Boston, MA Atlantis Partners Second Quarter 1996
Remington International Second Quarter 1989
Chicago, IL Remington International First Quarter 1999
Los Angeles, CA The Boylston Group First Quarter 1999
Remington International Fourth Quarter 1996
New York, NY Atlantis Partners First Quarter 1998
The Boylston Group Third Quarter 1993
MacArthur & Associates Fourth Quarter 1994
Remington International Second Quarter 1995
Newport Beach, CA Atlantis Partners First Quarter 1998
MacArthur & Associates First Quarter 1991
San Jose, CA Remington International Fourth Quarter 1996
Stride & Associates First Quarter 1998
</TABLE>
THE PLACEMENT PROCESS. We have developed a proprietary methodology for our
placement operations. Each practice group is responsible for both identifying
job openings and generating a list of qualified mid-level information technology
professionals available for placement. To identify job openings, our counselors
regularly contact information technology line managers who have previously used
our placement services and continually cold-call other employers with potential
requirements for information technology professionals. Our counselors determine
whether the line managers they contact have a budget to hire any information
technology professionals and seek to understand the skill sets required to fill
open positions. At the same time, the counselors communicate with their practice
group to begin reviewing available candidates for any job openings they have
identified. The counselors conclude their calls with employers by establishing
several time slots during which the contacted information technology line
manager will be available to interview candidates. Establishing a time
commitment from the information technology line manager, which is called a
"send-out," is the primary goal for counselors on every call to an employer.
Following calls to information technology line managers, and often even
before a call has concluded, counselors and their teams begin matching existing
candidates with open positions, or "job orders," based on the skill sets and
experience of available candidates and those required for the identified job
orders. We generally do not conduct candidate reference checks unless requested
by a particular employer. Scheduling candidates for send-outs often occurs
within 48 hours of the initial call to the information technology line manager.
Promptly following the initial round of candidate interviews by the information
technology line managers, our counselors call the information technology line
managers to determine which candidates should be scheduled for second interviews
and make the necessary arrangements for those interviews.
We identify qualified information technology professionals both through
advertising and referrals. As part of this process, each practice group
regularly runs print advertisements for a variety of skills, not only based upon
immediate needs but also in anticipation of market requirements in the practice
group's specialized area. Our counselors follow-up with all respondents and are
trained to use such follow-up both to initially assess the candidate's
qualifications and to generate other potential candidate leads as part of the
placement process. We have has historically generated a substantial portion of
our leads on available candidates through referrals from information technology
professionals previously placed by us. To ensure that we have access to the
broadest pool of available candidates, we have not
39
<PAGE>
entered into any agreements restricting our ability to recruit information
technology professionals from any employer.
Our placement counselors interview all candidates before send-outs with
prospective employers. During the interview process, the counselors discuss
career goals, desired income level, income history, background in technology and
previous experience. Our counselors also use the interview process to prepare
the candidate for a successful interview with the hiring manager for a
prospective employer. The counselors provide candidates with available
background information on the prospective employer, as well as the hiring
process, including who has the responsibility for negotiating the salary and
terms of the employment offer. Our placement process is designed to ensure that
individual candidates are quickly matched with appropriate opportunities based
upon their experience, pay requirements and career objectives. After the
candidate's interview with us, the practice group updates its list of available
candidates to reflect the likely level of interest in the candidate. Practice
group team members share job orders and candidates and work together to match
several candidates to a job order and several job orders to a particular
candidate. If a send-out does not result in a prompt placement, the practice
group will seek to place the candidate into other appropriate job opportunities
and to match other qualified candidates if the job order remains unfilled.
OUR GROWTH METHODOLOGY. In recent years, we have grown rapidly by adding
practice groups at existing offices, opening new offices in existing markets and
entering new markets. We continuously evaluate new markets and expansion
opportunities within our existing markets. Although our individual offices act
independently with respect to developing lists of candidates and filling job
orders, we have a set of internal operating methodologies which govern training,
operations and sales.
After selecting the metropolitan area for a new office, which may be in an
existing or new market, we then select the team to open the new office.
Generally, new offices are initially staffed with an office manager, who also
acts as a group manager, another group manager and two senior counselors. These
employees are generally drawn from different practice groups and offices,
mitigating the impact on each office that loses an experienced group manager or
counselor and distributing the opportunity for advancement among several
offices. We believe that the successful transition of employees to date is due,
in part, to our formula for training employees and our disciplined
organizational and operating methodologies. After the initial staff at a new
office has generated several successful placements, we generally expand the
office by fully staffing the two initial practice groups with additional
counselors and adding a third practice group. As each office reaches its
targeted operating level, we generally consider whether the demand for
information technology professionals within that market can support an
additional office or if a new office would be more successful in a geographic
market in which the company does not already have a presence. We believe that
this proprietary approach of adding practice groups and opening new offices can
reduce the costs and risks associated with expansion and provides a clear and
defined career path for successful employees.
MANAGEMENT STRUCTURE, TRAINING AND CAREER ADVANCEMENT
We have a relatively flat management structure, which is intended to provide
direct performance incentives for key managers and to facilitate growth by
developing group managers who can replicate our operating methodologies in new
practice groups and offices. In addition to our executive management team, we
currently have five district managers with responsibility for the Northern
California, Southern California, Boston, Chicago/New York and Atlanta regions.
Each district manager has oversight responsibility for all offices within his or
her region, as well as direct responsibility as an office manager. At the office
level, each office manager is responsible for his or her own practice group and
has oversight of the other two practice groups within the office. Each group
manager is responsible for the counselors and trainees within the practice
group. We believe that our requirement that senior managers bear multiple
responsibilities at the district, office and group levels both minimizes our
40
<PAGE>
compensation costs related to non-revenue generating personnel and provides
opportunities for career progression as managers develop and advance within the
company.
We have developed a proprietary methodology for training new counselors and
replicating our business model. A practice group will generally have a group
manager, one senior placement counselor with about six to twelve months of
experience, one counselor with about three to six months of experience and
typically one or two newly hired trainees. Our offices and operations are
structured both to produce rapid and successful placements and to encourage
employees to assume increasing levels of responsibility.
As counselors demonstrate an ability to generate successful placements and
train new counselors, they are eligible to progress along a clear and defined
career path with the company with successive levels of increased compensation
and responsibility as new offices are opened and existing offices are expanded.
For example, a senior counselor is eligible to transition to the position of
group manager, where he or she will lead a practice group and be responsible for
the development of each team member of that group. Successful group managers are
then eligible to advance to the position of office manager, in which they retain
responsibilities as group managers, but also assume responsibility for the
overall office, including the development of the other group managers in the
office.
We have experienced a turnover rate of approximately 68% at the placement
trainee level, which we believe is largely due to Stride's, or the trainee's,
determination early on that the trainee does not have the skills or interest
necessary to be successful in our fast-paced, entrepreneurial environment.
Historically, employees who progress through the placement trainee and counselor
stages during their first 18 months with the company have generally remained
with us. Historically, substantially all of the individuals who reached the
group manager level have remained with us.
Our compensation structure is designed to reward major contributors and
provide a lucrative opportunity for motivated and productive employees. We
review our placement trainees regularly and provide performance-based salary
increases after the trainee's first two to six months. Trainees, counselors and
senior counselors are generally paid salaries, with no commission-based
compensation. Group managers, office managers and district managers receive
commission-based compensation, which is highly dependent on the individual's
position and the revenues generated by the individual's practice group, office
or district.
EMPLOYERS SERVED BY US
We have historically provided placement services across a broad spectrum of
businesses ranging from start-ups to Fortune 500 companies. The future success
of our business strategy will depend in large part on the ability of our
practice groups to continually identify and solicit job orders from new
employers. We provided placement services to 1,247 different employers for the
year ended December 31, 1998 and 856 different employers during the year ended
December 31, 1997. For these same periods, the ten largest employers we served
represented less than 10% of net revenues. However, our business historically
has been concentrated in specific industries, reflecting our geographic presence
in markets where those industries are prevalent. Therefore, a significant
economic downturn, particularly in regions, or industries prevalent in those
regions, in which our operations are located, could have an adverse effect on
our business. For example, the financial services industry, which has
historically represented a significant portion of our revenues, undergoes a
period of contraction from time to time, prompting financial institutions to
announce layoffs. In addition, it is possible that the level of demand for
information technology services among prospective employers may decline. For
example, as businesses resolve the "Year 2000" issue, demand among prospective
employers for information technology services and information technology
professionals may diminish significantly.
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<PAGE>
COMPETITION
We face significant competition, both for employers looking for solutions to
information technology problems, and for mid-level information technology
professionals looking for improved career opportunities.
We believe that the availability and quality of candidates, the scope of
geographic service and, to a lesser extent, the price of service, are the
principal elements of competition. The availability of qualified mid-level
information technology professionals is a particularly important facet of
competition. To attract employers we emphasize our ability to quickly provide
employers with a choice of several candidates with the applicable skill set, as
well as a guarantee to refund its fee if the placement is not successful for at
least 30 days. To attract qualified candidates, we place emphasis upon our
ability to provide such candidates with a choice of attractive full-time
employment opportunities at competitive compensation levels. We believe that our
ability to compete also depends in part on a number of other competitive factors
outside our control, including the ability of competitors to recruit qualified
candidates. Although to date we have not experienced any significant pricing
pressure from our competitors, there can be no assurance that we will not
experience such pressure in the future.
The permanent placement industry, particularly firms focused on the
placement of information technology professionals, is extremely competitive, and
there are few, if any, barriers to entry. We compete with national, regional and
local placement firms for both employers seeking candidates and information
technology professionals. Many of these national and regional firms have greater
financial, technical and marketing resources than we have. Smaller firms
typically are owner-operated, and each market generally has one or more
significant established competitors. Particularly as we attempt to expand into
new geographic markets, we expect to compete with additional national, regional
and local firms. As a provider of full-time information technology
professionals, we also compete for both employers and information technology
professionals with providers of non-permanent information technology staffing
services and consulting firms. These competitors offer employers qualified
information technology professionals on a contract basis, often at a fixed
price, without the long term commitment of hiring permanent employees. The
information technology staffing and consulting industry is itself intensely
competitive, with multinational, national, regional and local firms aggressively
marketing their services to the same employers targeted by us.
In addition, we compete for candidates directly with employers who continue
to rely on their internal human resource departments to recruit some, if not
all, of the professionals they require. This is often the case with employers
who hire professionals on an ongoing basis and can justify the investment in
developing an experienced recruiting staff in-house and avoid the direct cost of
multiple placement fees which, at $8,000 to $20,000 per candidate, can be
substantial.
We expect increased competition from placement, staffing and consulting
firms which are adopting the Internet to both solicit employers and candidates,
as well as post job openings and candidate profiles. Currently, hundreds of Web
sites offer these services and more can be expected. Although we recently
established our own Web site and are planning to establish additional sites, we
currently do not conduct any material amount of business on the Internet. There
can be no assurance that we will be able to compete successfully against
competitors using the Internet.
Although we have offices in major cities across the United States, we use
multiple operating names. As a result, we do not expect to develop any national
brand awareness. This may put us at a competitive disadvantage to regional or
national firms with established identities which are recognizable to employers
and candidates alike.
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<PAGE>
EMPLOYEES
As of December 31, 1998, we had 172 full-time employees, which included 66
counselors, 33 group managers and 51 trainees. We are not a party to any
collective bargaining agreements covering any of our employees, have never
experienced any material labor disruption and are unaware of any current efforts
or plans to organize our employees. We consider our relationships with our
employees to be good. See "Risk Factors--We Must Hire, Develop and Retain
Placement Staff to Sustain Future Growth" and "--Our Success Is Largely
Dependent Upon Mr. Robichaud and Our Senior Management Team."
FACILITY
We lease each of our 15 office locations. Our leases cover in the aggregate
approximately 41,000 square feet of space, with each office lease covering
approximately 2,700 square feet. We believe that our current facilities are
suitable and adequate for our business and, upon expiration of our leases, we do
not anticipate any significant difficulty in obtaining renewals or alternative
space.
LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages as of December 31,
1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Michael C. Robichaud (1)............................. 34 President, Chief Executive Officer and Director
Anthony J.M. Groves.................................. 42 Chief Financial Officer, Senior Vice
President--Finance and Administration
Glen P. Froio........................................ 28 Senior Vice President--Operations
Bethann G. Gilfeather................................ 28 Senior Vice President--Operations
Rachel C. Burnett.................................... 34 Director
Scott C. Collins (1)(2).............................. 33 Director
John J. Devine....................................... 46 Director
Alan P. Matthews (1)................................. 40 Director
James C. New......................................... 53 Director
Thomas S. Roberts (1)(2)............................. 35 Director
</TABLE>
- --------------
(1) Member of the compensation committee
(2) Member of the audit committee
MICHAEL C. ROBICHAUD co-founded Stride in July 1989 and has served as our
President since January 1995 and our Chief Executive Officer since January 1998.
Mr. Robichaud has served as a director since October 1994. From 1991 to 1995,
Mr. Robichaud served in numerous positions with us, including operations
manager, with responsibility for strategic planning and implementation of
expansion efforts. Before joining us, Mr. Robichaud served as an information
technology recruiter and sales manager for D.C.R., an employee placement
company. Mr. Robichaud is also a stockholder and a director of Bond
Technologies, Inc., an information technology consulting company, and Percussion
Software, Inc., a software development company, each of which is privately owned
and affiliated with our founding stockholders. See "Certain Transactions."
ANTHONY J.M. GROVES joined us in June 1998 and has served as our Chief
Financial Officer and Senior Vice President of Finance and Administration since
then. From November 1997 to June 1998, Mr. Groves was an employee of Percussion
Software, Inc. where he provided consulting services to us and to Bond
Technologies, Inc. Before that, Mr. Groves served in numerous positions with
Cognos Inc., a Canadian software company, between 1988 and November 1997, most
recently as Vice President of Finance and Administration of its U.S. subsidiary.
See "Certain Transactions."
GLEN P. FROIO joined us in August 1992 and has served as Senior Vice
President of Operations since January 1998. Mr. Froio has served in numerous
positions with us, including Group Manager from January 1994 to December 1995,
Office Manager of our Los Angeles office from January 1996 to December 1996 and
District Manager of our California region from January 1997 to December 1997.
BETHANN G. GILFEATHER joined us in September 1991 and has served as Senior
Vice President of Operations since January 1998. Ms. Gilfeather has served in
numerous positions with us, including Group Manager from December 1992 to April
1993, Office Manager at various offices from May 1994 to November 1995 and
District Manager of our New York region from December 1995 to December 1997.
RACHEL C. BURNETT co-founded Stride in July 1989 and has served as a
director since October 1994. Ms. Burnett has been the Chief Operating Officer of
Bond Technologies, Inc. since April 1996. Before joining Bond Technologies,
Inc., Ms. Burnett served in numerous positions with us with responsibility for
strategic planning and implementation of expansion efforts, including
responsibility for the opening
44
<PAGE>
of our Los Angeles MacArthur Associates and New York Boylston Group offices. Ms.
Burnett is also a stockholder and director of Bond Technologies, Inc. and
Percussion Software, Inc. See "Certain Transactions."
SCOTT C. COLLINS has served as a director since June 1998. Mr. Collins has
been employed by Summit Partners, LLC or its predecessors since 1996. Before
joining Summit Partners, Mr. Collins was employed by McKinsey & Company, a
management consulting firm, from 1995 to 1996 and worked as an Assistant U.S.
Attorney from 1992 to 1995. See "Certain Transactions."
JOHN J. DEVINE co-founded Stride in July 1989 and served as President until
January 1995 and as Chief Executive Officer until March 1996. Mr. Devine is also
a founding stockholder and director of Bond Technologies, Inc. and Percussion
Software, Inc. See "Certain Transactions."
ALAN P. MATTHEWS co-founded Stride in July 1989 and has served as Chairman
of our board of directors since October 1994. Mr. Matthews is also a founding
stockholder and director of Bond Technologies, Inc. and Percussion Software,
Inc. Mr. Matthews has been Chief Executive Officer of Bond Technologies, Inc.
since 1987. See "Certain Transactions."
JAMES C. NEW has served as a director of Stride since August 1998. Mr. New
has served as the President, Chief Executive Officer and a director of
AmeriPath, Inc., a physician practice management services company, since
February 1996. Before joining AmeriPath, Inc., Mr. New served as President and
Chief Executive Officer and as a director of RehabClinics, Inc., an outpatient
rehabilitation company, which he formed in 1991. RehabClinics merged with
NovaCare, Inc. in February 1994. Mr. New was President of NovaCare, Inc.'s
Outpatient Division from 1994 to 1996. From 1993 through 1996, Mr. New was the
Chairman of the Acquisition Committee of the board of directors of Pet Practice,
Inc.
THOMAS S. ROBERTS has served as a director of Stride since June 1998. Mr.
Roberts has been associated with Summit Partners, LLC or its predecessor since
1989 and is currently a member of that firm. Mr. Roberts is a director of AMX
Corporation, a manufacturer and marketer of integrated remote control systems,
and is Chairman of the Board of Directors of AmeriPath, Inc. See "Certain
Transactions."
The number of our directors is currently fixed at seven. Following the
completion of this offering, the board of directors will be divided into three
classes, each of whose members will serve for a staggered three-year term. The
board of directors will consist of two Class I directors, Rachel C. Burnett and
Thomas S. Roberts, three Class II directors, Scott C. Collins, John J. Devine
and Alan P. Matthews, and two Class III directors, James C. New and Michael C.
Robichaud. At each annual meeting of stockholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. The terms of the Class I directors, Class II directors
and Class III directors expire upon the election and qualification of successor
directors at the annual meeting of stockholders to be held during the calendar
year 2000, 2001 and 2002, respectively.
Each officer, except the Chief Executive Officer, serves at the discretion
of the board of directors and holds office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. The Chief
Executive Officer serves under his employment agreement with us. See
"--Employment Agreements and Severance Agreements." There are no family
relationships among any of our directors or executive officers.
COMMITTEES OF THE BOARD OF DIRECTORS
The audit committee is responsible for recommending to the board of
directors the engagement of our outside auditors and reviewing our accounting
controls and the results and scope of audits and other services provided by our
auditors. The members of the Audit Committee are Scott C. Collins and Thomas S.
Roberts.
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<PAGE>
Under our 1998 Stock Option and Grant Plan, the board of directors may
designate a committee of two independent directors to administer the 1998 Stock
Option and Grant Plan. No such committee has been appointed and the 1998 Stock
Option and Grant Plan is currently administered by the board of directors.
The compensation committee is responsible for reviewing and approving the
amount and type of consideration to be paid to senior management. The members of
the compensation committee are Scott C. Collins, Alan P. Matthews, Thomas S.
Roberts and Michael C. Robichaud.
The board of directors may establish, from time to time, other committees to
facilitate the management of our business.
DIRECTOR COMPENSATION
James C. New, one of our directors, will be paid a fee of $1,500 for each
meeting of the board of directors attended and be reimbursed for all travel
related expenses in connection with attendance. In addition, Mr. New has been
granted an option to purchase 14,535 shares of common stock at an exercise price
of $13.76 per share. No other current director will receive compensation for
their services as a director. We anticipate that persons who in the future
become directors and are not employees will be offered compensation for their
services substantially similar to that received by Mr. New.
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation that was
paid to our Chief Executive Officer and the other most highly compensated
executive officers whose aggregate compensation exceeded $100,000 in the year
ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
------------------------
ANNUAL COMPENSATION SECURITIES RESTRICTED
----------------------------------- UNDERLYING STOCK
NAME AND PRINCIPAL POSITION SALARY COMMISSION BONUS OPTIONS AWARDS
- ---------------------------------------------------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Michael C. Robichaud (1)............................ $ 317,250 $ -- $ -- 58,140 --
President and Chief Executive Officer
Anthony J.M. Groves (2)............................. 116,667 -- 60,000 46,512 --
Chief Financial Officer, Senior Vice
President--Finance and Administration
Glen P. Froio (3)................................... 200,000 400,000 122,725 -- 41,530
Senior Vice President--Operations
Bethann G. Gilfeather (4)........................... 200,000 400,000 122,725 -- 41,530
Senior Vice President--Operations
</TABLE>
- --------------
(1) Mr. Robichaud became our Chief Executive Officer in January 1998. Mr.
Robichaud's compensation from January 1998 to March 1998 was $69,000.
Beginning in April 1998, Mr. Robichaud was compensated at an annual base
salary rate of $400,000 and is eligible to receive an annual incentive bonus
in an annual amount determined by our compensation committee if we meet
targets set by the compensation committee for financial performance. In
addition to the compensation shown in the table above, an entity affiliated
with Mr. Robichaud was paid $666,667 in management fees by us in 1998. See
"--Employment Agreements and Severance Agreement" and "Certain
Transactions--Management Fees."
(2) Mr. Groves became our Chief Financial Officer in June 1998. Mr. Groves was
employed by Percussion Software, Inc. from November 1997 to June 1998.
During 1998, we paid an aggregate of $31,398 in consulting fees to
Percussion Software, Inc. for services provided to us by Mr. Groves. See
"Certain Transactions."
(3) Mr. Froio became our Senior Vice President of Operations in June 1998.
During 1997, Mr. Froio was District Manager of our California region.
(4) Ms. Gilfeather became our Senior Vice President of Operations in June 1998.
Before becoming Senior Vice President of Operations, Ms. Gilfeather was
District Manager of our New York region.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during 1998 to our Chief Executive Officer and the other most highly compensated
executive officers. The exercise price per share of each option is equal to the
fair market value of the common stock as of the grant date as determined by our
board of directors after consideration of a number of factors, including, but
not limited to:
- our financial performance;
- our status as a private company at the time of grant;
- the minority interests represented by shares underlying options; and
- the price of shares of equity securities sold to or purchased by outside
investors.
The amounts shown as potential realizable value illustrate what might be
realized upon exercise immediately prior to expiration of the option term using
the 5% and 10% appreciation rates established in regulations of the SEC
compounded annually. The options granted to each of Mr. Robichaud and Mr. Groves
have no potential realizable value using an assumed initial public offering
price of $12.00 per share and an assumed 5% or 10% appreciation rate. The
potential realizable value is not intended to predict future appreciation of the
price of our common stock. The values shown do not consider nontransferability,
vesting or termination of the options upon termination of employee's employment
relationship with us.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
INDIVIDUAL GRANTS ANNUAL
------------------------------------------------------ RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION
SECURITIES OPTIONS EXERCISE FOR OPTION
UNDERLYING GRANTED TO PRICE PER TERM
OPTIONS EMPLOYEES IN SHARE EXPIRATION -----------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%
- ------------------------------------------------------ ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Michael C. Robichaud.................................. 58,140 19.8% 20.64 6/04/03 --
Anthony J.M. Groves................................... 46,512 15.8% 13.76 7/14/03 --
Glen P. Froio......................................... -- -- -- -- --
Bethann G. Gilfeather................................. -- -- -- -- --
<CAPTION>
NAME 10%
- ------------------------------------------------------ -----------
<S> <C>
Michael C. Robichaud.................................. --
Anthony J.M. Groves................................... --
Glen P. Froio......................................... --
Bethann G. Gilfeather................................. --
</TABLE>
Mr. Robichaud's options are fully vested and exercisable as of the date of
grant until the expiration date. These options were granted on June 4, 1998.
Mr. Groves' options vest 33 1/3% on April 30, 2000 and 8.333% on each fiscal
quarter end thereafter. These options were granted on July 14, 1998. Vesting of
these options is subject to the continuation of such employee's employment
relationship with us.
OPTIONS EXERCISES AND YEAR-END HOLDINGS. The following table sets forth
information concerning the number and value of unexercised options to purchase
common stock held by our Chief Executive Officer and the other most highly
compensated executive officers. The Chief Executive Officer and the named
executive officers did not exercise any stock options during 1998. There was no
public trading market for our common stock as of December 31, 1998. Accordingly,
the values of the unexercised in-the-money options have been calculated on the
basis of an assumed initial public offering price of $12.00 per share, less the
applicable exercise price.
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<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Neither our Chief Executive Officer nor the named executive officers
exercised any stock option during the fiscal year ended December 31, 1998. The
following table sets forth certain information regarding stock options held as
of December 31, 1998 by our Chief Executive Officer and by the named executive
officers. The "Value of Unexercised In-the-Money Options at December 31, 1998"
is based upon a value of $12.00 per share, the estimated initial public offering
price, minus the per share exercise price, multiplied by the number of shares
underlying the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 AT DECEMBER 31, 1998
-------------------------- ----------------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- --------------- -----------------
Michael C. Robichaud...................................... 58,140 -- -- --
Anthony J.M. Groves....................................... -- 46,512 -- --
Glen P. Froio............................................. -- -- -- --
Bethann G. Gilfeather..................................... -- -- -- --
</TABLE>
EMPLOYEE BENEFIT PLANS
1998 STOCK OPTION AND GRANT PLAN. Our board of directors and stockholders
adopted the 1998 Stock Option and Grant Plan in June 1998, which was amended and
restated in November 1998. The 1998 Stock Option and Grant Plan permits us to:
- grant incentive stock options;
- grant non-qualified stock options; and
- issue or sell common stock with vesting or other restrictions, or without
restrictions.
These grants may be made to our officers, employees, directors, consultants,
advisors and other key persons of Stride. The 1998 Stock Option and Grant Plan
allows for the issuance of 813,950 shares of common stock.
Of the shares reserved for issuance under the 1998 Stock Option and Grant
Plan:
- 232,560 shares are subject to outstanding options granted on June 4, 1998
to our founding stockholders, Rachel C. Burnett, John J. Devine, Alan P.
Matthews and Michael C. Robichaud, with an exercise price of $20.64 per
share. These options were fully vested and exercisable as of the date of
grant;
- an additional 46,512 shares are subject to outstanding options granted to
Anthony J.M. Groves, our Chief Financial Officer, on July 14, 1998, with
an exercise price of $13.76 per share of which 15,504 shares will vest on
April 30, 2000 and an additional 3,876 shares will vest at the end of each
fiscal quarter thereafter;
- an additional 14,535 shares are subject to options granted to James C.
New, director, on August 11, 1998 with an exercise price of $13.76 per
share of which 3,631.25 shares will vest on August 11, 1999 and an
additional 908.4375 will vest at the end of each fiscal quarter
thereafter;
- an additional 290,710 shares were granted on June 4, 1998 to several of
our key employees as restricted common stock awards, all of which shares
will vest upon the closing of the offering; and
- an additional 11,628 shares were sold on June 23, 1998 to Mr. Groves as
restricted common stock awards for an aggregate purchase price of
$160,001, all of which shares will vest on April 30, 1999.
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<PAGE>
The 1998 Stock Option and Grant Plan is administered by the board of
directors or a committee designated by the board of directors consisting solely
of two or more independent directors. Subject to the provisions of the 1998
Stock Option and Grant Plan, the committee may select the individuals eligible
to receive awards, determine the terms and conditions of the awards granted,
accelerate the vesting schedule of any award and generally administer and
interpret the plan.
The exercise price of options granted under the 1998 Stock Option and Grant
Plan is determined by the committee. Under present law, incentive stock options
and options intended to qualify as performance-based compensation under Section
162(m) of the Internal Revenue Code of 1986 may not be granted at an exercise
price less than the fair market value of the common stock on the date of grant,
or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the voting power.
Non-qualified stock options may be granted at prices which are less than the
fair market value of the underlying shares on the date granted. Options are
typically subject to vesting schedules, terminate ten years from the date of
grant and may be exercised for specified periods after to the termination of the
optionee's employment or other service relationship with us. Upon the exercise
of options, the option exercise price must be paid in full either in cash or by
certified or bank check or other instrument acceptable to the committee or, in
the sole discretion of the committee, by delivery of shares of common stock that
have been owned by the optionee free of restrictions for at least six months.
The exercise price may also be delivered to us (a) by the optionee in the form
of a promissory note if the loan of such funds to the optionee has been
authorized by the board of directors and the optionee pays so much of the
exercise price as represents the par value of the common stock acquired in a
form other than a promissory note and (b) by a broker under irrevocable
instructions to the broker selling the underlying shares from the optionee.
In the event of a merger, reorganization or consolidation, the sale of all
or substantially all of our assets or all of our outstanding capital stock or a
liquidation or other similar transaction, 50% of any outstanding awards, issued
under the 1998 Stock Option and Grant Plan that are not then vested will become
fully vested and exercisable upon the closing of the transaction. The 1998 Stock
Option and Grant Plan and all awards issued under the plan will terminate upon
any of the transactions described above, unless Stride and the other parties to
such transactions have agreed otherwise. All participants under the 1998 Stock
Option and Grant Plan will be permitted to exercise for a period of 15 days
before any such termination all awards held by them which are then exercisable
or will become exercisable upon the closing of the transaction.
EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENT
Under an employment agreement dated June 4, 1998, we agreed to employ
Michael C. Robichaud as our President and Chief Executive Officer. The
employment agreement also provides that Mr. Robichaud will be nominated to serve
as a director during the term of the employment agreement. Under the terms of
the employment agreement, Mr. Robichaud will receive an annual base salary of
$400,000 and will be eligible to receive an annual incentive bonus in an amount
determined annually by the compensation committee of the board of directors if
we meet targets set by the compensation committee for financial performance. We
also agreed to provide Mr. Robichaud, under certain circumstances, 12 months of
base salary continuation and continuation of hospital, health and insurance
benefits upon termination of Mr. Robichaud's employment.
In connection with our June 1998 leveraged recapitalization, we entered into
Non-Solicitation, Non-Competition and Non-Disclosure Agreements with Rachel C.
Burnett, John J. Devine, Alan P. Matthews and Michael C. Robichaud. Each of the
agreements provides that the individual will not engage in competitive
activities before the later of (a) May 31, 2003 and (b) the first anniversary of
the termination of the individual's employment with us. Each of the agreements
also places restrictions on the individual during the same period with respect
to solicitation of our clients or employees and restrictions for an unlimited
period with respect to disclosure of confidential information. We also
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<PAGE>
entered into typical non-solicitation, non-competition and confidentiality
agreements with substantially all of our employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Before June 1998, we did not have a compensation committee or similar
committee of the board of directors. In June 1998, the compensation committee of
the board of directors consisting of Michael C. Robichaud, Scott C. Collins,
Alan P. Matthews and Thomas S. Roberts was established. Before the establishment
of the compensation committee, Michael C. Robichaud, Rachel C. Burnett and John
J. Devine and Alan P. Matthews each participated in deliberations of our board
of directors concerning executive officer compensation. Each of Messrs.
Robichaud, Devine and Matthews and Ms. Burnett also serve on the board of
directors of Bond Technologies, Inc. and Percussion Software, Inc. and has
participated in deliberations of the board of directors of each company
concerning executive compensation. For information regarding transactions and
relationships between Stride and Messrs. Robichaud, Devine and Matthews and Ms.
Burnett, see "--Employment Agreements and Severance Agreement" and "Certain
Transactions."
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CERTAIN TRANSACTIONS
RECAPITALIZATION
On June 4, 1998, we underwent a leveraged recapitalization. The proceeds of
the recapitalization were used primarily to redeem 60% of the outstanding common
stock then held by our founding stockholders, Rachel C. Burnett, John J. Devine,
Alan P. Matthews and Michael C. Robichaud. As part of the recapitalization, a
group of investment funds associated with Summit Partners, LLC acquired shares
of series A convertible preferred stock, shares of common stock, warrants to
purchase additional shares of common stock and subordinated debentures, each as
described in more detail below. Immediately before the closing of the offering,
the Summit investors will convert their shares of series A convertible preferred
stock into 1,000,000 shares of common stock and 24,802.5 shares of series B
redeemable preferred stock. Approximately $32.9 million of the net proceeds of
the offering will be used to make a net redemption payment on the the shares of
series B redeemable preferred stock, and $10.0 million of the net proceeds of
the offering will be used to repay the outstanding subordinated debentures.
Following the closing of the offering, the Summit investors will own an
aggregate of 3,000,010 shares of common stock, or % of the total shares of
common stock outstanding, and our founding stockholders will own an aggregate of
2,000,000 shares of common stock, or 2,232,560 shares of common stock assuming
the exercise by the founders of outstanding options to purchase 232,560 shares
of common stock, or % of the total outstanding shares of common stock, or %
assuming the exercise by the founders of outstanding options to purchase 232,560
shares of common stock. The terms of the recapitalization are shown in more
detail below.
- The Summit investors invested $40.0 million in our business to acquire:
-- 24,802.5 shares of series A convertible preferred stock, which shares
are convertible in connection with the offering into 1,000,000 shares of
common stock and 24,802.5 shares of series B redeemable preferred stock;
-- warrants to purchase 762,505 shares of common stock with an exercise
price of $4.62 per share;
-- 1,237,505 shares of common stock; and
-- $10.0 million in subordinated debentures which bear interest at a rate
of 12.0% annually.
In connection with the offering, the Summit investors will convert their
shares of series A convertible preferred stock into 24,802.5 shares of
series B redeemable preferred stock and 1,000,000 shares of common stock,
and we will redeem all of the series B redeemable preferred stock for an
aggregate redemption price of approximately $36.5 million, together with
accrued dividends of approximately $1.6 million as of December 31, 1998, and
we will repay the outstanding subordinated debentures, which would otherwise
mature as of August 4, 2003, for an aggregate repayment of $10.0 million. In
addition, the Summit investors will exercise their warrants for an aggregate
exercise price of approximately $3.5 million.
- We borrowed $26.0 million in senior bank debt from BankBoston, N.A., an
affiliate of BancBoston Robertson Stephens, which bears interest at a
variable rate and matures on June 4, 2003. As of December 31, 1998, the
interest rate was approximately 7.03% annually. In connection with the
offering, we will repay with any remaining net proceeds a portion, but not
less than $2.0 million, of the $25.2 in principal of the senior bank debt.
- We redeemed shares of common stock held by each of our founding
stockholders, representing an aggregate of approximately 60% of the
outstanding common stock held by each of them, for a price of
approximately $15.9 million each and an aggregate price of approximately
$63.8 million;
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- The parties to the recapitalization entered into a Registration Rights
Agreement under which the Summit investors and the founding stockholders
each received rights to require us in certain circumstances and subject to
certain limitations (a) to file a registration statement with the SEC
covering the shares of common stock held by such stockholders and (b) to
register shares of common stock held by such stockholders in a
registration statement being filed by Stride to register other securities
for sale to the public.
- The parties to the recapitalization entered into a Shareholders' Agreement
under which the Summit investors and the founding stockholders were
granted rights regarding proposed sales or other transfers of shares of
common stock and future issuances of securities proposed by us. The
parties to the Shareholders' Agreement also agreed to vote their shares of
common stock in favor of individuals nominated by each of the founding
stockholders and the Summit investors for election as directors. All of
our current directors were nominated for and elected to their positions as
provided under the Shareholders' Agreement. Effective upon and subject to
the closing of the offering, the Shareholders' Agreement will terminate
under its original terms.
MANAGEMENT FEES
In connection with the management of our business from its founding until
June 1998, we paid management fees to entities affiliated with our founding
stockholders. The payment of such management fees ceased upon the closing of the
recapitalization in June 1998. In the years ended December 31, 1994, 1995, 1996,
1997 and 1998, we paid the following management fees:
- on behalf of Rachel C. Burnett, $666,667 in 1998, $1,866,980 in 1997 and
$897,887 in 1996;
- on behalf of John J. Devine, $668,005 in 1998, $1,931,172 in 1997,
$944,435 in 1996 and $217,727 in 1994;
- on behalf of Alan P. Matthews, $868,005 in 1998, $1,942,050 in 1997,
$979,069 in 1996, $31,703 in 1995 and $217,727 in 1994;
- on behalf of Michael C. Robichaud, $666,667 in 1998, $1,866,980 in 1997
and $897,887 in 1996.
REORGANIZATION
In January 1995, we purchased several corporations owned by Messrs. Devine,
Matthews and Robichaud and Ms. Burnett. On January 1, 1995, we purchased:
- N.Y. Futures, Inc., a New York corporation, for consideration of $101,385,
consisting of $14,496 in cash and the assumption of capital leases by the
company;
- LA Futures, Inc., a California corporation, for consideration of $17,197;
and
- Mass. Futures, Inc., a Massachusetts corporation, for consideration of
$46,480, consisting of $12,660 in cash and the assumption of capital
leases.
RESTRICTED STOCK GRANTS
In June 1998, we sold 11,628 shares of restricted common stock to Anthony J.
M. Groves, our Chief Financial Officer, under the 1998 Stock Option and Grant
Plan for an aggregate purchase price of $160,001. In connection with the sale,
we loaned Mr. Groves $160,001. The loan to Mr. Groves matures as of July 14,
2002, bears interest at the rate of 6% annually, is required to be prepaid to
the extent of the after-tax net proceeds realized from the sale of the
restricted common stock as such stock is sold and is secured by a pledge of the
stock, with recourse to Mr. Groves' personal assets limited to 25% of the
principal and accrued and unpaid interest thereon.
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PLACEMENT SERVICES
In the regular course of business, we provide placement services to Bond
Technologies, Inc., an information technology consulting firm, and Percussion
Software, Inc., a software development company, each of which is affiliated with
our founding stockholders. We receive fees for such services which we believe
are comparable to fees we receive from unaffiliated third parties.
PROPERTY LEASES
Our Remington Boston and Atlantis New York offices are situated in office
space sublet from Bond Technologies, Inc., a majority interest of which is owned
collectively by our founding stockholders. Remington Boston currently occupies
all of the office space covered by the Bond Technologies, Inc. master lease for
the Boston office space, and we pay the full amount due under such lease.
Atlantis New York currently occupies a portion of the office space covered by
the Bond Technologies, Inc. master lease for the New York office space, and we
pay a pro-rata portion of the full amount due under such lease.
SERVICES OF CHIEF FINANCIAL OFFICER
From November 1997 to June 1998, Anthony J.M. Groves, our Chief Financial
Officer, was employed by Percussion Software, Inc. During that period, Mr.
Groves provided consulting services to us and to Bond Technologies, Inc. Stride
and Bond Technologies, Inc. together paid to Percussion Software, Inc.
consulting fees in an aggregate amount of approximately $62,000 for such
services, $31,398 of which was paid solely by Stride.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of common stock as of December 31, 1998 and as adjusted to reflect the
sale of the common stock offered hereby, by (a) all persons known by us to own
beneficially 5% or more of the common stock, (b) each of our directors, (c) the
Chief Executive Officer and each of the other named executive officers and (d)
all directors and named executive officers as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares of common stock beneficially owned by such stockholder.
The address of the Summit Partners Group is 600 Atlantic Avenue, Boston, MA
02210. The address of Messrs. Collins and Roberts is c/o Summit Partners, LLC,
600 Atlantic Avenue, Boston, MA 02210. The address of all other listed
stockholders is c/o Stride & Associates, Inc., 222 Berkeley Street, Suite 1620,
Boston, MA 02116.
The number of shares beneficially owned by each stockholder is determined
under rules issued by the SEC. The information is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and any shares as to which the
individual or entity has the right to acquire beneficial ownership within 60
days after December 31, 1998 through the exercise of any stock option or other
right. As of December 31, 1998, a total of 5,534,908 shares of common stock were
either outstanding or subject options, warrants or other convertible securities
that are exercisable or that will become exercisable within 60 days of the
estimated effective date of this offering. The inclusion in this prospectus of
such shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner of such shares. In the
event that the overallotment option is exercised in full, the aggregate number
of outstanding shares of common stock would be 10,304,848. The applicable
percentage of "beneficial ownership" after this offering is based upon 3,539,843
shares of common stock outstanding at December 31, 1998. The number of shares of
common stock shown in this prospectus includes 24,802.5 shares of series A
convertible preferred stock on an a converted basis, which will be converted
into an aggregate of 1,000,000 shares of common stock and 24,802.5 shares of
series B redeemable preferred stock upon completion of this offering.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE OF SHARES BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNERS OWNED BEFORE THE OFFERING AFTER THE OFFERING
- -------------------------------------------------------- -------------- --------------------- -------------------------
<S> <C> <C> <C>
Summit Partners Group (1)............................... 3,000,010 56.6% %
Thomas S. Roberts (2)................................... 3,000,010 56.6
Rachel C. Burnett (3)................................... 558,140 12.1
John J. Devine (3)...................................... 558,140 12.1
Alan P. Matthews (3).................................... 558,140 12.1
Michael C. Robichaud (3)................................ 558,140 12.1
Glen P. Froio (4)....................................... 41,530 * *
Bethann G. Gilfeather (5)............................... 41,530 * *
Anthony J.M. Groves (6)................................. 11,628 * *
Scott C. Collins (7).................................... 3,904 * *
James C. New (8)........................................ 0 * 0
All executive officers and directors as a group (10
persons)(9)........................................... 5,327,258 96.2
</TABLE>
- --------------
* Less than 1%
(1) Represents:
- 1,372,128.1495 shares of common stock owned by Summit Ventures IV, L.P.;
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- 1,175,557.80 shares of common stock owned by Summit Ventures V, L.P.;
- 196,570.3285 shares of common stock owned by Summit V Companion Fund,
L.P.;
- 123,800.0 shares of common stock owned by Summit Subordinated Debt Fund
II, L.P.;
- 78,629.2685 shares of common stock owned by Summit V Advisors Fund (QP),
L.P.;
- 29,294.1790 shares of common stock owned by Summit Investors III, L.P.;
and
- 24,030.2745 shares of common stock owned by Summit V Advisors Fund, L.P.
Summit Ventures IV, L.P., Summit Ventures V, L.P., Summit V Companion Fund,
L.P., Summit Subordinated Debt Fund II, L.P., Summit V Advisors Fund (QP),
L.P., Summit Investors III, L.P. and Summit V Advisors Fund, L.P. are part
of an affiliated group of investment partnerships referred to, collectively,
as the Summit Partners Group. Mr. Roberts, one of our directors, is a
general partner of Stamps, Woodsum & Co., IV, which is the ultimate general
partner of Summit Ventures IV, L.P., a member of Summit Partners, LLC, which
is the ultimate general partner of each of Summit Ventures V, L.P., Summit V
Companion Fund, L.P., Summit V Advisors Fund (QP), L.P. and Summit V
Advisors Fund, L.P. and a member of Summit Partner SD II, LLC, which is the
general partner of Summit Subordinated Debt Fund II, L.P.
(2) Represents shares described in note (1) above. Mr. Roberts, one of our
directors is a member of Summit Partners, LLC and is a member or general
partner of affiliates of Summit Partners, LLC, and, as such, has the power
to vote or direct the vote of and to dispose of or direct the disposition of
the shares owned by the Summit Partners Group. Mr. Roberts disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
(3) Includes 58,140 shares of common stock which may be acquired upon exercise
of stock options that are currently exercisable.
(4) Represents shares of restricted common stock held by Mr. Froio all of which
shares will be vested upon the completion of this offering.
(5) Represents shares of restricted common stock held by Ms. Gilfeather all of
which shares will be vested upon the completion of this offering.
(6) Represents shares of restricted common stock held by Mr. Groves of which no
shares will be vested upon the completion of this offering. All of such
shares of restricted common stock will vest on April 30, 1999. Excludes
46,512 shares of common stock which may be acquired upon exercise of
unvested stock options, of which 15,504 shares vest on April 30, 2000 and an
additional 3,878 vest at the end of each fiscal quarter beginning June 30,
2000 and ending March 31, 2002.
(7) Represents shares of common stock owned by Summit Investors III, L.P. in
which Mr. Collins holds a pecuniary interest.
(8) Excludes 14,535 shares of common stock which may be acquired upon exercise
of unvested stock options, of which 3,631.25 vest on August 11, 1999 and an
additional 908.4375 vest at the end of each fiscal quarter beginning
September 30, 1999 and ending June 30, 2002.
(9) Represents 5,327,258 shares held of record by current executive officers and
directors as a group and 207,650 shares subject to options or warrants
exercisable within 60 days of December 31, 1998 held by current executive
officers and directors as a group.
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DESCRIPTION OF INDEBTEDNESS
Our senior bank debt with BankBoston, N.A. and several other lending
institutions will remain in place following the completion of the offering. The
following is a summary of the material terms of the senior bank debt. Although
the material provisions have been accurately summarized, statements concerning
the provisions of any documents are not necessarily complete, and in each
instance you should refer to the form of the relevant document to be filed as an
exhibit to the registration statement. Each statement below is qualified in its
entirety by such reference.
SENIOR BANK DEBT
As of December 31, 1998, as part of our senior bank debt, we had $25.2
million outstanding under a term loan and $2.0 million available under a
revolving credit facility. The term loan matures on June 4, 2003, and the
revolving credit facility commitment terminates June 4, 2003. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The senior bank debt is secured, with limited exceptions, by a perfected
first priority security interest in all our assets owned today and all assets we
acquire in the future. We have agreed to pledge as additional collateral all
assets owned by any subsidiaries which we may form or acquire in the future, and
we have agreed to cause any future subsidiaries to guarantee all outstanding
amounts.
Interest accrues on each base rate loan made under the revolving credit
facility at a rate equal to the higher of the interest rate established by
BankBoston, N.A. as its base rate or 0.5% above the federal funds effective
rate, plus the applicable margin.
Interest accrues on each LIBOR rate loan made under the revolving credit
facility at a rate equal to the rate determined by BankBoston, N.A. at which
dollar deposits for the applicable interest period are offered based on
information presented on Telerate Page 3750 as of 11:00 a.m. London time on the
second LIBOR business day before the first day of the applicable interest
period, divided by a number equal to 1.00 minus the eurocurrency reserve rate
determined under the loan documents.
Interest accrues on borrowings under the term loan, at our option, at either
of the following rates:
- to the extent that all or any portion of the term loan bears interest
during the applicable interest period at the base rate, the loan will bear
interest at the base rate, plus the applicable margin; or
- to the extent that all or any portion of the term loan bears interest
during the applicable interest period at the LIBOR rate, the loan will
bear interest at the LIBOR rate, plus the applicable margin.
The senior bank debt agreements impose a number of affirmative covenants on
us, including, without limitation, obligations to:
- deliver to the lenders financial statements and other periodic reports;
- provide the lenders notice of defaults, litigation, material events,
claims against collateral and judgments;
- afford the lenders access to our business for inspection purposes;
- pay all taxes or other assessments when due;
- comply with applicable laws and contracts;
- maintain our corporate existence and maintain our properties in good
repair; and
- maintain adequate and suitable insurance for our industry.
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The senior bank debt agreements also impose on us a number of negative
covenants, including, without limitation, restrictions on:
- incurring indebtedness;
- incurring liens on assets;
- making investments, except for permitted investments such as government
obligations and deposit accounts;
- making dividend or distribution payments on any class of our capital
stock;
- making any payments to affiliates;
- entering into mergers and acquisitions and dissolution transactions;
- entering into sale leaseback transactions;
- changing lines of business; and
- entering into transactions with affiliates.
We are required under the senior bank debt to meet financial covenants,
consisting of (a) a maximum leverage ratio, (b) a minimum debt service coverage
ratio and (c) a minimum current ratio of consolidated current assets to
consolidate current liabilities.
The senior bank debt agreements specify events of default, including,
without limitation:
- non-payment of principal when due or interest, fees or other amounts after
a three-day grace period;
- breach of any other agreement in the senior bank debt agreements not cured
within 30 days of notice of the breach;
- default under other agreements governing indebtedness;
- material breach of any representation or warranty in the agreements;
- events of bankruptcy or insolvency;
- failure of the lenders' security interest to be perfected or to have first
priority;
- failure to satisfy material ERISA requirements;
- any reduction of the ownership of the Summit investors below 25% of the
outstanding common stock; and
- any liquidity event.
We also entered into an interest rate collar agreement for the term loan,
with a notional amount of $13.0 million, to reduce our exposure to market risks
from changes in interest rates. The collar expires on August 4, 2000. See note 5
of notes to our financial statements included elsewhere in this prospectus.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
There are 3,539,843 shares of common stock and 24,802.5 shares of series A
convertible preferred stock issued and outstanding. In connection with and
subject to the closing of the offering, the Summit investors will convert all of
the outstanding shares of series A convertible preferred stock into an aggregate
of 1,000,000 shares of common stock and 24,802.5 shares of series B redeemable
preferred stock. Under the terms of the series B redeemable preferred stock,
upon the closing of the offering all of the outstanding shares of series B
redeemable preferred stock will be redeemed by us for an aggregate of
approximately $36.5 million, together with accrued dividends of approximately
$1.6 million as of December 31, 1998. At the same time, the holders of the
outstanding warrants will exercise the warrants for 780,005 shares of common
stock for an aggregate exercise price of approximately $3.5 million.
Following the offering, our authorized capital stock will consist of
50,000,000 shares of common stock of which 9,652,348 will be issued and
outstanding; and 5,000,000 shares of undesignated preferred stock issuable in
one or more series designated by the board of directors, of which no shares will
be issued and outstanding.
COMMON STOCK
VOTING RIGHTS
The holders of common stock have one vote per share. Holders of common stock
are not entitled to vote cumulatively for the election of directors. Generally,
all matters to be voted on by stockholders must be approved by a majority, or,
in the case of election of directors, by a plurality, of the votes entitled to
be cast at a meeting at which a quorum is present by all shares of common stock
present in person or represented by proxy, voting together as a single class,
subject to any voting rights granted to holders of any then outstanding
preferred stock. Except as otherwise provided by law, amendments to our
certificate of incorporation, which will be effective upon consummation of the
offering must be approved by a majority of the voting power of the common stock.
DIVIDENDS
Holders of common stock will share ratably in any dividends declared by the
board of directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock.
OTHER RIGHTS
In the event of any merger or consolidation of Stride with or into another
company as a result of which shares of common stock are converted into or
exchangeable for shares of stock, other securities or property, including cash,
all holders of common stock will be entitled to receive the same kind and
amount, on a per share of common stock basis, of such shares of stock and other
securities and property, including cash. On liquidation, dissolution or winding
up of Stride, all holders of common stock are entitled to share ratably in any
assets available for distribution to holders of shares of common stock. No
shares of common stock are subject to redemption or have preemptive rights to
purchase additional shares of common stock.
Following the offering, all the outstanding shares of common stock will be
legally issued, fully paid and nonassessable.
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PREFERRED STOCK
Our certificate of incorporation provides that shares of preferred stock may
be issued from time to time in one or more series. Our board of directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. The board of directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects. We have no present plans to issue any shares of preferred
stock. The ability of the board of directors to issue preferred stock without
stockholder approval could have the effect of delaying, deferring or preventing
a change of control of Stride or the removal of existing management.
REGISTRATION RIGHTS
Under the terms of the Registration Rights Agreement entered into for the
June 1998 leveraged recapitalization, after the date of the recapitalization,
any of the Summit investors and our founding stockholders, who in the aggregate
hold twenty-five percent of the shares of common stock held by all of them, may
demand that we file a registration statement for the registration of at least
fifteen percent of their shares under the Securities Act. We are not required to
effect more than a total of four of these demand registrations.
After the closing of the offering, those stockholders also will be entitled
to piggyback registration rights in connection with any registration by us of
securities for our own account or the account of other stockholders. If we
propose to register any shares of common stock under the Securities Act, we are
required to give those stockholders notice of the registration and to include
their shares in the registration statement. At any time after we become eligible
to file a registration statement on Form S-3, these stockholders may require us
to file an unlimited number of registration statements on Form S-3 under the
Securities Act with respect to their shares of common stock.
The registration rights of these stockholders will terminate when the shares
held by them may be sold under Rule 144 under the Securities Act. We are
generally required to bear all of the expenses of all demand and piggyback
registrations, except underwriting discounts and commissions. We also have
agreed to indemnify those stockholders under the terms of the Registration
Rights Agreement.
INDEMNIFICATION MATTERS
Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained in improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers shall
be, and in the discretion of the board of directors, non-officer employees may
be, indemnified by Stride to the fullest extent authorized by Delaware law, as
it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
Stride. The by-laws also provide that the right of directors and officers to
indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any by-law, agreement,
vote of stockholders or otherwise. We also have directors' and officers'
insurance against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Stride as
described above, we have been advised that in the
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opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable. At present, there is no
pending material litigation or proceeding involving any director, officer,
employee or agent of Stride in which indemnification will be required or
permitted.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Any amendment to our certificate of incorporation must first be approved by
a majority of the board of directors and thereafter approved by a majority of
the total votes eligible to be cast by holders of voting stock with respect to
such amendment.
BY-LAW PROVISIONS
Our by-laws provide that a special meeting of stockholders may be called
only by the President or the board of directors unless otherwise required by
law. Our by-laws provide that only those matters included in the notice of the
special meeting may be considered or acted upon at that special meeting unless
otherwise provided by law. In addition, our by-laws include advance notice and
informational requirements and time limitations on any director nomination or
any new proposal which a stockholder wishes to make at an annual meeting of
stockholders.
ABILITY TO ADOPT STOCKHOLDER RIGHTS PLAN
The board of directors may in the future resolve to issue shares of
preferred stock or rights to acquire such shares to implement a stockholder
rights plan. A stockholder rights plan typically creates voting or other
impediments to discourage persons seeking to gain control of Stride by means of
a merger, tender offer, proxy contest or otherwise if the board of directors
determines that such change in control is not in the best interests of Stride
and our stockholders. The board of directors has no present intention of
adopting a stockholder rights plan and is not aware of any attempt to obtain
control of Stride.
STATUTORY BUSINESS COMBINATION PROVISION
Following the offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly held Delaware corporation
from consummating a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless:
- before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
- upon the closing of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares held
by directors who are also officers of the corporation and shares held by
employee stock plans; or
- following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.
The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, asset sales and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more
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difficult for an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. A Delaware corporation
may "opt out" of Section 203 with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or by-laws resulting from an amendment approved by holders of at
least a majority of the outstanding voting stock. Neither our certificate of
incorporation nor our by-laws contains any such exclusion.
TRADING ON THE NASDAQ NATIONAL MARKET SYSTEM
We have applied to have the common stock approved for quotation on the
Nasdaq National Market under the symbol STDA.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be American Stock
Transfer & Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that sales of common
stock or the availability of common stock for sale will have on the market price
of the common stock prevailing from time to time. Nonetheless, substantial sales
of common stock in the public market following the offering, or the perception
that such sales could occur, could lower market price of the common stock or
make it difficult for us to raise additional equity capital in the future.
Following this offering, there will be 9,652,348 shares of common stock
outstanding on a fully diluted basis. Of these shares, the 4,350,000 shares
which are being sold in the offering generally will be freely transferable
without restriction or further registration under the Securities Act, except
that any shares held by our "affiliates" as is defined in Rule 144 under the
Securities Act may be sold only in compliance with the limitations described
below. The remaining 5,302,348 shares of common stock which will be outstanding
after the offering will be "restricted securities" as defined in Rule 144, and
may be sold in the future without registration under the Securities Act subject
to compliance with the provisions of Rule 144 or any other applicable exemption
under the Securities Act. In connection with the offering, our existing
officers, directors and stockholders, who hold all of the currently outstanding
shares of common stock and will own the remaining 5,302,348 shares of common
stock after the offering, have agreed with the underwriters that, subject to
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. Hambrecht & Quist LLC may, in its sole
discretion and at any time without notice, release all or any portion of the
shares subject to such restrictions. Subject to these lock-up agreements, the
shares of common stock outstanding upon the closing of the offering will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
SHARES DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
<C> <S>
4,350,000 After the date of this prospectus, freely tradeable shares sold in this offering.
5,302,348 After 180 days from the date of this prospectus, the lock-up is released and these shares are
saleable under Rule 144 (subject, in some cases, to volume limitations), Rule 144(k), or under a
registration statement to register for resale shares of common stock issued upon the exercise of
stock options.
</TABLE>
In general, under Rule 144, as currently in effect, a person or persons
whose shares are required to be aggregated, including an affiliate of ours, and
who has beneficially owned shares for at least one year is entitled to sell,
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of 1% of the
then outstanding shares of common stock, which is expected to be approximately
97,000 shares upon the completion of the offering, or the average weekly trading
volume of the common stock during the calendar weeks preceding the date on which
notice of such sale is filed, subject to certain restrictions. In addition, a
person who is not deemed to have been an affiliate of ours at any time during
the 90 days preceding a sale and who has beneficially owned the shares proposed
to be sold for at least two years would be entitled to sell such shares under
Rule 144(i) without regard to the requirements described above. To the extent
that shares were acquired from an affiliate of ours, such person's holding
period for the purpose of effecting a sale under Rule 144 commences on the date
of transfer from the affiliate.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 1998
Stock Option and Grant Plan. See "Risk Factors--The Future Sale of Our Common
Stock Could Adversely Affect the Market Price of Our Common Stock."
62
<PAGE>
Following the offering, under specified circumstances and subject to
customary conditions, the Summit investors and our founding stockholders will
have rights with respect to 5,000,010 shares of common stock, subject to the
180-day lock-up arrangement described above, to require us to register their
shares of common stock under the Securities Act, and they will have rights to
participate in any future registration of securities by us. We are not required
to effect more than an aggregate of four demand registrations on behalf of these
holders.
As of March 31, 1999, 813,950 shares were reserved for issuance under our
1998 Stock Option and Grant Plan, of which options to purchase 293,607 shares
were then outstanding. Beginning 180 days after the date of this prospectus,
approximately 232,560 shares issuable upon the exercise of vested options will
become eligible for sale.
63
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Hambrecht & Quist LLC
and BancBoston Robertson Stephens Inc. have severally agreed with us to purchase
from us the following respective numbers of shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------
<S> <C>
Hambrecht & Quist LLC......................................................
BancBoston Robertson Stephens Inc. .......................................
---
Total......................................................................
---
---
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are subject to conditions precedent, including the absence of any material
adverse change in our business and the receipt of certificates, opinions and
letters from us, our counsel and independent auditors. The nature of the
underwriters' obligation is that they are committed to purchase all shares of
common stock offered by this prospectus if any of the shares are purchased.
The underwriters propose to offer the shares of common stock directly to the
public at the initial public offering price shown on the cover page of this
prospectus and to certain dealers at that price less a concession not in excess
of $ per share. The underwriters may allow and the dealers may reallow
a concession not in excess of $ per share to other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the representatives of the underwriters. The
representatives have advised us that the underwriters do not intend to confirm
discretionary sales in excess of 5% of the shares of common stock offered by
this prospectus.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus to purchase up to 652,500 additional
shares of common stock at the initial public offering price less the
underwriting discount, shown on the cover page of this prospectus. To the extent
that the underwriters exercise this option, each of the underwriters will have a
firm commitment to purchase approximately the same percentage of the option
which the number of shares of common stock to be purchased by it shown in the
above table bears to the total number of shares of common stock offered. We will
be obligated, as part of the option, to sell shares to the underwriters to the
extent the option is exercised. The underwriters may exercise such option only
to cover over-allotments made in connection with the sale of shares of common
stock offered.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
Stride, the founding stockholders and a group investment funds associated
with Summit Partners, LLC have agreed to indemnify the underwriters against
specific liabilities, including liabilities under the
64
<PAGE>
Securities Act, and to contribute to payments the underwriters may be required
to make in respect of those liabilities.
All our stockholders and directors, who will own in the aggregate 5,302,348
shares of common stock after the offering, have agreed that they will not,
without the prior written consent of Hambrecht & Quist LLC, offer, sell, or
otherwise dispose of any shares of common stock, options or warrants to acquire
shares of common stock or securities exchangeable for or convertible into shares
of common stock owned by them during the 180-day period following the date of
this prospectus. We have agreed that we will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that we may
issue shares upon the exercise of options granted before the closing of this
offering, and may grant additional options under our stock option plans,
provided that, without the prior written consent of Hambrecht & Quist LLC, these
additional options will not be exercisable during that period.
Before the offering, there has been no public market for the common stock.
The initial public offering price for the common stock will be determined by
negotiation among us and the underwriters. Among the factors considered in
determining the initial public offering price are prevailing market and economic
conditions, our revenue and earnings, market valuations of other companies
engaged in activities similar to us, estimates of our business potential and
prospects, the present state of our business operations, our management and
other factors deemed relevant. The estimated initial public offering price range
shown on the cover of this prospectus is subject to change as a result of market
conditions and other factors.
Some persons participating in the offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the common stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effective syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting any purchase, for the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when the common stock sold by the syndicate member is purchased in
syndicate covering transactions. Such transactions may be effected on the Nasdaq
National Market, in the over-the-counter market, or otherwise. Such stabilizing,
if commenced may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Stride by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Various
legal matters related to the sale of the common stock offered hereby will be
passed upon for the underwriters by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
Our audited financial statements as of December 31, 1997 and 1998, and for
each of the three years in the period ended December 31, 1998 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing in this prospectus, and have been so included
in reliance upon their authority as experts in accounting and auditing.
65
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act and the rules and regulations thereunder, for the registration of
the common stock offered hereby. This prospectus, which forms a part of the
registration statement, does not contain all the information included in the
registration statement, parts of which have been omitted as permitted by the SEC
rules and regulations. For further information about us and our common stock,
you should refer to the registration statement. Statements contained in this
prospectus as to any contract or other document are not necessarily complete.
Where the contract or other document is an exhibit to the registration
statement, each statement is qualified by the provisions of that exhibit.
The registration statement can be inspected and copied at the public
reference facility maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the registration statement can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the registration statement is publicly available
through the SEC's site on the Internet's World Wide Web, located at
http://www.sec.gov.
We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can also request copies of these
documents, for a copying fee, by writing to the SEC.
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................................................... F-2
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 1997 and 1998.......................................................... F-3
Statements of Income for the Years Ended December 31, 1996, 1997 and 1998................................ F-4
Statements of Common Stockholders' Equity (Deficiency) for the Years Ended December 31, 1996, 1997 and
1998................................................................................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998............................ F-6
Notes to Financial Statements............................................................................ F-7
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES:
The information required for supplemental financial statement schedules is either not applicable or is included
elsewhere in the financial statements.
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Stride & Associates, Inc.
Boston, Massachusetts
We have audited the accompanying balance sheets of Stride & Associates, Inc.
(the "Company") as of December 31, 1997 and 1998, and the related statements of
income, common stockholders' equity (deficiency) and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
New York, New York
February 1, 1999 (May , 1999 as to Note 14)
------------------------
To the Stockholders of
Stride & Associates, Inc.
The financial statements included herein reflect the approval by the
Company's stockholders of the Company's five-for-one stock split of the
Company's common stock as described in Note 14 to the financial statements. The
above report is in the form that will be signed by Deloitte & Touche LLP upon
the effectiveness of such event assuming that from February 1, 1999 to the
effective date of such event, no other events shall have occurred that would
affect the accompanying financial statements or notes thereto.
/s/ DELOITTE & TOUCHE LLP
NEW YORK, NEW YORK
MARCH 30, 1999
F-2
<PAGE>
STRIDE & ASSOCIATES, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 736 $ 3,683
Accounts receivable, net of allowance for unearned revenue and doubtful accounts of $380
and $640, respectively (Note 13)...................................................... 2,359 2,832
Prepaid expenses and other current assets............................................... 125 388
---------- ----------
Total current assets................................................................ 3,220 6,903
DEBT ISSUANCE COSTS....................................................................... -- 142
DEFERRED COSTS............................................................................ -- 465
PROPERTY AND EQUIPMENT, Net............................................................... 560 838
---------- ----------
TOTAL ASSETS.............................................................................. $ 3,780 $ 8,348
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable........................................................................ $ 71 $ 396
Accrued expenses........................................................................ 861 2,152
Current portion of term loan............................................................ -- 3,577
Deferred income taxes................................................................... -- 75
---------- ----------
Total current liabilities........................................................... 932 6,200
TERM LOAN................................................................................. -- 21,623
SUBORDINATED DEBENTURES................................................................... -- 10,000
DEFERRED INCOME TAXES..................................................................... -- 645
---------- ----------
Total liabilities................................................................... 932 38,468
---------- ----------
SERIES A CONVERTIBLE PREFERRED STOCK,
$0.01 par value per share; 24,802.5 shares authorized as of December 31, 1998; 24,802.5
shares issued and outstanding as of December 31, 1998................................... -- 25,299
---------- ----------
SERIES B REDEEMABLE PREFERRED STOCK,
$0.01 par value per share; 24,802.5 shares authorized as of December 31, 1998; no shares
issued and outstanding.................................................................. -- --
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 12)
COMMON STOCKHOLDERS' EQUITY (DEFICIENCY):
Common Stock, $0.01 par value per share; 50,000,000 shares authorized; 5,000,000 shares
issued and outstanding as of December 31, 1997 and 3,539,843 shares issued and
outstanding as of December 31, 1998................................................... 50 35
Additional paid-in capital.............................................................. -- 5,718
Deferred compensation................................................................... -- (984)
Note receivable from officer and stockholder............................................ -- (160)
Retained earnings (accumulated deficit)................................................. 2,798 (60,028)
---------- ----------
Total common stockholders' equity (deficiency)...................................... 2,848 (55,419)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)................................... $ 3,780 $ 8,348
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
STRIDE & ASSOCIATES, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
NET REVENUES (Note 13)........................................................... $ 10,614 $ 19,187 $ 28,804
COST OF SERVICES................................................................. 3,742 6,426 9,849
--------- --------- ---------
GROSS PROFIT..................................................................... 6,872 12,761 18,955
OPERATING EXPENSES............................................................... 2,460 4,655 8,305
MANAGEMENT FEES (Note 13)........................................................ 3,719 7,620 2,869
NON-RECURRING RECAPITALIZATION COSTS (Note 11)................................... -- -- 2,239
--------- --------- ---------
INCOME FROM OPERATIONS........................................................... 693 486 5,542
OTHER INCOME (EXPENSE):
Interest income................................................................ 85 38 108
Interest expense............................................................... (23) (11) (1,856)
--------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES......................................... 755 513 3,794
PROVISION FOR INCOME TAXES....................................................... 23 62 1,935
--------- --------- ---------
NET INCOME....................................................................... 732 451 1,859
PREFERRED STOCK DIVIDENDS........................................................ -- -- 1,553
--------- --------- ---------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS...................................... $ 732 $ 451 $ 306
--------- --------- ---------
--------- --------- ---------
NET INCOME PER COMMON SHARE:
Basic.......................................................................... $ 0.15 $ 0.09 $ 0.07
--------- --------- ---------
--------- --------- ---------
Diluted........................................................................ $ 0.15 $ 0.09 $ 0.06
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic.......................................................................... 5,000 5,000 4,158
--------- --------- ---------
--------- --------- ---------
Diluted........................................................................ 5,000 5,000 4,734
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
STRIDE & ASSOCIATES, INC.
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOTE RETAINED
COMMON STOCK ADDITIONAL RECEIVABLE EARNINGS
------------------------- PAID-IN DEFERRED FROM OFFICER AND (ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDER DEFICIT)
------------ ----------- ----------- ------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996............... 5,000,000 $ 50 $ -- $ -- $ -- $ 1,615
Net income........................... -- -- -- -- -- 732
------------ --- ----------- ------------- ----- ------------
BALANCE, DECEMBER 31, 1996............. 5,000,000 50 -- -- -- 2,347
Net income........................... -- -- -- -- -- 451
------------ --- ----------- ------------- ----- ------------
BALANCE, DECEMBER 31, 1997............. 5,000,000 50 -- -- -- 2,798
"S" corporation distributions........ -- -- -- -- -- (929)
Issuance of common stock............. 1,237,505 12 5,185 -- -- --
Common stock warrants granted in
connection with the issuance of
Series A Convertible Preferred
Stock.............................. -- -- 1,657 -- -- --
Direct costs of common and preferred
stock issuance..................... -- -- (349) -- -- --
Issuance of restricted stock......... 302,338 3 1,378 (1,221) (160) --
Repurchase of common stock........... (3,000,000) (30) -- -- -- (63,756)
Dividends on Series A Convertible
Preferred Stock.................... -- -- (1,553) -- -- --
Compensation expense recognized...... -- -- -- 237 -- --
Net income........................... -- -- -- -- -- 1,859
------------ --- ----------- ------------- ----- ------------
BALANCE, DECEMBER 31, 1998............. 3,539,843 $ 35 $ 5,718 $ (984) $ (160) $ (60,028)
------------ --- ----------- ------------- ----- ------------
------------ --- ----------- ------------- ----- ------------
<CAPTION>
TOTAL
----------
<S> <C>
BALANCE, JANUARY 1, 1996............... $ 1,665
Net income........................... 732
----------
BALANCE, DECEMBER 31, 1996............. 2,397
Net income........................... 451
----------
BALANCE, DECEMBER 31, 1997............. 2,848
"S" corporation distributions........ (929)
Issuance of common stock............. 5,197
Common stock warrants granted in
connection with the issuance of
Series A Convertible Preferred
Stock.............................. 1,057
Direct costs of common and preferred
stock issuance..................... (349)
Issuance of restricted stock......... --
Repurchase of common stock........... (63,786)
Dividends on Series A Convertible
Preferred Stock.................... (1,553)
Compensation expense recognized...... 237
Net income........................... 1,859
----------
BALANCE, DECEMBER 31, 1998............. $ (55,419)
----------
----------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
STRIDE & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................................... $ 732 $ 451 $ 1,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................... 95 180 251
Loss on disposal of property and equipment....................................... 15 -- --
Provision for doubtful accounts receivable....................................... 9 135 205
Amortization of deferred compensation............................................ -- -- 237
Amortization of debt issuance costs.............................................. -- -- 19
Deferred income taxes............................................................ -- -- 720
Changes in operating assets and liabilities:
Accounts receivable............................................................ (377) (676) (678)
Prepaid expenses and other current assets...................................... (81) (11) (263)
Accounts payable............................................................... (45) (85) 325
Accrued expenses............................................................... 93 562 1,291
--------- --------- ----------
Net cash provided by operating activities.................................... 441 556 3,966
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES --
Purchases of property and equipment................................................ (152) (463) (529)
--------- --------- ----------
Net cash used in investing activities........................................ (152) (463) (529)
CASH FLOWS FROM FINANCING ACTIVITIES:
S corporation distributions........................................................ -- -- (929)
Proceeds from issuance of common stock............................................. -- -- 5,197
Proceeds from issuance of Series A Convertible Preferred Stock and warrants........ -- -- 24,803
Direct costs of common and preferred stock issuance................................ -- -- (349)
Proceeds from issuance of subordinated debentures.................................. -- -- 10,000
Borrowings under term loan......................................................... -- -- 26,000
Repayments under term loan......................................................... -- -- (800)
Debt issuance costs................................................................ -- -- (161)
Repurchase of common stock......................................................... -- -- (63,786)
Deferred costs..................................................................... -- -- (465)
Decrease in notes receivable from stockholders..................................... (286) 640 --
--------- --------- ----------
Net cash provided by (used in) financing activities.......................... (286) 640 (490)
--------- --------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................................ 3 733 2,947
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR......................................... 0 3 736
--------- --------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR............................................... $ 3 $ 736 $ 3,683
--------- --------- ----------
--------- --------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest............................................. $ 20 $ 11 $ 1,837
--------- --------- ----------
--------- --------- ----------
Cash paid during the year for income taxes......................................... $ 48 $ 62 $ 1,347
--------- --------- ----------
--------- --------- ----------
</TABLE>
See notes to financial statements
F-6
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
NATURE OF BUSINESS--Stride & Associates, Inc. (the "Company") was formed on
October 7, 1994 and commenced operations on January 1, 1995. The Company
operates in one business segment and is a leading provider of information
technology professionals on a permanent, full-time basis. At December 31, 1998,
the Company had 12 offices in New York, California, Massachusetts and Georgia.
In January 1999, the Company opened three new offices in Chicago, Illinois,
Atlanta, Georgia and Los Angeles, California.
On June 4, 1998, the Company engaged in a leveraged recapitalization of the
Company (the "Recapitalization") pursuant to which, (i) the Company borrowed
$26.0 million under a term loan agreement (ii) the Company received $10.0
million in cash from an investor in connection with the issuance of Subordinated
Debentures (iii) the Company received $24,802,500 in cash from an investor in
connection with the issuance of 24,802.5 shares of Series A Convertible
Preferred Stock and warrants to purchase 762,505 shares of common stock at an
exercise price of $4.62 per share (iv) the Company received $5,197,500 in cash
from an investor in connection with the issuance of 1,237,505 shares of common
stock, and (v) the Company paid $63,786,100 in cash to reacquire 3,000,000
shares of common stock (the "Redemption Shares") from the founding stockholders.
Upon the surrender of the Redemption Shares to the Company, the Company
cancelled such Redemption Shares, which shares thereafter ceased to be issued
and outstanding.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION--Placement fee revenues are recognized at the effective
hire date of the individual placed, net of the appropriate allowance for
placement fall-offs.
CASH AND CASH EQUIVALENTS--Cash equivalents represent investments with
maturities of three months or less and are stated at carrying value, which
approximates market value.
DEBT ISSUANCE COSTS--Debt issuance costs relate to the costs associated with
obtaining the term loan and revolving credit facility, and are being amortized
on a straight-line basis over the five-year term of the related debt and are
included in interest expense.
DEFERRED COSTS--Deferred costs include costs associated with the Company's
proposed initial public offering. Such costs will be charged against additional
paid-in capital upon the effective date of the initial public offering.
PROPERTY AND EQUIPMENT--Property and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation of property and
equipment is provided for by the straight-line method over the estimated useful
lives of the related assets (3 to 5 years). Leasehold improvements are amortized
over the lesser of the term of the respective lease or the estimated useful
lives of the improvements (5 years).
LONG-LIVED ASSETS--In 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"),
which requires the Company to periodically assess the recoverability of the
carrying value of long-lived assets, including intangible assets, property and
equipment, based on estimated undiscounted cash flows on an individual asset
basis. If the estimated undiscounted cash flows are less than the carrying
value, an impairment loss is charged to operations
F-7
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
based on the difference between the carrying amount and the estimated discounted
cash flows. The adoption of SFAS 121 did not have a material impact on the
Company's financial statements.
INCOME TAXES--Prior to the Recapitalization, the Company was an "S"
corporation, pursuant to the Internal Revenue Code. Under the "S" corporation
election, all of the Company's income, deductions and credits are passed through
to, and taken into account by, the Company's stockholders in computing their own
taxable income. No provision for Federal income taxes has been recorded in the
accompanying financial statements for the periods prior to the Recapitalization.
A provision for state and local taxes has been recorded in the accompanying
financial statements for those jurisdictions which tax "S" corporations. Upon
consummation of the Recapitalization, the Company terminated its "S" corporation
status.
The Company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and are
measured using enacted tax rates and laws that are expected to be in effect when
the differences are expected to reverse.
NET INCOME PER COMMON SHARE--Basic net income per common share is computed
by dividing net income available to common stockholders by the weighted average
common shares outstanding. Diluted net income per common share further assumes
the issuance of common shares for all dilutive outstanding common stock
equivalents. For the years ended December 31, 1996 and 1997, there were no
outstanding common stock equivalents. For the year ended December 31, 1998, the
effect of dilutive common stock equivalents was approximately 576,000 shares
resulting from the assumed conversion of the Series A Convertible Preferred
Stock. The effect of outstanding options and warrants for the year ended
December 31, 1998 was antidilutive.
STOCK SPLIT--Effective June 4, 1998, the Company authorized a 5,000 for one
stock split effected in the form of a stock dividend. All share and per share
data in these financial statements have been retroactively restated to reflect
this stock split.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The following methods and assumptions
were used to estimate the fair value of each class of financial instruments:
1. CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts approximate fair value because of the short
maturity of these instruments.
2. TERM LOAN AND SUBORDINATED DEBENTURES--The carrying amounts approximate fair
value based on borrowing rates currently available to the Company for debt
with similar terms.
3. NOTE RECEIVABLE FROM OFFICER AND STOCKHOLDER--The carrying amount
approximates fair value based on the Company's estimate of the current
replacement cost of this instrument.
4. SERIES A CONVERTIBLE PREFERRED STOCK--The carrying amount approximates fair
value due to the relatively short period of time between the issuance of
this instrument and the balance sheet date, and the Company's estimate of
the current replacement cost of this instrument.
F-8
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. INTEREST RATE COLLAR--The carrying value of the financial instrument is $0
and the approximate fair value at December 31, 1998 is a liability of
approximately $125,000, based on the net present value of the future
expected cash flows using the current LIBOR yield curve at December 31,
1998.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS--Certain prior year balances have been reclassified to
conform with current year classifications.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENT--During 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 requires that all derivative financial instruments be recognized
as either assets or liabilities in the balance sheet. Measurement is at fair
value, and if the derivative is not designated as a hedging instrument, changes
in fair value (i.e., gains and losses) are to be recognized in earnings in the
period of change. If certain conditions are met, a derivative may be designated
as a hedge, in which case the accounting for changes in fair value will depend
on the specific exposure being hedged. The method that will be used for
assessing the effectiveness of a hedging derivative, as well as the measurement
approach for determining the ineffective aspects of the hedge, must be
established at the inception of the hedge. The methods must be consistent with
the Company's approach to managing risk. SFAS 133 will be effective for fiscal
years beginning after June 15, 1999. The Company is currently evaluating the
impact that SFAS 133 will have on its financial statements.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Computer equipment..................................................... $ 178 $ 307
Furniture and fixtures................................................. 662 942
Leasehold improvements................................................. 123 231
--------- ---------
963 1,480
Less accumulated depreciation and amortization......................... 403 642
--------- ---------
Property and equipment--net............................................ $ 560 $ 838
--------- ---------
--------- ---------
</TABLE>
During 1997 and 1998, approximately $20,000 and $12,000 of fully depreciated
computer equipment was written-off.
F-9
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Employee compensation........................................................ $ 551 $ 1,412
Advertising.................................................................. 74 120
Other........................................................................ 236 620
--------- ---------
Total........................................................................ $ 861 $ 2,152
--------- ---------
--------- ---------
</TABLE>
5. TERM LOAN AND REVOLVING CREDIT FACILITY
The Company has an available line of credit with a bank totaling $300,000.
Borrowings under this line of credit bear interest at the prime rate (the prime
rate being 7.75 percent at December 31, 1998) plus one percent. The line of
credit expires December 31, 1999. There were no borrowings under this line of
credit as of December 31, 1997 and 1998.
In connection with the Recapitalization, the Company borrowed $26.0 million
under a term loan agreement with a number of lending institutions (the "Term
Loan"). Additionally, a $2.0 million revolving credit facility (the "Credit
Facility") was also obtained from the same lending institutions, to provide for
working capital requirements, and such Credit Facility expires in June 2003.
There were no borrowings under the Credit Facility as of December 31, 1998. The
Term Loan is payable in twenty consecutive quarterly payments, payable on the
last day of each calendar quarter commencing on September 30, 1998, with a final
payment representing the remaining unpaid principal balance due on June 4, 2003.
In addition, the Company is required to make mandatory annual repayments equal
to fifty percent of excess cash flow, as defined, no later than 120 days after
the end of the fiscal year end. As of December 31, 1998, approximately $777,000
representing mandatory payments for excess cash flow for the period from June 4,
1998 to December 31, 1998, is included in the current portion of term loan on
the accompanying balance sheet. In the event of an Asset Sale, as defined, or
Equity Issuance, as defined, all of the net proceeds must be applied first to
repay the remaining outstanding balance of the Term Loan (see Note 14). Minimum
required repayments of the Term Loan are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------- AMOUNT
-----------------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
1999............................................................... $ 3,577
2000............................................................... 4,500
2001............................................................... 6,300
2002............................................................... 7,300
2003............................................................... 3,523
-------
Total.............................................................. $ 25,200
-------
-------
</TABLE>
Borrowings under the Term Loan and Credit Facility bear interest at the
bank's base rate, as defined, plus the applicable margin (ranging between 25 and
100 basis points), or at the LIBOR rate
F-10
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
5. TERM LOAN AND REVOLVING CREDIT FACILITY (CONTINUED)
plus the applicable margin (ranging between 150 and 225 basis points). Such
margins are subject to reduction based upon the achievement of certain
performance targets, as defined. The Company's borrowing rate at December 31,
1998 was 7.03 percent per annum. The Company must also pay a commitment fee of
0.375 percent per annum. The Term Loan and Credit Facility are secured by
substantially all of the assets of the Company.
The Term Loan and Credit Facility, among other matters, requires the Company
to maintain certain leverage, debt service and current ratios and places
restrictions on additional indebtedness and the payment of dividends.
Additionally, effective August 4, 1998, the Company entered into an interest
rate collar agreement (the "Collar") with a notional amount of $13.0 million
related to the Term Loan to reduce its exposure to market risks from changes in
interest rates. The Collar expires on August 4, 2000. Under the terms of the
Collar, if the floating rate option is greater than the cap rate of 7.75 percent
(inclusive of the applicable margin at December 31, 1998), the bank will pay the
Company an amount equal to the difference of the two rates. If the floating rate
option is less than the floor rate of 7.38 percent (inclusive of the applicable
margin at December 31, 1998), the Company will pay the bank an amount equal to
the difference of the two rates. If the floating rate option is equal to or
between the floor rate of 7.38 percent and the cap rate of 7.75 percent, no
payments will be made. The payment dates are on the last business days of March,
June, September and December in each year. Income or expense with respect to the
Collar is recorded as a component of interest expense on the accompanying
statement of income.
At December 31, 1998, the fair market value of the Collar, as discussed in
Note 2, was calculated on the assumption that the underlying LIBOR rates will
continue to decrease through the remaining term of the Collar. As such, the
Company's obligation to make payments under the terms of the Collar will be
largely offset by the impact of lower LIBOR rates on the balance of the Term
Loan.
6. SUBORDINATED DEBENTURES
The Subordinated Debentures (the "Debentures") bear interest at 12 percent
per annum, payable quarterly. Upon an occurrence of an Event of Default, as
defined, any unpaid principal balance may become due upon demand and shall bear
an interest rate of 14 percent per annum. The Debentures mature on August 4,
2003. The Debentures are subordinated in right of payment to all existing and
future senior indebtedness of the Company. The Debentures are required to be
repaid in full upon consummation of a Liquidity Event, as defined. The Company
can repay the Debentures in whole or from time to time in installments of not
less than $100,000, without premium or penalty.
7. INCOME TAXES
The provision for income taxes for the years ended December 31, 1996 and
1997, and through the consummation of the Recapitalization on June 4, 1998,
represents state and local taxes for those jurisdictions that impose a tax on
"S" corporations. Upon consummation of the Recapitalization, the Company
terminated its "S" corporation status.
F-11
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
7. INCOME TAXES (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
----- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Current:
Federal............................................................. $ -- $ -- $ 787
State and local..................................................... 23 62 428
--- --------- ---------
23 62 1,215
--- --------- ---------
Deferred:
Federal............................................................. -- -- 493
State and local..................................................... -- -- 227
--- --------- ---------
-- -- 720
--- --------- ---------
$ 23 $ 62 $ 1,935
--- --------- ---------
--- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of timing differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The income tax effects of
significant items comprising the Company's net deferred tax liability are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
CURRENT LONG-TERM TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Deferred tax assets:
Allowance for doubtful accounts............................ $ 277 $ -- $ 277
Difference between book and tax basis of property and
equipment................................................ -- 29 29
Accrued straight-line rent................................. 28 -- 28
----- ----- ---------
305 29 334
----- ----- ---------
Deferred tax liabilities:
Deferred compensation...................................... (151) (215) (366)
Change from cash to accrual basis.......................... (229) (459) (688)
----- ----- ---------
(380) (674) (1,054)
----- ----- ---------
Net deferred tax liabilities................................. $ (75) $ (645) $ (720)
----- ----- ---------
----- ----- ---------
</TABLE>
F-12
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
7. INCOME TAXES (CONTINUED)
The difference between the statutory Federal tax rate and the Company's
effective tax rate is as follows (as a percentage of pre-tax income):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Statutory Federal income tax rate............................... 34.0% 34.0% 34.0%
State and local income taxes (net of Federal tax benefit)....... 3.0 12.1 12.3
Exempt income due to "S" corporation status..................... (34.0) (34.0) (10.8)
Change in tax status............................................ -- -- 11.0
Other........................................................... -- -- 4.5
--------- --------- ---------
Effective tax rate.............................................. 3.0% 12.1% 51.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
8. PREFERRED STOCK AND WARRANTS
Each share of Series A Non-voting Convertible Preferred Stock ("Series A
Preferred Stock") may, at the election of the holder, be converted into one
share of Series B Non-voting Redeemable Preferred Stock ("Series B Preferred
Stock") and 40.3185 shares of common stock (which represents a total of
1,000,000 shares of common stock). Upon the conversion of the Series A Preferred
Stock to Series B Preferred Stock, the Company will reduce the balance
applicable to the preferred stock by $4.2 million, which represents the fair
value allocation of the cash proceeds received at issuance attributable to the
1,000,000 shares of common stock, and increase common stock and additional
paid-in capital. The Series A Preferred Stock shall pay dividends of nine
percent per annum of the Base Liquidation Amount ($1,209.56 per share) when and
as declared by the Board of Directors. To the extent not paid, dividends shall
cumulate and compound annually. Upon conversion of the Series A Preferred Stock,
any dividends which have cumulated and have not been paid shall attach to the
Series B Preferred Stock into which such Series A Preferred Stock is convertible
and thereafter shall be payable with respect to the Series B Preferred Stock. In
the event of a Liquidity Event, as defined, the holders of the Series A
Preferred Stock shall be entitled to be paid an amount in cash equal to (i)
$1,470.13 per share, plus (ii) all accrued and unpaid dividends, plus (iii) the
amount which would have been payable with respect to the shares of common stock
issuable upon conversion of the Series A Preferred Stock had such conversion
occurred immediately prior to such Liquidity Event (collectively, the "Series A
Liquidation Amount").
The holders of a majority of the Series B Preferred Stock may, at their
election and upon the consummation of a Liquidity Event, as defined, require the
Company to redeem all the Series B Preferred Stock. In the event of a Liquidity
Event, as defined, the holders of the Series B Preferred Stock shall be entitled
to be paid an amount in cash equal to (i) $1,470.13 per share, plus (ii) all
accrued and unpaid dividends (collectively, the "Series B Liquidation Amount"
and together with the Series A Liquidation Amount, the "Liquidation Amount").
The Series B Preferred Stock shall pay a dividend of nine percent per annum of
the Base Liquidation Amount ($1,209.56 per share) when and as declared by the
Board of Directors. To the extent not paid, dividends shall cumulate and
compound annually.
F-13
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
8. PREFERRED STOCK AND WARRANTS (CONTINUED)
Upon an initial public offering, the Company shall redeem all of the shares
of Series A and Series B Preferred Stock at the Liquidation Amount, except that,
with respect to the Series A Preferred Stock, the Company shall issue the shares
of common stock in lieu of the cash payment which would otherwise be required
upon a Liquidity Event. Prior to the redemption of the Series A Preferred Stock,
the Company will reduce the Series A Preferred Stock by $4.2 million, which
represents the fair value allocation of the cash proceeds received at issuance
attributable to the 1,000,000 shares of common stock, and increase common stock
and additional paid-in capital.
The Company is prohibited from paying dividends on its common stock without
the consent of a majority of the holders of the outstanding shares of Series A
and Series B Preferred Stock (the "Preferred Stock"). In the event the holders
of the Series A Preferred Stock consent to the payment of a dividend to the
common stockholders, the holders of the Series A Preferred Stock would be
entitled to be paid a dividend equal to the amount which would have been paid to
them had they held the shares of common stock into which the Series A Preferred
Stock is convertible immediately prior to the record date of payment of such
dividends.
In connection with the issuance of the Series A Preferred Stock to an
investor, the Company also issued warrants to purchase 762,505 shares of common
stock at an exercise price of $4.62 per share. The warrants expire on June 4,
2008. If the Series A or Series B Preferred Stock is ever redeemed, the Company
may require the holders of the warrants to exercise any warrants then
outstanding in full and offset the redemption amount with the proceeds from the
exercise of the warrants. The fair value of the warrants was approximately
$1,057,000, as determined by the Black-Scholes method, and recorded as an
increase in additional paid-in capital.
9. COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
In connection with the Recapitalization, the Board of Directors and the
stockholders of the Company adopted the 1998 Stock Option and Grant Plan (the
"Plan"). The Plan permits the Company to (i) grant incentive stock options, (ii)
grant non-qualified stock options and (iii) issue or sell common stock with
vesting or other restrictions ("Restricted Stock") or without restrictions.
These grants may be made to officers, employees, directors, consultants,
advisors and other key persons of the Company. Options which are designated as
incentive stock options under the Plan may be granted with an exercise price not
less than fair market value of the underlying shares at the date of grant and
are subject to certain limitations specified in Section 422 of the Internal
Revenue Code. Non-qualified stock options may be granted at prices which are
less than the fair market price of the underlying shares on the date of grant.
The rights to exercise the options generally vest in annual increments over a
period of up to four years from the grant date. The Plan provides for the
issuance of up to 813,950 shares of common stock. At December 31, 1998,
1,056,112 shares of common stock were reserved for issuance upon the exercise of
outstanding warrants and stock options and 218,005 shares of common stock were
available for future grant under the Plan.
During the year ended December 31, 1998, options to purchase 293,607 shares
of common stock were granted at a weighted average exercise price of $19.21 per
share. At December 31, 1998, options to purchase 293,607 shares of common stock
were outstanding with exercise prices ranging from $20.64 to $13.76 per share.
At December 31, 1998, options to purchase 232,560 shares of common stock were
exercisable at a weighted average exercise price of $20.64 per share.
F-14
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
9. COMMON STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Compensation Issued to Employees," and selected interpretations, in
accounting for its option plans. Accordingly, as options have been granted at
exercise prices equal to or in excess of fair market value on the date of grant,
no compensation expense has been recognized by the Company in connection with
its stock option issuances. Had compensation cost for the Company's stock
options been determined based upon the fair value at the date of grant
consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the
Company's net income available to common stockholders and related per share
amounts would not have changed for the year ended December 31, 1998. The
weighted average fair value of the options granted during the year ended
December 31, 1998 is estimated at $-0- per share on the date of grant (using the
minimum value method) with the following weighted average assumptions; zero
volatility, risk-free interest rate of 5.5 percent, and expected life of five
years.
In June 1998, the Company issued 290,710 shares of restricted common stock
to certain key employees of the Company. The Company recorded deferred
compensation of approximately $1,221,000 related to this restricted stock. The
Company is amortizing the deferred compensation over the three-year vesting
period of the stock. Upon the effective date of an initial public offering of
the Company's common stock, the vesting of the restricted stock accelerates to
become fully vested. In June 1998, the Company sold approximately 11,628 shares
of restricted common stock to an officer and stockholder of the Company for
approximately $160,000. In connection with the sale, the Company issued a note
receivable from the officer and stockholder for approximately $160,000. The note
receivable from an officer and stockholder matures on July 14, 2002 and bears
interest at six percent per annum. The note is required to be prepaid to the
extent of the after-tax net proceeds realized from the sale of the restricted
common stock and is secured by a pledge of the restricted common stock, with
recourse to the officer and stockholder's personal assets limited to twenty-five
percent of the principal and accrued and unpaid interest thereon.
10. EMPLOYEE BENEFIT PLAN
On January 1, 1992, Bond Technologies, Inc. ("Bond"), a corporation under
the common control of the stockholders of the Company, established the Bond
Technologies 401(k) Savings Plan (the "401(k) Plan") covering substantially all
employees who have at least one year of service. This 401(k) Plan was
subsequently amended to include employees of the Company. Under the terms of the
401(k) Plan, the Company may make a discretionary contribution equal to a
percentage of the amounts contributed by the participants. As of December 31,
1996, 1997 and 1998, the Company matched 25 percent of the first 4 percent of
salary contributed by each employee. The Company's matching contributions under
the 401(k) Plan for the years ended December 31, 1996, 1997 and 1998 were
$18,000, $25,000 and $50,000, respectively. Effective January 1, 1999, the
Company established its own 401(k) Savings Plan with terms identical to the
401(k) Plan.
11. NON-RECURRING RECAPITALIZATION COSTS
In connection with the Recapitalization, the Company paid special
non-recurring bonuses of approximately $1,967,000 (inclusive of the Company's
portion of related payroll taxes), and incurred approximately $35,000 related to
other costs of the Recapitalization which are included in the caption
F-15
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
11. NON-RECURRING RECAPITALIZATION COSTS (CONTINUED)
non-recurring recapitalization costs on the accompanying statement of income for
the year ended December 31, 1998. Also included in non-recurring
recapitalization costs is amortization expense relating to deferred compensation
(see Note 9) of approximately $237,000.
12. COMMITMENTS AND CONTINGENCIES
As of December 31, 1998, the Company was obligated to make rental payments
under noncancelable lease agreements which provide for escalations based on real
estate taxes and other costs. The minimum annual rental commitments under
noncancelable leases having an initial or remaining term of more than one year
from December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------------- AMOUNT
-----------------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
1999............................................................................... $ 951
2000............................................................................... 879
2001............................................................................... 817
2002............................................................................... 573
2003............................................................................... 307
Thereafter......................................................................... 274
------
$ 3,801
------
------
</TABLE>
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
$300,000, $517,000 and $889,000, respectively.
The Company has an employment agreement with its President and Chief
Executive Officer, the terms of which expire on June 4, 2001. Such agreement
provides for annual compensation of $400,000 per year, as well as incentive
bonuses that are payable if specified earnings targets are achieved.
The Company has been, from time to time, involved in various litigation
matters arising in the ordinary course of business. The Company believes that
the resolution of currently pending legal proceedings, either individually or
taken as a whole, will not have an adverse effect on the Company, its business
and its financial statements.
13. RELATED PARTY TRANSACTIONS
The Company had an arrangement with various affiliated companies, owned by
the individual stockholders of the Company, whereby the individual stockholders
provide management services to the Company at a fee, plus certain allocated and
out-of-pocket expenses. The services provided include consultation and direct
management assistance with respect to operations, strategic planning and other
aspects of the business of the Company. Fees and expenses paid to the affiliated
companies for these services amounted to $3,719,000, $7,620,000 and $2,869,000
for the years ended December 31, 1996, 1997 and 1998, respectively.
The Company had sales to affiliated entities which are under the common
control of the stockholders of the Company. Sales to these affiliated entities
for the years ended December 31, 1996, 1997 and 1998 were $115,000, $116,000 and
$339,000, respectively. As of December 31, 1997 and 1998, accounts receivable
from these affiliated entities amounted to $45,000 and $128,000, respectively.
F-16
<PAGE>
STRIDE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
14. SUBSEQUENT EVENTS
On March 16, 1999, the Company amended its Term Loan to allow the Company to
use proceeds from an initial public offering ("IPO") to repay the outstanding
Preferred Stock and Debentures, with the remaining proceeds used to repay a
portion of the outstanding principal amount of the Term Loan (which remaining
amount shall in no event be less than $2.0 million) in consideration for a fee
payable ( 1/4% of the total commitment after giving effect to the prepayment) to
the lending institutions upon the receipt of the cash proceeds by the Company,
subject to certain conditions set forth in the Term Loan.
On March 17, 1999, the Board of Directors approved a change in the
authorized number of shares of the Common and Preferred Stock to 50,000,000 and
5,000,000, respectively.
On March 30, 1999, the Company filed a registration statement on Form S-1 in
respect of an offering by the Company for sale to the public of shares of its
common stock. The expected use of the net proceeds of the IPO together with
available cash resources of the Company will be used to redeem all the
outstanding shares of the Preferred Stock, which has an aggregate liquidation
preference of approximately $36.5 million (plus accrued and unpaid dividends
thereon), to repay the $10.0 million of principal relating to the Debentures
(plus accrued and unpaid interest) and pay down, with any remaining net
proceeds, principal relating to the Term Loan.
Effective May , 1999, the Company authorized a five-for-one stock split
effected in the form of a dividend. All share and per share data in these
financial statements have been retroactively restated to reflect this stock
split.
* * * * *
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,350,000 Shares
[LOGO]
Common Stock
-------------
PROSPECTUS
-------------
Hambrecht & Quist
BancBoston Robertson Stephens
-------------
, 1999
-------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO
PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF
THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE IN THAT JURISDICTION.
UNTIL , 1999 ALL DEALERS THAT BUY, SELL OR TRADE IN OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the estimated expenses payable by us in
connection with this offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
SEC Registration Fee................................................................................ $ 18,079.04
NASD Filing Fee..................................................................................... 7,004
Nasdaq National Market Listing Fee.................................................................. 75,625
Accounting Fees and Expenses........................................................................ *
Legal Fees and Expenses............................................................................. *
Printing Expenses................................................................................... *
Blue Sky Qualification Fees and Expenses............................................................ 10,000
Transfer Agent's Fee................................................................................ *
Miscellaneous....................................................................................... *
------------
Total........................................................................................... $ 750,000
</TABLE>
The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.
- --------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the Delaware General Corporation Law,
Article VIII of our first amended and restated certificate of incorporation
provides that no director of Stride be personally liable to Stride, its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to
Stride or its stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) in respect of
unlawful dividend payments or stock redemptions or repurchases, or (4) for any
transaction from which the director derived an improper personal benefit. In
addition, the first amended and restated certificate of incorporation provides
that if the Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Article V of our amended and restated by-laws provides for indemnification
by Stride of its officers and certain non-officer employees under certain
circumstances against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement, reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceeding in which
any such person is involved by reason of the fact that such person is or was an
officer or employee of the registrant if such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of Stride, and, with respect to criminal actions or proceedings, if
such person had no reasonable cause to believe his or her conduct was unlawful.
Under Section 7 of the underwriting agreement filed as Exhibit 1.1 hereto,
the underwriters have agreed to indemnify, under certain conditions, Stride, its
directors, certain officers and persons who control Stride within the meaning of
the Securities Act against certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of shares of capital stock issued by the Registrant during the past three years.
Further included is the consideration, if any, received by the Registrant for
such shares, and information relating to the section of the Securities Act or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed.
(1) In June 1998, pursuant to a Securities Purchase and Redemption
Agreement, the Registrant sold an aggregate of 24,802.5 shares of the
Registrant's Series A Convertible Preferred Stock and warrants to
purchase an aggregate of 762,505 shares of common stock for an aggregate
purchase price of $24,802,500 and 1,237,505 shares of the Registrant's
common stock for an aggregate purchase price of $5,197,500 to Summit
Ventures IV, L.P., Summit Subordinated Debt Fund II, L.P., Summit V
Ventures, L.P., Summit V Advisors Fund, L.P., Summit Advisors V (QP),
L.P. and Summit Investors III, L.P., in reliance upon the exemption from
registration under Regulation D of the Securities Act.
(2) In June 1998, pursuant to Restricted Stock Award Agreements, the
Registrant issued an aggregate of 232,560 shares of restricted common
stock to seven employees in reliance upon the exemption from registration
under Rule 701 promulgated under the Securities Act.
(3) In June 1998, pursuant to Non-Qualified Stock Option Agreements, the
Registrant granted options to purchase up to an aggregate of 279,072
shares of common stock to four directors in reliance upon the exemption
from registration under Rule 701 promulgated under the Securities Act.
(4) In June 1998, pursuant to a Restricted Stock Award Agreement, the
Registrant sold an aggregate of 11,628 shares of restricted common stock
for an aggregate purchase price of $160,001 to the Registrant's Chief
Financial Officer in reliance upon the exemption from registration under
Rule 701 promulgated under the Securities Act.
(5) In July 1998, pursuant to a Non-Qualified Stock Option Agreement, the
Registrant granted options to purchase up to an aggregate of 46,512
shares of common stock to the Registrant's Chief Financial Officer in
reliance upon the exemption from registration under Rule 701 promulgated
under the Securities Act.
(6) In August 1998, pursuant to a Non-Qualified Stock Option Agreement, the
Registrant granted options to purchase up to an aggregate of 14,535
shares of common stock to one director in reliance on the exemption from
registration under Rule 701 promulgated under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<C> <C> <S>
* 1.1 Form of Underwriting Agreement.
2.1 Securities Purchase and Redemption Agreement, dated as of June 4, 1998, by and
among the Registrant, the Principal Stockholders and the Purchasers named
therein (excluding schedules, which the Registrant agrees to furnish
supplementally to the Commission upon request).
3.1 Second Amended and Restated Certificate of Incorporation of the Registrant.
3.2 Form of Third Amended and Restated Certificate of Incorporation of the
Registrant (to be effective upon consummation of the offering).
3.3 By-laws of the Registrant.
3.4 Form of Amended and Restated By-laws of the Registrant (to be effective upon
consummation of the offering)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <C> <S>
* 4.1 Specimen certificate for shares of common stock, $.01 par value, of the
Registrant.
* 5.1 Opinion of Goodwin, Procter & Hoar LLP as to the validity of the securities
being offered.
10.1 Shareholders' Agreement, dated June 4, 1998, between the Registrant and the
Shareholders named therein.
10.2 Registration Rights Agreement, dated June 4, 1998, between the Registrant and
the Shareholders named therein.
10.3 Warrant Agreement, dated June 4, 1998, between the Registrant and the Purchasers
named therein.
10.4 Second Amendment and Restatement of the 1998 Stock Option and Grant Plan of the
Registrant.
10.5 Form of standard Non-Qualified Stock Option Agreement.
10.6 Form of standard Restricted Stock Award Agreement.
10.7 Form of Non-Qualified Stock Option Agreement issued to Rachel C. Burnett, John
J. Devine, Alan P. Matthews and Michael C. Robichaud on June 4, 1998.
10.8 Form of Amended and Restated Restricted Stock Award Agreement between the
Registrant and Glen P. Froio, Bethann G. Gilfeather and other senior level
employees entered into on November 16, 1998.
* 10.9 Form of Non-Solicitation, Non-Competition and Non-Disclosure Agreement, dated
June 4, 1998, between the Registrant and Michael C. Robichaud, Rachel C. Barret,
John J Devine, and Alan P. Matthews entered into on June 4, 1998.
* 10.10 Amended and Restated Employment Agreement, dated March 19, 1999, between the
Registrant and Michael C. Robichaud.
10.11 Promissory Note, dated July 14, 1998, from Anthony J.M. Groves in favor of the
Registrant.
10.12 Subordinated Debenture D-1 Due August 4, 2003 of the Registrant.
10.13 Subordinated Debenture D-2 Due August 4, 2003 of the Registrant.
* 10.14 Revolving Credit and Term Loan Agreement, dated as of June 4, 1998, among the
Registrant, BankBoston, N.A. and other lending institutions named therein.
* 10.15 First Amendment to Revolving Credit and Term Loan Agreement, dated as of August
10, 1998, among the Registrant, BankBoston, N.A. and the other lending
institutions named therein.
* 10.16 Second Amendment to Revolving Credit and Term Loan Agreement, dated as of
December 31, 1998, among the Registrant, BankBoston, N.A. and the other lending
institutions named therein.
* 10.17 Third Amendment to Revolving Credit and Term Loan Agreement, dated as of March
16, 1999, among the Registrant, BankBoston, N.A. and the other lending
institutions named therein.
10.18 Subordination and Intercreditor Agreement, dated as of June 4, 1998, among
BankBoston, N.A., Summit Investors III, L.P., Summit Subordinated Debt Fund II,
L.P. and the Registrant.
10.19 Security Agreement, dated as of June 4, 1998, between the Registrant and
BankBoston, N.A.
* 11.1 Computation of income per common share.
* 23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto).
23.2 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney (included on page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment to this Registration Statement.
II-3
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because they are not required or because the
required information is given in our Financial Statements or Notes to those
statements.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of
Massachusetts, on March 30, 1999.
STRIDE & ASSOCIATES, INC.
BY: /S/ MICHAEL C. ROBICHAUD
----------------------------------------
Michael C. Robichaud
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Michael C. Robichaud and Anthony J.M.
Groves such person's true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ MICHAEL C. ROBICHAUD Officer and Director
- ------------------------------ (Principal Executive March 30, 1999
Michael C. Robichaud Officer)
Chief Financial Officer
/s/ ANTHONY J.M. GROVES (Principal Financial
- ------------------------------ Officer and Principal March 30, 1999
Anthony J.M. Groves Accounting Officer)
/s/ RACHEL C. BURNETT Director
- ------------------------------ March 30, 1999
Rachel C. Burnett
/s/ SCOTT C. COLLINS Director
- ------------------------------ March 30, 1999
Scott C. Collins
/s/ JOHN J. DEVINE Director
- ------------------------------ March 30, 1999
John J. Devine
/s/ ALAN P. MATTHEWS Director
- ------------------------------ March 30, 1999
Alan P. Matthews
/s/ JAMES C. NEW Director
- ------------------------------ March 30, 1999
James C. New
/s/ THOMAS S. ROBERTS Director
- ------------------------------ March 30, 1999
Thomas S. Roberts
</TABLE>
II-5
<PAGE>
Exhibit 2.1
STRIDE & ASSOCIATES, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
Dated as of June 4, 1998
<PAGE>
STRIDE & ASSOCIATES, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
Dated as of June 4, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
PURCHASE AND SALE OF SECURITIES; REDEMPTION.......................................................................1
1.1 PURCHASE AND SALE OF SUBORDINATED DEBENTURES......................................................1
1.2 PURCHASE AND SALE OF CONVERTIBLE PREFERRED STOCK..................................................2
1.3 PURCHASE AND SALE OF COMMON STOCK.................................................................2
1.4 PURCHASE OF WARRANTS..............................................................................3
1.5 USE OF PROCEEDS; REDEMPTION.......................................................................3
1.6 CLOSING...........................................................................................3
1.7 OPTIONS AND RESTRICTED STOCK......................................................................4
1.8 DISTRIBUTIONS ON OR PRIOR TO CLOSING DATE.........................................................4
1.9 BONUS TO SENIOR MANAGERS..........................................................................4
1.10 STOCK SPLIT.......................................................................................5
1.11 HSR FILING........................................................................................5
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS............................................................................5
2.1 ORGANIZATION AND CORPORATE POWER..................................................................5
2.2 AUTHORIZATION.....................................................................................5
2.3 GOVERNMENT APPROVALS..............................................................................6
2.4 AUTHORIZED AND OUTSTANDING STOCK..................................................................6
2.5 SUBSIDIARIES......................................................................................7
2.6 FINANCIAL INFORMATION.............................................................................7
2.7 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS.........................................8
2.8 LITIGATION........................................................................................8
2.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS........................................................8
2.10 TAXES.............................................................................................8
2.11 REAL PROPERTY; ENVIRONMENTAL MATTERS..............................................................9
2.12 PERSONAL PROPERTY................................................................................10
2.13 PATENTS, TRADEMARKS, ETC.........................................................................10
2.14 AGREEMENTS OF DIRECTORS, OFFICERS AND EMPLOYEES..................................................11
2.15 PERMITS AND LICENSES.............................................................................11
2.16 CONTRACTS AND COMMITMENTS........................................................................11
2.17 REGISTRATION RIGHTS..............................................................................11
2.18 INSURANCE COVERAGE...............................................................................11
2.19 EMPLOYEE MATTERS.................................................................................11
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
2.20 CLIENTS..........................................................................................12
2.21 NO BROKERS OR FINDERS............................................................................13
2.22 TRANSACTIONS WITH AFFILIATES.....................................................................13
2.23 ASSUMPTIONS, GUARANTEES, ETC. OF INDEBTEDNESS OF OTHER PERSONS...................................13
2.24 DISCLOSURES......................................................................................13
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY.............................................................................13
3.1 ACCOUNTS AND REPORTS.............................................................................13
3.2 PAYMENT OF TAXES.................................................................................15
3.3 MAINTENANCE OF KEY MAN INSURANCE.................................................................15
3.4 COMPLIANCE WITH LAWS, ETC........................................................................15
3.5 INSPECTION.......................................................................................15
3.6 CORPORATE EXISTENCE; OWNERSHIP OF SUBSIDIARIES...................................................16
3.7 COMPLIANCE WITH ERISA............................................................................16
3.8 BOARD APPROVAL...................................................................................16
3.9 FINANCINGS.......................................................................................16
3.10 MEETINGS OF THE BOARD OF DIRECTORS...............................................................16
3.11 NINTH BOARD MEMBER...............................................................................16
3.12 TRADING POLICY...................................................................................16
3.13 EMPLOYEE BENEFITS................................................................................17
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY................................................................................17
4.1 INVESTMENTS IN OTHER PERSONS.....................................................................17
4.2 DISTRIBUTIONS....................................................................................18
4.3 DEALINGS WITH AFFILIATES.........................................................................19
4.4 MERGER...........................................................................................19
4.5 LIMITATION ON OPTIONS............................................................................19
4.6 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND OTHER DISTRIBUTIONS.......................19
4.7 NO CONFLICTING AGREEMENTS........................................................................20
4.8 CHANGE IN BUSINESS...............................................................................20
4.9 INDEBTEDNESS.....................................................................................20
4.10 LIENS............................................................................................20
4.11 CONSOLIDATED OPERATING CASH FLOW TO CONSOLIDATED TOTAL DEBT......................................20
4.12 PROFITABLE OPERATIONS............................................................................20
4.13 TOTAL INDEBTEDNESS TO EBITDA.....................................................................20
ARTICLE V
INVESTMENT REPRESENTATIONS.......................................................................................20
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
5.1 REPRESENTATIONS AND WARRANTIES...................................................................20
5.2 PERMITTED TRANSFERS; LEGENDS.....................................................................22
ARTICLE VI
SUBORDINATION OF DEBENTURES......................................................................................23
6.1 AGREEMENT TO SUBORDINATE.........................................................................23
ARTICLE VII
CONDITIONS OF PURCHASERS' OBLIGATIONS............................................................................23
7.1 EFFECT OF CONDITIONS.............................................................................23
7.2 REPRESENTATIONS AND WARRANTIES...................................................................23
7.3 PERFORMANCE......................................................................................24
7.4 NO MATERIAL ADVERSE CHANGE.......................................................................24
7.5 OPINION OF COUNSEL...............................................................................24
7.6 COMPLETION OF DUE DILIGENCE......................................................................24
7.7 COMPLETION OF AUDIT..............................................................................24
7.8 EMPLOYMENT AGREEMENT.............................................................................24
7.9 NON COMPETITION AGREEMENTS.......................................................................24
7.10 BOARD ELECTION...................................................................................24
7.11 ARTICLES OF INCORPORATION........................................................................25
7.12 CONSENTS AND WAIVERS.............................................................................25
7.13 REGISTRATION RIGHTS AGREEMENT....................................................................25
7.14 SHAREHOLDERS' AGREEMENT..........................................................................25
7.15 INJUNCTIONS, ETC.................................................................................25
7.16 FIRPTA...........................................................................................25
ARTICLE VIII
CONDITIONS OF THE OBLIGATIONS OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS...........................................................................25
8.1 EFFECT OF CONDITIONS.............................................................................25
8.2 REPRESENTATIONS AND WARRANTIES...................................................................25
8.3 SHAREHOLDERS' AGREEMENT..........................................................................25
8.4 PERFORMANCE......................................................................................26
8.5 CONSENTS AND WAIVERS.............................................................................26
8.6 REGISTRATION RIGHTS AGREEMENT....................................................................26
8.7 SENIOR CREDIT AGREEMENT..........................................................................26
8.8 RESTRICTED STOCK AWARDS; FOUNDER OPTIONS.........................................................26
8.9 DISTRIBUTIONS....................................................................................26
8.10 INJUNCTIONS, ETC.................................................................................26
8.11 BONUS PAYMENTS...................................................................................26
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
DEFAULTS AND REMEDIES............................................................................................26
9.1 EVENTS OF DEFAULT; ACCELERATION..................................................................26
9.2 RESCISSION OF ACCELERATION.......................................................................29
ARTICLE X
INDEMNIFICATION AND LIMITS ON LIABILITY..........................................................................29
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......................................................29
10.2 INDEMNIFICATION BY THE PRINCIPAL SHAREHOLDERS....................................................29
10.3 NOTICE OF CLAIM..................................................................................30
10.4 COMMENCEMENT OF ACTIONS..........................................................................30
10.5 ADJUSTMENT FOR TAXES AND INSURANCE...............................................................31
10.6 EXCLUSIVE REMEDY.................................................................................31
ARTICLE XI
CERTAIN DEFINITIONS..............................................................................................31
ARTICLE XII
MISCELLANEOUS....................................................................................................33
12.1. DEBENTURE PAYMENTS...............................................................................33
12.2 FORM, REGISTRATION, TRANSFER AND EXCHANGE OF DEBENTURES..........................................34
12.3 PARTIES IN INTEREST..............................................................................34
12.4 DEBENTURES OWNED BY AFFILIATES...................................................................34
12.5 AMENDMENTS AND WAIVERS...........................................................................35
12.6 NOTICES..........................................................................................35
12.7 EXPENSES.........................................................................................36
12.8 COUNTERPARTS.....................................................................................36
12.9 EFFECT OF HEADINGS...............................................................................36
12.10 GOVERNING LAW....................................................................................37
Matters .................................................................................................37
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
A Form of Senior Subordinated Debenture
B Description of Preferred Stock
C Amended Certificate of Incorporation
D Opinion of Counsel for the Company and Principal Shareholders
E Employment Agreement
F Non-Solicitation, Non-Competition and Non-Disclosure Agreement
G Registration Rights Agreement
H Shareholders' Agreement
I 1998 Stock Option and Grant Plan
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
J Form of Restricted Stock Award Agreement
K Form of Founders' Option Agreement
L Warrant Agreement
</TABLE>
-v-
<PAGE>
June 4, 1998
To: The Persons listed on
SCHEDULE 1.1 attached hereto:
Re: SECURITIES PURCHASE AND REDEMPTION AGREEMENT
Ladies and Gentlemen:
Stride & Associates, Inc., a Delaware corporation (the "Company"), and
John Devine, Rachel Burnett, Alan Matthews and Michael Robichaud (each a
"Principal Shareholder" and collectively the "Principal Shareholders") hereby
agree with you as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES; REDEMPTION
1.1 PURCHASE AND SALE OF SUBORDINATED DEBENTURES. At the Closing (as
such term and other terms are defined in Article XI), the Company will sell to
you (the "Purchasers") 12% Senior Subordinated Debentures of the Company (the
"Debentures") in the aggregate principal amount of $10,000,000. The Debentures
shall be in the form of EXHIBIT A attached hereto. The Debentures shall have the
following terms, and shall be entitled to the following rights and benefits:
(a) The principal amount of the Debentures shall be payable in
full on August 4, 2003. The Debentures shall be prepaid in full upon
consummation of a Liquidity Event. The Company may prepay the Debentures in
whole or from time to time in installments of not less than $100,000, without
premium or penalty. Each such optional prepayment shall be preceded by not less
than two Business Days' notice. At any time the Company prepays the Debentures,
it shall also pay any accrued but unpaid interest. Any partial prepayment of the
Debentures shall be allocated among all holders of Debentures PRO RATA in
proportion to the principal amount of the Debentures held by each.
<PAGE>
(b) The Debentures shall bear interest from the date of
issuance until the date of payment in principal in full. Interest shall be
computed on the basis of a 365 day year and the actual number of days elapsed,
on the unpaid principal amount of the Debentures at the Applicable Interest Rate
(as herein defined). To the extent permitted under the provisions of the Senior
Credit Agreement and the Subordination Agreement (as each of those terms and
other defined terms used herein are defined in Article XI hereof), interest
shall be payable on each March 31, June 30, September 30, and December 31 for
the respective three month period ending on such date, commencing on the first
such date following Closing, or if any such date is not a Business Day, on the
next succeeding Business Day.
(c) The "Applicable Interest Rate" shall mean the rate of
twelve percent (12%) per annum; provided, however, that if an Event of Default
shall have occurred and be continuing, the Applicable Interest Rate shall
increase to fourteen percent (14%) per annum until the Event of Default shall
have been cured or waived or until the principal of and all accrued interest on
the Debenture shall have been paid in full.
(d) All payments of principal and interest on the Debentures
shall be made by the Company in lawful money of the United States in immediately
available federal funds (or at the request of the holder of a Debenture in
writing not less than two Business Days before a payment date by a certified or
a bank check or wire transfer) on the date such payment is due in accordance
with Section 12.1 hereof.
(e) The indebtedness evidenced by the Debentures shall be
junior and subordinate in right of payment to all Senior Debt, as that term is
defined in Article II hereof.
(f) The parties agree that the issue price of the Debentures
shall be their face amount for federal income tax purposes.
1.2 PURCHASE AND SALE OF CONVERTIBLE PREFERRED STOCK. At the Closing,
the Company will sell to the Purchasers investment units ("Units") comprised of
the Series A Preferred Stock, Common Stock and Warrants herein described.
Included in the Units will be 24,802.5 shares of Series A Convertible Preferred
Stock of the Company, par value $.01 per share (the "Series A Preferred Stock"),
at a price of $1,000 per share, for a total purchase price for the Series A
Preferred Stock of $24,802,500 The Series A Preferred Stock shall have the
rights, terms, preferences and privileges set forth in the Description of
Preferred Stock attached as EXHIBIT B hereto, and shall be convertible into
24,802.5 shares of Series B Redeemable Preferred Stock, par value $.01 per share
("Series B Preferred Stock, and, together with the Series A Preferred Stock, the
"Preferred Stock"), and 40 shares of common stock of the Company, par value $.01
per share ("Common Stock") as set forth on EXHIBIT B. The Series B Preferred
Stock shall have the rights, terms, preferences and privileges set forth on
EXHIBIT B. The shares of Series B Preferred Stock and Common Stock issuable upon
conversion of the Series A Preferred Stock are referred to herein collectively
as the "Conversion Shares." The principal amount of Debentures and number
-2-
<PAGE>
of shares of Series A Preferred Stock, Common Stock and Warrants to be issued to
each Purchaser are set forth on SCHEDULE 1.2 attached hereto.
1.3 PURCHASE AND SALE OF COMMON STOCK. At the Closing, the Company will
sell to the Purchasers an aggregate of 49.5 shares of Common Stock, (together
with the Debentures and the Series A Preferred Stock, the "Securities"). The
Common Stock shall be sold at a price of $105,000 per share, for a total
purchase price of $5,197,500 for the Common Stock. Prior to the Closing, the
Certificate of Incorporation of the Company shall be amended as set forth on
EXHIBIT C.
1.4 PURCHASE OF WARRANTS. At the Closing, the Company will issue to the
Purchasers, as part of the Units and for no additional consideration, warrants
(the "Warrants" and, together with the Debentures, the Series A Preferred Stock
and the Common Stock, the "Securities") to purchase an aggregate of 30.5 shares
of Common Stock at a price of $115,500 per share. The Warrants will be issued
pursuant to a Warrant Agreement in the form of EXHIBIT L attached hereto, and
the shares of Common Stock issuable upon exercise thereof are referred to herein
as the "Warrant Shares." The Company and the Purchasers agree that the purchase
price paid for the Series A Preferred Stock and Common Stock represents the fair
market value thereof on the date hereof and agree to account for the purchase of
such securities on such basis.
1.5 USE OF PROCEEDS; REDEMPTION. The proceeds from the sale of the
Securities, and certain additional senior financing to be obtained at the
Closing, shall be used by the Company to fund the redemption of 120 shares of
Common Stock (the "Redemption Shares") from the Principal Shareholders at a
price of $539,292.50 per share, for a total redemption price of $64,715,131,
which amount is $66 million less the Offset Amount under Section 1.8 hereof (the
"Redemption Price"). Each Principal Shareholder shall have redeemed from him or
her that number of Redemption Shares set forth opposite his or her name on
SCHEDULE 1.5 attached hereto in exchange for that portion of the Redemption
Price set forth opposite his or her name on such Schedule. Upon the surrender of
the Redemption Shares to the Company, the Company shall cancel such Redemption
Shares, which shares shall thereafter cease to be issued and outstanding. After
giving effect to the issuance of the Securities and the redemption of the
Redemption Shares, the outstanding shares of Common Stock shall be held by those
Persons and in such amounts as are set forth on SCHEDULE 1.5 attached hereto.
1.6 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth in Articles VII and VIII hereof, the purchase of the Securities shall
be made at a closing (the "Closing") to be held at the offices of Hutchins,
Wheeler & Dittmar, A Professional Corporation, 101 Federal Street, Boston,
Massachusetts, at 10:00 A.M. on June 4, 1998, or, if later, a date specified by
the Purchasers which is not later than ten (10) Business Days after the delivery
to the Purchasers of the audited financial statements and management letter
described in Section 7.7. (the "Closing Date"). Payment at the Closing for the
Securities and the Redemption Shares shall be by wire transfer payable in
immediately available federal funds. Each Purchaser
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shall pay that amount for the Securities being acquired by it at the Closing as
described on SCHEDULE 1.2 hereof. At the Closing, the Company will deliver to
each Purchaser one or more certificates and notes representing the Securities
purchased by such Purchaser, in such denominations and issued in such names as
may be requested by such Purchaser. At the Closing, each Principal Shareholder
shall surrender to the Company the certificate or certificates representing his
or her portion of the Redemption Shares, whereupon the Company shall arrange for
the payment by wire transfer to each of the Principal Shareholders their
respective portion of the Redemption Price payable in immediately available
federal funds.
1.7 OPTIONS AND RESTRICTED STOCK. At or prior to the Closing, the
Company shall establish the 1998 Stock Option and Grant Plan (the "Plan") in
substantially the form of EXHIBIT I attached hereto. There shall be reserved for
issuance pursuant to the Plan a total of 32.558 shares of Common Stock. Of such
number, 23.256 shares (the "Management Pool") shall be reserved for issuance
pursuant to awards (including incentive stock options, nonqualified stock
options and restricted and non-restricted stock awards) under the Plan which may
be granted to members of senior management and Directors, other than the
Principal Shareholders. At the Closing, the Company shall grant restricted stock
awards ("Restricted Stock Awards") out of such Management Pool to those members
of senior management (other than the Principal Shareholders) identified in
SCHEDULE 1.6(A) hereto (the "Senior Managers"). Such Restricted Stock Awards
shall be granted to Senior Managers in the amounts set forth opposite their
respective names on SCHEDULE 1.7(A) hereto. The terms and restrictions of the
Restricted Stock Awards shall be contained in an award agreement substantially
in the form of EXHIBIT J attached hereto (the "Restricted Stock Award
Agreement"). Other than the Restricted Stock Awards, none of the shares in the
Management Pool may be issued at a price which corresponds to a Common Stock
valuation of the Company of less than $110,000,000. The balance of 9.302 shares
of Common Stock reserved under the Plan shall be reserved for issuance upon
exercise of non-qualified options granted at the Closing to the Principal
Shareholders (the "Founder Options"). Such Founder Options shall be granted to
the Principal Shareholders in the amounts set forth opposite their respective
names on SCHEDULE 1.7B hereto. The Founder Options shall be in substantially the
form of EXHIBIT K attached hereto, and shall have an excise price which
corresponds to a Common Stock valuation of the Company of at least $120,000,000.
1.8 DISTRIBUTIONS ON OR PRIOR TO CLOSING DATE. On or prior to the
Closing Date, the Company shall distribute to the Principal Shareholders (i) an
amount equal to the pre-tax earnings of the Company for the quarter ended March
31, 1998; and (ii) an amount equal to the pre-tax earnings of the Company for
the period (the "Stub Period") April 1, 1998 through the Closing (the "Stub
Amount"). The Company shall also make the payments and/or distributions
designated by the Principal Shareholders as set forth in SCHEDULE 1.8 attached
hereto (the "Designated Distributions"). To the extent that the aggregate of the
Stub Amount and the Designated Distributions exceeds the Tax Liability Amount
(as hereinafter defined), such excess (the "Offset Amount") shall reduce the
amount of the Redemption Price. For purposes of this Section 1.8, the term "Tax
Liability Amount" shall mean an amount equal to the aggregate
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federal and state income tax liabilities of the Principal Shareholders
attributable to the earnings of the Company for the Stub Period. Except as set
forth in this Section 1.8, the Company shall not have made any distributions to
the Principal Shareholders since December 31, 1997.
1.9 BONUS TO SENIOR MANAGERS. Concurrently with the grant of the
Restricted Stock Awards to the Senior Managers pursuant to Section 1.7, the
Company shall pay to the Senior Managers cash bonuses (the "Cash Bonuses") equal
to the amount of income taxes incurred by such persons in connection with the
receipt of the Restricted Stock Awards and the Cash Bonuses. Such aggregate Cash
Bonuses shall be allocated among the Senior Managers in accordance with SCHEDULE
1.9 hereto. The Cash Bonuses shall be applied to pay all withholding and other
taxes determined to be due in connection with the Restricted Stock Awards and
Cash Bonuses.
1.10 STOCK SPLIT. Immediately after the Closing, the Company will
effect a 5,000-for-1 stock split in the form of a common stock dividend of 4,999
shares issued for each share of Common Stock outstanding.
1.11 HSR FILING. If prior to the conversion of the Series A Preferred
Stock or exercise of the Warrants one or more of the Purchasers is required to
make a filing under the Hart-Scott- Rodino Antitrust Improvements Act of 1976
with respect to an acquisition of securities of the Company, the Company will
cooperate in the preparation and submission of such filing and will pay any
filing fee payable in connection therewith.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS
In order to induce the Purchasers to purchase the Securities, the
Company and the Principal Shareholders, acting jointly and severally, make the
following representations and warranties which shall be true, correct and
complete in all respects on the date hereof except for those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time; provided, however, that each Principal
Shareholder's warranties set forth in Section 2.2(b) and, with respect to the
title to the Common Stock held by such Principal Shareholder, Section 2.4
(collectively, the "Individual Representations"), are made severally and not
jointly by each Principal Shareholder with respect to his or her respective
warranties contained therein. For purposes of this Agreement, the phrase "to the
knowledge of the Company and the Principal Shareholders" or any similar phrase
shall mean the actual, not constructive or imputed, knowledge of any one or more
of John Devine, Rachel Burnett, Alan Matthews, Michael Robichaud, Anthony
Groves, Beth Matonis, Krista McDonagh and Glen Froio, without any obligation on
any of their parts to make any independent investigation of the
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matters being represented or warranted, or to make any inquiry of any other
persons, or to search or examine any files, records, books, correspondence and
the like.
2.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own its properties and to carry on its business as presently
conducted. The Company is qualified as a foreign corporation in good standing in
each jurisdiction in which it owns or leases real property or maintains
employees.
2.2 AUTHORIZATION. (a) The Company has all necessary corporate power
and has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement and the
Related Documents, and any other agreements or instruments executed by the
Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Securities, and the issuance of the Series B
Preferred Stock and Common Stock upon conversion of the Series A Preferred Stock
and the issuance of the Warrant Shares upon exercise of the Warrants. The
issuance of the Securities, and the issuance of the Series B Preferred Stock and
Common Stock upon conversion of the Series A Preferred Stock and the issuance of
the Warrant Shares upon exercise of the Warrants, does not require any further
corporate action and is not and will not be subject to any preemptive right,
right of first refusal or the like. This Agreement and the Related Documents and
the other agreements and instruments executed by the Company in connection
herewith or therewith will each be a valid and binding obligation of the Company
enforceable in accordance with its respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(b) Each Principal Shareholder has full right and power to
execute and deliver this Agreement and the Related Documents to which he or she
is a party, and any other agreements or instruments executed by him or her in
connection herewith or therewith and to consummate the transactions contemplated
herein or therein. This Agreement, the Related Documents and the other
agreements and instruments executed by the Principal Shareholders in connection
herewith or therewith each will be a valid and binding obligation of each
Principal Shareholder enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
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2.3 GOVERNMENT APPROVALS. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company or the
Principal Shareholders in connection with the execution, delivery and
performance by the Company or the Principal Shareholders of this Agreement, any
of the Related Documents and any other agreements or instruments executed by the
Company or the Principal Shareholders in connection herewith or therewith, or in
connection with the issuance of the Securities or the issuance of the Series B
Preferred Stock and Common Stock upon conversion of the Series A Preferred Stock
or the Warrant Shares upon exercise of the Warrants, except for (i) those which
have already been made or granted, and (ii) the filing of registration
statements with the Securities and Exchange Commission (the "Commission") and
any applicable state securities commission as specifically provided for in the
Registration Rights Agreement and, (iii) any filing contemplated by Section 1.11
hereof.
2.4 AUTHORIZED AND OUTSTANDING STOCK. Immediately prior to the Closing,
the authorized capital stock of the Company consists of (i) 3,000 shares of
Common Stock, of which 200 shares are validly issued and outstanding and held of
record and owned beneficially by the Persons set forth on SCHEDULE 2.4 attached
hereto, free and clear of all liens, security interests, restrictions on
transfer, and other encumbrances except as otherwise set forth in SCHEDULE 2.4.
Immediately after the Closing, and after giving effect to the stock split
described in Section 1.9, the authorized capital stock of the Company will
consist of (a) 10,000,000 shares of Common Stock, 705,500 of which will be
issued and outstanding and held of record by the Persons set forth on SCHEDULE
1.5 attached hereto; and (b) 5,000,000 shares of Preferred Stock, of which
24,802.5 shall have been designated as Series A Preferred Stock with the rights,
terms and privileges set forth in EXHIBIT A, and all of which will be issued and
outstanding and held of record by the Purchasers as set forth on SCHEDULE 1.1,
and 24,802.5 of which shall have been designated Series B Preferred Stock. All
issued and outstanding shares of capital stock are, and when issued in
accordance with the terms hereof, all Securities and all shares of Series B
Preferred Stock and Common Stock issuable upon conversion of the Series A
Preferred Stock and all Warrant Shares issuable upon exercise of the Warrants,
will be, duly and validly authorized, validly issued and fully paid and
non-assessable and free from any restrictions on transfer, except for
restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to any Related Document. Except as set forth
on SCHEDULE 2.4, there are no outstanding warrants, options, commitments,
preemptive rights, rights to acquire or purchase, conversion rights or demands
of any character relating to the capital stock or other securities of the
Company other than those specifically contemplated by this Agreement. All issued
and outstanding shares of capital stock of the Company were issued (i) in
transactions exempt from the registration provisions of the Act, and (ii) in
compliance with or in transactions exempt from the registration provisions of
applicable state securities or "blue-sky" laws.
2.5 SUBSIDIARIES. Except as set forth in SCHEDULE 2.5, the Company does
not have any Subsidiaries or other equity investment in any other Person.
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2.6 FINANCIAL INFORMATION. The Company has previously delivered to the
Purchasers the financial statements of the Company for the years ended December
31, 1996 and December 31, 1997 accompanied by the audit report of Deloitte &
Touche, LLP (together with the financial statements referenced in Section 7.7,
the "Audited Financial Statements") and the unaudited financial statements as of
April 30, 1998 (the "Last Balance Sheet Date") and for the four (4) months then
ended (the "Unaudited Financial Statements, and together with the Audited
Financial Statements, the "Financial Statements"). The Financial Statements are
in accordance with the books and records of the Company and present fairly in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods the financial condition and results of operations
of the Company as of the dates and for the periods shown; provided, however,
that the Unaudited Financial Statements do not have footnotes required by
generally accepted accounting principles ("GAAP"), and are subject to normal and
customary year end adjustments, none of which will be material. The Company has
no liability or obligation, contingent or otherwise, which is required to be
reserved against or reflected in accordance with GAAP and is not adequately
reserved against or reflected in the balance sheets contained in the Financial
Statements, except for liabilities and obligations incurred in the ordinary
course of business since December 31, 1997 and liabilities resulting from the
transactions contemplated hereby. Except as set forth on SCHEDULE 2.6, since
December 31, 1997, there has been no change in the business, assets,
liabilities, financial condition, or operations of the Company except for
changes which, individually or in the aggregate, would not have a Material
Adverse Effect, whether or not insured against.
2.7 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS. Except
as specifically contemplated in this Agreement or the Related Documents or as
set forth on SCHEDULE 2.7, since December 31, 1997, the Company has not, except
in the ordinary course of business, (i) issued any stock, stock options,
warrants or other securities convertible into or exchangeable for capital stock,
or any bond or other corporate security, (ii) borrowed any money (except under
revolving lines of credit which existed as of December 31, 1997) or mortgaged,
pledged or subjected to any lien any of its assets, tangible or intangible,
(iii) sold, assigned or transferred any of its tangible assets, or canceled any
debt or claim, or (iv) suffered any loss of property or waived any right of
substantial value. Except as specifically contemplated in this Agreement or the
Related Documents or as set forth on SCHEDULE 2.7, since December 31, 1997, the
Company has not declared or made any payment or distribution to stockholders in
any capacity or purchased or redeemed any shares of its capital stock or other
securities.
2.8 LITIGATION. Except as otherwise set forth on SCHEDULE 2.8, there is
no litigation or governmental proceeding or investigation pending against the
Company or, to the knowledge of the Company or the Principal Shareholders,
threatened against the Company, affecting any of its properties or assets, or to
the knowledge of the Company and the Principal Shareholders any litigation or
governmental proceeding or investigation pending against any officer, key
employee or shareholder of the Company in his capacity as such. The Company is
not, to the knowledge of the Company and the Principal Shareholders, in material
default with respect to any order, writ,
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injunction, decree, ruling or decision of any court, commission, board or other
government agency.
2.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set forth on
SCHEDULE 2.9, the Company is in compliance with (i) its charter and by-laws,
and, (ii) with the provisions of each mortgage, indenture, lease, license, other
agreement or instrument, judgment, decree, judicial order, statute, and
regulation by which it is bound or to which it or its properties are subject,
except to the extent non-compliance under this clause (ii) would not have a
Material Adverse Effect. Neither (i) the execution, delivery or performance of
this Agreement and the Related Documents, nor (ii) the consummation of the
transactions contemplated hereby and thereby, nor (iii) the offer, issuance,
sale or delivery of the Securities, nor (iv) the redemption of the Redemption
Shares, will, with or without the giving of notice or passage of time, or both,
violate, or result in any breach of, or constitute a default under, or result in
the imposition of any encumbrance upon any asset of the Company pursuant to any
provision of the Company's charter or by-laws, or any statute, rule or
regulation, contract, lease, judgment, decree or other document or instrument by
which the Company is bound or to which it or any of its properties are subject,
except in each case for violations, breaches, defaults, encumbrances or losses
which would not have a Material Adverse Effect.
2.10 TAXES. Prior to giving effect to the transactions contemplated
hereby, the Company qualifies as an S corporation within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code") for federal income tax
purposes and has been an S corporation continually since October 7, 1996. The
Company has filed all tax returns, reports and forms (including statements of
estimated taxes owed) required to be filed within the applicable periods for
such filings and has paid all taxes required to be paid, and has established
adequate reserves (net of estimated tax payments already made) for the payment
of all taxes payable in respect to the period subsequent to the last periods
covered by such returns. All such tax returns, reports and forms are true,
correct and complete and have been made available to the Purchasers. The Company
has properly classified for tax purposes all employees, consultants and
independent contractors, and has made all filings and has withheld and paid all
taxes, required to have been filed, withheld or paid in connection with services
provided by such persons. Adequate amounts have been withheld by the Company
from its employees for all periods in compliance with the tax, social security
and unemployment withholding provisions of all federal, state, local and foreign
laws. No deficiencies for any past due tax are currently assessed against the
Company, and no tax returns of the Company have ever been audited or examined,
and, to the knowledge of the Company and the Principal Shareholders, there is no
such audit or examination pending and the Company has not received any notice
from any taxing authority that it is contemplating such an audit. There is no
tax lien, whether imposed by any federal, state or local taxing authority,
outstanding against the assets, properties or business of the Company, other
than any lien for taxes not yet due and payable. The Company is not a "United
State Real Property Holding Corporation" within the meaning of Section 897(c)(2)
of the Code. The Company has not filed a consent under Section 341(f) of the
Code. The Company has not waived or extended any statute
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of limitation in respect of taxes or agreed to any extension of time with
respect to a tax assessment or deficiency. None of the Principal Shareholders is
a "foreign person" within the meaning of Section 1445 of the Code. For the
purposes of this Agreement, the term "tax" shall include all federal, state,
local and foreign taxes, including income, franchise, property, sales, use,
gross receipts, excise, withholding, payroll and employment taxes or other
similar assessments of any kind whatsoever, including all interest, penalties
and additions imposed with respect to such amounts.
2.11 REAL PROPERTY; ENVIRONMENTAL MATTERS.
(a) SCHEDULE 2.11 sets forth the addresses and uses of all
real property that the Company leases or subleases, and any lien (exclusive of
any statutory landlord's lien) or encumbrance for which the Company is liable
and which the Company has secured with any such leasehold interest. True and
correct copies of the Company's real property lease have previously been
provided to the Purchasers (or their legal counsel). There are no defaults by
the Company, or to the knowledge of the Company and the Principal Shareholders,
by any other party thereto, which might curtail in any material respect the
present use by the Company of the property listed on SCHEDULE 2.11. Except as
set forth in SCHEDULE 2.11, the performance by the Company of this Agreement and
the Related Documents will not result in the termination of, or in any increase
of any amounts payable under, any lease listed on SCHEDULE 2.11.
(b) The Company is not in violation of any law, regulation or
ordinance relating to zoning, environmental, city planning or similar matters)
relating to any real property or part thereof, as the case may be, leased or
subleased by the Company which violation would have a Material Adverse Effect.
(c) Except for commercially reasonable quantities of leasing
and office supplies, the Company has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Waste (as defined below) or
Hazardous Material (as defined below). To the knowledge of the Company and the
Principal Shareholders, (i) the Company does not have any material liability
under, nor has the Company violated in any material respect, any Environmental
Law (as defined below); (ii) the Company is in compliance in all material
respects with applicable Environmental Laws; and (iii) the Company has never
entered into or been subject to any judgment, consent decree, compliance order,
or administrative order with respect to any environmental or health and safety
matter or received any demand letter, formal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law. For purposes of this Section 2.11(c), (i) "Hazardous
Material" shall mean and include any hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, or contaminant, as defined
or regulated under any Environmental Law, or any other substance which may pose
a threat to the environment or to human health or safety; (ii) "Hazardous Waste"
shall mean and include any hazardous waste as defined or regulated under any
Environmental Law; and (iii) "Environmental Law" shall mean
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any environmental or health and safety-related law, regulation, rule, ordinance,
or by-law at the foreign, federal, state, or local level existing as of the date
hereof.
2.12 PERSONAL PROPERTY. Except as set forth on SCHEDULE 2.12 and except
for property sold or otherwise disposed of in the ordinary course of business
since the Last Balance Sheet Date, the Company owns free and clear of any liens
or encumbrances, all of the personal property reflected as owned by the Company
in the Last Balance Sheet, and all other material items of personal property
acquired by the Company through the date hereof. All material items of such
personal property are in normal operating condition, wear and tear excepted.
2.13 PATENTS, TRADEMARKS, ETC. Set forth on SCHEDULE 2.13 is a list of
all material patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service mark applications trade names and
copyrights owned by or registered in the name of the Company, or of which the
Company is a licensor or licensee. The Company owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know-how
(collectively, "Intellectual Property") necessary to the conduct of its business
as conducted and no claim is pending or, to the knowledge of the Company and the
Principal Shareholders, threatened to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property, and the Company and the Principal Shareholders
are not aware of any basis upon which any such claim (whether or not pending or
threatened) should reasonably be anticipated. Except as set forth on SCHEDULE
2.13, no claim is pending or, to the knowledge of the Company and the Principal
Shareholders, threatened to the effect that any such Intellectual Property owned
or licensed by the Company, or which the Company otherwise has the right to use,
is invalid or unenforceable by the Company, and the Company and the Principal
Shareholders are not aware of any basis upon which any such claim (whether or
not pending or threatened) should reasonably be anticipated.
2.14 AGREEMENTS OF DIRECTORS, OFFICERS AND EMPLOYEES. To the knowledge
of the Company, no director, officer or employee of the Company is in violation
of any terms of any employment contract, non-competition agreement,
non-disclosure agreement, patent disclosure or assignment agreement or other
contract or agreement containing restrictive covenants relating to the right of
any such director, officer, employee to be employed or engaged by the Company
because of the nature of the business conducted or proposed to be conducted by
the Company, or relating to the use of trade secrets or proprietary information
of others.
2.15 PERMITS AND LICENSES. The Company has all permits, licenses,
orders, franchises and other rights and privileges of all federal, state, local
or foreign governmental or regulatory bodies (collectively, "PERMITS") necessary
for the conduct of its business as presently conducted except where failure to
obtain Permits would not have a Material Adverse Effect. All such Permits are in
full force and effect and, to the knowledge of the Company and the Principal
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Shareholders, no suspension or cancellation of any of them is pending. None of
the Permits will be materially adversely affected by the consummation of the
transactions contemplated in this Agreement and the Related Documents.
2.16 CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULE 2.16
attached hereto, the Company has no contract, obligation or commitment which is
material or which involves a potential material commitment, or any stock
redemption or stock purchase agreement, stock option plan, shareholders'
agreement, financing agreement, license or real property lease. For purposes of
this Section 2.16, a contract, obligation or commitment shall be deemed material
if it requires future expenditures by the Company in excess of $100,000 or
requires payment to the Company in excess of $100,000.
2.17 REGISTRATION RIGHTS. The Company has not granted any rights
relating to registration of its capital stock under the Act or state securities
laws other than those contained in the Registration Rights Agreement.
2.18 INSURANCE COVERAGE. SCHEDULE 2.18 hereto contains an accurate list
of the insurance policies currently maintained by the Company. Except as
described on SCHEDULE 2.18, there are currently no material claims pending
against the Company under any insurance policies currently in effect and
covering the property, business or employees of the Company, and all premiums
due and payable with respect to the policies maintained by the Company have been
paid to date. All such policies are in full force and effect and provide
insurance, including without limitation, liability insurance, in such amounts
and against such risks as is customary for companies engaged in similar
businesses to the Company to protect employees, properties, assets, businesses
and operations of the Company.
2.19 EMPLOYEE MATTERS. Except as set forth on SCHEDULE 2.19, the
Company does not have in effect any consulting agreements with any individuals
or labor or collective bargaining agreements, written or oral. The Company and
the Principal Shareholders have no knowledge that any of the officers or other
key employees of the Company presently intends to terminate his employment with
the exception of the Principal Shareholders (other than Mr. Robichaud). The
Company is in compliance in all material respects with all applicable laws and
regulations relating to labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. SCHEDULE 2.19 lists and
identifies: each "employee pension benefit plan" (as such term is defined in
section 3(2) of ERISA); each "employee welfare benefit plan" (as such term is
defined in section 3(1) of ERISA); each stock purchase, stock option, stock
bonus, restricted stock, deferred compensation, severance pay, incentive
compensation, salary continuation, vacation, sick pay, or disability plan,
policy, or arrangement; each material fringe benefit plan, policy, arrangement,
or practice; and each employment, separation, termination, stay-with-bonus,
change-of-control, retention, or similar contract, agreement, policy, or
understanding, which is maintained or contributed to by the Company or any ERISA
Affiliate for, on behalf of, or with respect to, any current or former employee,
officer, director, or
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dependent thereof, to which the Company is a party, or for which the Company has
any liability or contingent liability (individually a "Plan" and collectively
the "Plans"). True and complete copies of all Plans and all amendments thereto
(and where written Plan documents do not exist, detailed written summaries
thereof) have been furnished to the Purchaser. For purposes of this Agreement,
"ERISA Affiliate" means, with respect to Title IV of ERISA, any trade or
business, whether or not incorporated, that together with the Company , would be
deemed to be a "single employer" within the meaning of section 4001 of ERISA,
and, with respect to the Code, any member of any group that, together with the
Company, is treated as a "single employer" under section 414 of the Code. Each
Plan complies and has been administered in form and operation with all material
requirements of law and regulation applicable thereto. The Company and the ERISA
Affiliates have performed all of their material obligations under all such
Plans. There have been no acts or omissions which have given rise to, or which
could give rise to, any penalty, tax, or fine under sections 409, 502(c) or
502(i) of ERISA, or sections 4975 or 4976 of the Code, for which the Company may
be liable. None of the assets of any Plan are invested in any employer
securities, employer real property, or any insurance contract of any company
subject to rehabilitation proceedings. All contributions required with respect
to any Plan for all periods ending prior to the Closing (including periods from
the first day of the current plan year to the Closing) will be completely and
timely made prior to the Closing by the Company or the ERISA Affiliates. All
required reports and descriptions of each Plan (including IRS Form 5500 Annual
Reports, summary annual reports, and summary plan descriptions) have been timely
filed and distributed. None of the Company or any ERISA Affiliate has any plan
or commitment to establish any additional Plans or to amend any existing Plan,
other than as may be required by applicable statute. Other than coverage
mandated by applicable statute, the Company is not under any obligation or
liability to provide medical benefits or death benefits (including through
insurance) to retirees or former employees, officers or directors of the Company
or any ERISA Affiliate or to their respective dependents. The consummation of
the transactions contemplated hereby will not entitle any employee of the
Company to receive any bonus, severance or other payment except as contemplated
by this Agreement or except as set forth in Schedules 1.7, 1.8 and 1.9.
2.20 CLIENTS. During each of the past two years, no single customer has
accounted for more than 5% of the Company's aggregate revenues, and no group of
five customers have accounted for more than 10% of the Company's aggregate
revenues. The relationships of the Company with its clients are good commercial
working relationships and, except as set forth on SCHEDULE 2.20, no clients
which accounts for more than 2% of the Company's revenues in 1997 has canceled
or otherwise terminated, or threatened to cancel or otherwise terminate, its
relationship with the Company.
2.21 NO BROKERS OR FINDERS. Except for a fee payable to Hambrecht &
Quist, which fee shall be the sole responsibility of and shall be paid by the
Principal Shareholders, no person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or
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claim against or upon the Company for any commission, fee or other compensation
as a finder or broker because of any act or omission by the Company.
2.22 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
2.22, there are no loans, leases or other continuing transactions between the
Company on the one hand, and any officer or director of the Company or any
Principal Shareholder or any respective family member or affiliate of such
officer, director or shareholder on the other hand.
2.23 ASSUMPTIONS, GUARANTEES, ETC. OF INDEBTEDNESS OF OTHER PERSONS.
Except as set forth on SCHEDULE 2.23, the Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on or for any
indebtedness for borrowed money of any other Person, except guarantees by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
2.24 DISCLOSURES. To the knowledge of the Company and the Principal
Shareholders, the representations and warranties contained in this Agreement,
together with the Schedules to this Agreement, taken as a whole, do not contain
any untrue statement of material fact or omit to state any material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the Closing Date and until any Securities shall remain outstanding.
3.1 ACCOUNTS AND REPORTS. The Company will, and will cause each of its
Subsidiaries (if any) to, maintain a system of accounts in accordance with
generally accepted accounting principles consistently applied and the Company
will, and will cause each of its Subsidiaries (if any) to keep full and complete
financial records. The Company will furnish to each Purchaser the information
set forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year,
a copy of the consolidated and consolidating balance sheet of the Company and
its Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and accompanied by the unqualified report of one of the six
largest public accountant firms
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(measured by total revenues), which firm shall be selected by the Board of
Directors of the Company; provided that such consolidating statements need not
be audited.
(b) Within thirty (30) days after each month, a preliminary
consolidated and consolidating balance sheet of the Company and its Subsidiaries
as of the end of such month and preliminary consolidated and consolidating
statements of income, shareholders' equity and cash flow for such month and for
the period commencing at the end of the previous fiscal year and ending with the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail.
(c) At the time of delivery of each monthly and annual
statement, a certificate, executed by either the president or chief financial
officer of the Company stating that such officer has caused the provisions of
Articles III, IV and IX of this Agreement, and the terms of the documents
related to the Senior Credit Financing to be reviewed and has no knowledge of
any default by the Company or any Subsidiary in the performance or observance of
any of the provisions thereof or, if such officer has such knowledge, specifying
such default.
(d) Not later than thirty (30) days prior to the end of each
fiscal year, a copy of the operating plan and budget for the next fiscal year
required under Section 3.8.
(e) Promptly upon receipt thereof, any written report, so
called "management letter," and any other reports submitted to the Company or
any Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries;
(f) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, would have a
Material Adverse Effect; and (ii) all material defaults by the Company or any
Subsidiary (whether or not declared) under any agreement for money borrowed
(unless waived or cured within applicable grace periods); and
(g) Such other information with regard to the business,
properties or the condition or operations, financial or otherwise, of the
Company or its Subsidiaries as the Purchasers may from time to time reasonably
request.
3.2 PAYMENT OF TAXES. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the
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Company nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which (i) has not been asserted or is not owed, or (ii) is
being contested in good faith and by proper proceedings if the Company or such
Subsidiary shall have set aside on its books adequate reserves in the opinion of
management and the Company's independent accountants with respect thereto.
3.3 MAINTENANCE OF KEY MAN INSURANCE. The Company will, at its expense,
maintain a life insurance policy in the face amount of $1,000,000 with a
responsible and reputable insurance company payable to the Company on the life
of Michael Robichaud. The Company will maintain such policy and will not cause
or permit any assignment of the proceeds of such policy and will not borrow
against such policy; PROVIDED, HOWEVER, that the Company may assign the proceeds
thereof to its senior lender in connection with the Senior Credit Agreement. The
Company will add one designee of the Purchasers as a notice party to such
policy, and will request that the issuer of each policy provide such designee
with ten (10) days' notice before such policy is terminated (for failure to pay
premium or otherwise) or assigned, or before any change is made in the
designation of the beneficiary thereof.
3.4 COMPLIANCE WITH LAWS, ETC. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which would have a
Material Adverse Effect.
3.5 INSPECTION. At any reasonable time during normal business hours and
from time to time, but not more frequently than once per calendar quarter,
respectively, for all Purchasers and transferees of Purchasers as a group, the
Company (and each of its Subsidiaries) will permit upon reasonable prior written
notice (i) any one or more of the Purchasers so long as it shall own any
Securities and (ii) any of the agents or representatives of the foregoing
Persons, to examine and make copies of and extracts from the records and books
of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors; provided that any Person or Persons exercising
rights under this Section 3.5 shall (i) use all reasonable efforts to ensure
that any such examination or visit results in a minimum of disruption to the
operations of the Company and (ii) shall agree in writing to keep any
proprietary information of the Company disclosed to him in the course of such
inspection confidential in a manner consistent with prudent business practices
and treatment of such Person's or Persons' own confidential information and not
use such proprietary information for any purpose in competition with the
Company's business. The rights granted under this Section 3.5 shall be in
addition to any rights which any Purchaser may have under applicable law.
3.6 CORPORATE EXISTENCE; OWNERSHIP OF SUBSIDIARIES. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do
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business as a foreign corporation in any jurisdiction where the failure to do so
would have a Material Adverse Effect. The Company shall at all times own of
record and beneficially, free and clear of all liens, charges, restrictions,
claims and encumbrances of any nature, all of the issued and outstanding capital
stock of each of its Subsidiaries other than such liens, charges, restrictions,
claims and encumbrances as are granted for the benefit of the holders of Senior
Debt.
3.7 COMPLIANCE WITH ERISA. The Company will comply (and cause each of
its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any of its
Subsidiaries will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which cause the lien provided for
in Section 4068 of ERISA to attach to the assets of the Company or any of its
Subsidiaries.
3.8 BOARD APPROVAL. Not later than thirty (30) days prior to the end of
each fiscal year, the Company will prepare and submit to its Board of Directors
for its approval prior to such year end an operating plan and budget, cash flow
projections and profit and loss projections, all itemized in reasonable detail
for the immediately following year.
3.9 FINANCINGS. The Company will promptly provide to the Board of
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature for the
Company (or any of its Subsidiaries), whether initiated by the Company or any
other Person.
3.10 MEETINGS OF THE BOARD OF DIRECTORS. The Directors shall schedule
regular meetings not less frequently than once every fiscal quarter. The Company
shall reimburse all members of the Board of Directors of the Company for all
direct out-of-pocket expenses incurred by them in attending such meetings.
3.11 NINTH BOARD MEMBER. The Purchasers and the Principal Shareholders
will use their best efforts to elect a ninth member of the Company's Board of
Directors in accordance with the Shareholders' Agreement within 180 days
following the Closing Date.
3.12 TRADING POLICY. After the Company has consummated its first public
offering of securities pursuant to a registration statement filed under the
Securities Act of 1933, as amended, the Company shall establish a trading policy
(the "Trading Policy") relating to the sale of shares of the Company by
officers, directors and principal shareholders. The Trading Policy shall provide
that any such person may purchase or sell securities of the Company only during
the period commencing 48 hours after release of the Company's operating results,
and ending on the day which is no less than two weeks prior to expiration of the
fiscal quarter within which such announcement is made.
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3.13. EMPLOYEE BENEFITS. As a condition to the Closing, the Company
shall agree to cause Bond Technologies, Inc. and its related insurance and
pension service providers to allow employees of the Company to continue to
participate in the Bond Technologies, Inc. group medical, life, death and
disability, and dental insurance plans, as well as the Bond Technologies, Inc.
401(k) Savings Plan for a period of three months after Closing on the same terms
and conditions as such employees of the Company have participated prior to
Closing.
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) for the benefit of the Purchasers with each of the provisions of this
Article IV on and after the Closing Date and until the repayment in full of all
obligations under the Debentures and redemption of the Preferred Stock. In each
instance where this Article IV provides for action to be taken only with the
approval of the Purchasers, such approval may be evidenced either (i) by the
prior written consent or waiver of the Purchasers in accordance with Section
12.5, or (ii) by the prior written consent or waiver by a majority of the
members of the Company's Board of Directors designated exclusively by the
Purchasers, provided in each case that the document evidencing such consent or
waiver accurately describes the action to be taken and clearly references the
section or sections of this Agreement affected thereby.
4.1 INVESTMENTS IN OTHER PERSONS. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock or assets of any Person without the prior approval of the Purchasers,
EXCEPT:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in certificates
of deposit, notes, acceptances and repurchase agreements having a
maturity of not more than one year from the date of acquisition issued
by a bank organized in the United States having a combined capital and
surplus of at least $50,000,000;
(iii) loans or advances from the Company to any Subsidiary, a
Subsidiary to the Company or from a Subsidiary to another Subsidiary;
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<PAGE>
(iv) investments by the Company or a Subsidiary in A-rated or
better commercial paper having a maturity of not more than one year
from the date of acquisition;
(v) investments by the Company or a Subsidiary in shares of a
"money market" fund registered under the Investment Company Act of
1940, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other
financial institutions, provided that such "money market" fund or
"money market" accounts invest principally in investments of the types
described in clauses (i), (ii) or (iv) of this subsection 4.1;
(vi) investments existing as of the date of this Agreement
identified on SCHEDULE 4.1;
(vii) interest rate agreements entered into pursuant to the
Senior Credit Agreement in the ordinary course of the Company's
business;
(viii) repurchase agreements fully collateralized by United States
government securities;
(ix) operating deposit accounts of the Company and its
Subsidiaries;
(x) advances to employees in the ordinary course of business
in an aggregate amount not to exceed $25,000 outstanding at any time;
(xi) loans or advances made to directors, officers, employees
and consultants to fund the purchase or exercise price of stock grants
or options issued under the Plan or in connection other employee
benefit plans of the Company; and
(xii) other Investments in an aggregate amount not exceeding
$500,000 at any time which have been approved by the Company's Board of
Directors.
4.2 DISTRIBUTIONS. The Company will not declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any Subsidiary to
do any of the foregoing, except that the Subsidiaries may declare and make
payment of cash and stock dividends to the Company, return capital to the
Company and make distributions of assets to the Company and except that nothing
herein contained shall prevent the Company from:
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<PAGE>
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of
shares of such class of capital stock;
(ii) complying with any specific provision of the terms of the
Preferred Stock relating to the payment of dividends, liquidation
preferences or redemption payments on or with respect to the Preferred
Stock or redemption of the Preferred Stock;
(iii) redeeming the Redemption Shares as provided in Section 1.5;
(iv) repurchasing at cost Restricted Stock in accordance with the
Plan; or
(v) making the Designated Distributions pursuant to Section 1.8.
4.3 DEALINGS WITH AFFILIATES. Except for those transactions
contemplated by this Agreement or the Related Documents or listed in SCHEDULE
4.3 attached hereto, the Company will not enter into any transaction with any
officer or director of the Company or any Subsidiary or holder of any class of
capital stock of the Company, or any member of their respective immediate
families or any corporation or other entity directly or indirectly controlling,
controlled by or under common control with one or more of such officers,
directors or shareholders or members of their immediate families, unless (i) the
interest of such person is disclosed in advance to the Board of Directors, (ii)
such transaction is on arm's-length terms which are no less favorable to the
Company or any Subsidiary as those which could have been obtained from an
unaffiliated third party, and (iii) such transaction is approved by a
disinterested majority of the Board of Directors of the Company or such
Subsidiary.
4.4 MERGER. The Company shall not, and shall not permit any Subsidiary
to, merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or permit any Subsidiary to
do any of the foregoing, (i) EXCEPT for sales or other dispositions of assets in
the ordinary course of business, and (ii) except that (a) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary and (b) any wholly owned Subsidiary may merge into or
transfer assets to the Company.
4.5 LIMITATION ON OPTIONS. The Company shall not grant any options,
warrants or other rights to acquire shares of Common Stock or other equity
securities of the Company, except up to an aggregate of 32.558 shares of Common
Stock (as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock dividend or similar
event, including the stock split referred to in Section 1.10 hereof) may be
issued in the form of awards pursuant to the Plan as described in Section 1.6,
and all such grants made after the date hereof shall be approved by the
Compensation Committee of the Company's Board of Directors.
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4.6 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND OTHER
DISTRIBUTIONS. Except for the Senior Credit Agreement, the Company shall not
permit any of its Subsidiaries, directly or indirectly, to create or suffer to
exist or become effective any encumbrances or restrictions on the ability of any
of its Subsidiaries to (i) pay dividends or make any other distributions on its
capital stock or any other interest or participation in its profit owned by any
of the Company or any of its Subsidiaries, or pay any indebtedness owed by any
of the Subsidiaries, (ii) make loans or advances to the Company, or (iii)
transfer any of its properties or assets to the Company.
4.7 NO CONFLICTING AGREEMENTS. The Company agrees that neither it nor
any Subsidiary will enter into or amend any agreement, contract, commitment or
understanding, other than the Senior Credit Agreement which would restrict or
prohibit the exercise by the Purchasers of any of their rights under this
Agreement or any of the Related Documents.
4.8 CHANGE IN BUSINESS. The Company will continue to remain principally
engaged in its present line of business, and will not enter, to any material
extent, into any unrelated business.
4.9 INDEBTEDNESS. Neither the Company nor any of its Subsidiaries will
create, incur, guarantee, assume or otherwise become directly or indirectly
liable for any Indebtedness other than the Indebtedness (including any
refinancing thereof), evidenced by
(a) Indebtedness arising under the Senior Credit
Agreement;
(b) endorsements for collection, deposit, or negotiation
and warranties of products or services, in each case
incurred in the ordinary course of business;
(c) Indebtedness under this Agreement;
(d) Indebtedness incurred in connection with the
acquisition after the date hereof of any real or
personal property by the Company or any Subsidiary or
under any Capitalized Lease, PROVIDED that the
aggregate principal amount of such Indebtedness of
the Company and its Subsidiaries shall not exceed the
aggregate amount of $100,000 at any one time;
(e) Indebtedness existing on the date hereof and listed
and described on SCHEDULE 4.9 hereto;
(f) Indebtedness of a Subsidiary to the Company or
another Subsidiary and Indebtedness of the Company to
any Subsidiary;
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(g) Indebtedness of the Company in respect of interest
rate protection arrangements or in respect of
currency swap arrangements so long as such
arrangements are in the ordinary course of business
and are not for speculative purposes;
(h) unsecured Indebtedness of the Company not otherwise
permitted by this Section 4.9 in an aggregate amount
outstanding at any time not to exceed $250,000; and
(i) Indebtedness of the Company existing as a result of a
refinancing of Indebtedness permitted by this Section
4.9, provided that the terms of any such refinancing
Indebtedness, and any agreement or instrument
relating thereto, are otherwise permitted by the
Senior Credit Agreement and further provided that the
principal amount of such Indebtedness shall not be
increased above the amount of such Indebtedness
outstanding on the date of such refinancing and the
direct (and any contingent) obligors therefor and any
collateral security in respect thereof shall not be
changed (or increased), as a result of or in
connection with such refinancing.
4.10 RESTRICTIONS ON LIENS. The Company will not, and will not permit
any of its Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction, or other security interest of any kind upon any of its property or
assets of any character, whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device, or arrangement; (d) suffer to
exist for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (e) sell, assign, pledge, or otherwise
transfer any "receivables" as defined in clause (g) of the definition of the
term "Indebtedness," with or without recourse; or (f) enter into or permit to
exist any arrangement or agreement, enforceable under applicable law, which
directly or indirectly prohibits the Company or any of its Subsidiaries from
creating or incurring any lien, encumbrance, mortgage, pledge, charge,
restriction, or other security interest other than in favor of the lenders under
the Senior Credit Agreement and other than customary anti-assignment provisions
in leases and licensing agreements entered into by the Company or such
Subsidiary in the ordinary course of its business, PROVIDED that the Company or
any of its Subsidiaries may create or incur or suffer to be created or incurred
or to exist:
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(i) liens in favor of the Company or all or part
of the assets of Subsidiaries of the Company
securing Indebtedness owing by Subsidiaries
of the Company to the Company;
(ii) liens to secure taxes, assessments, and
other government charges in respect of
obligations not overdue or liens on
properties to secure claims for labor,
material, or supplies in respect of
obligations not overdue;
(iii) deposits or pledges made in connection with,
or to secure payment of, workmen's
compensation, unemployment insurance, old
age pensions, or other social security
obligations;
(iv) liens on properties in respect of judgments
or awards that have been in force for less
than the applicable period for taking an
appeal so long as execution is not levied
thereunder or in respect of which the
Company or such Subsidiary shall at the time
in good faith be prosecuting an appeal or
proceedings for review and in respect of
which a stay of execution shall have been
obtained pending such appeal or review;
(v) liens of carriers, warehousemen, mechanics,
and materialmen, and other like liens on
properties in existence less than 120 days
from the date of creation thereof in respect
of obligations not overdue;
(vi) encumbrances on real estate consisting of
easements, rights of way, zoning
restrictions, restrictions on the use of
real property and effects and irregularities
in the title thereto, landlord's or lessor's
liens under leases to which the Company or a
Subsidiary of the Company is a party, and
other minor liens or encumbrances none of
which in the opinion of the Company
interferes materially with the use of the
property affected in the ordinary conduct of
business of the Company and its
Subsidiaries, which defects do not
individually or in the aggregate have a
materially adverse effect on the business of
the Company individually or of the Company
and its Subsidiaries on a consolidated
basis;
(vii) liens existing on the date hereof and listed
on SCHEDULE 4.10 hereto;
(viii) purchase money security interests in or
purchase money mortgages on real or personal
property acquired after the date hereof to
secure
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purchase money Indebtedness of the type and
amount permitted by ss.4.9(d), incurred in
connection with the acquisition of such
property, which security interests or
mortgages cover only the real or personal
property so acquired;
(ix) liens in favor of the lender under the
Senior Credit Agreement;
(x) liens on security deposits with respect to
leases of office space of the Borrower or
any Subsidiary and other liens arising under
leases or rental agreements made by the
Borrower or any Subsidiary, in each case in
the ordinary course of business consistent
with past practices, which liens cover only
the real property so rented; and
(xi) UCC-1 financing statements filed solely for
notice or precautionary purposes under
operating leases which do not secure
Indebtedness and which are limited to the
items of equipment leased by the Borrower or
any Subsidiary pursuant to the lease in
question.
4.11 LEVERAGE RATIO. The Company will not at any time during any period
described in the table set forth below permit the Leverage Ratio to exceed the
ratio set forth opposite such period in such table:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Closing Date - September 30, 1998 4.00:1.00
October 1, 1998 - December 31, 1998 3.75:1.00
January 1, 1999 - December 31, 1999 3.00:1.00
any time thereafter 2.50:1.00
</TABLE>
4.12 DEBT SERVICE COVERAGE RATIO. The Company will not permit the Debt
Service Coverage Ratio at the end of any fiscal quarter to be less than
1.1:1.00.
4.13 CURRENT RATIO. The Company will not permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities to be less than
.85:1.00 at any time.
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ARTICLE V
INVESTMENT REPRESENTATIONS
5.1 REPRESENTATIONS AND WARRANTIES. Each Purchaser hereby represents
and warrants to the Company as follows:
(a) Such Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite partnership power and authority and has taken all
necessary partnership action required for the due authorization, execution,
delivery and performance by such Purchaser of this Agreement and the Related
Documents, and any other agreements or instruments executed by such Purchaser in
connection herewith or therewith and the consummation of the transactions
contemplated herein or therein;
(b) This Agreement, the Related Documents and the other
agreements and instruments executed by such Purchaser in connection herewith or
therewith will each be a legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms;
(c) No consent, approval, license or authorization of, or
designation, declaration or filing with, any court or governmental authority is
or will be required on the part of such Purchaser in connection with the
execution, delivery and performance by such Purchaser of this Agreement, any
Related Documents and any other agreements or instruments executed by such
Purchaser in connection herewith or therewith;
(d) Such Purchaser is in compliance with all the provisions of
this Agreement and their organizational and partnership documents, and, to such
Purchaser's knowledge, in all material respects with the material provisions of
each other agreement or instrument, judgment, decree, judicial order, statute
and regulation by which it is bound or to which it is subject. Neither the
execution, delivery or performance of this Agreement and the Related Documents
nor the consummation of the transactions contemplated hereby and thereby, will,
with or without the giving of notice or passage of time, or both, materially
violate, or result in any material breach of, or constitute a default under any
provision of such Purchaser's organization or partnership documents, or any
statute, rule or regulation, contract, lease, judgment, decree or other document
or instrument by which such Purchaser is bound or to which it or any of its
properties are subject;
(e) Such Purchaser is acquiring the Securities solely for its
own account as an investment and not with a view to any distribution or resale
thereof in violation of the Securities Act. Such Purchaser has been advised that
the Securities have not been registered under the Securities Act or under the
provisions of any state securities or "blue sky" law. Such Purchaser,
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by accepting the Securities, agrees and acknowledges that it will not directly
or indirectly, offer, transfer, sell, assign, pledge, encumber, hypothecate or
dispose of any of such Securities (or solicit any offers to purchase or
otherwise acquire or take a pledge of any of the Securities) unless such offer,
transfer, sale, assignment, pledge, encumbrance, hypothecation or other
disposition is made in accordance with the provisions of the Shareholders'
Agreement and (i) pursuant to an effective registration statement under the
Securities Act and in compliance with all applicable state securities or "blue
sky" laws or (ii) pursuant to an available exemption from registration under, or
otherwise in compliance with, the Securities Act and all applicable state
securities or "blue sky" laws. Such Purchaser understands and agrees that in the
case of a transfer or other disposition made pursuant to clause (ii) above, such
Purchaser of Securities shall be required to provide to the Company an opinion
of counsel reasonably satisfactory to the Company to the effect that
registration under the Securities Act is not required and a written
certification (or in the Company's discretion, an opinion of counsel reasonably
acceptable to the Company (who may be counsel employed by such Purchaser)) that
qualification or registration under any such state securities laws and
regulations is not required (or that any applicable state qualification or
registration requirements have been satisfied in full);
(f) Such Purchaser is an "Accredited Investor" (as such term
is defined in Rule 501 of Regulation D of the Securities Act). The financial
situation of such Purchaser is such that it can afford to bear the economic risk
of holding the unregistered Securities for an indefinite period of time. Such
Purchaser can afford to suffer the complete loss of its investment in the
Securities. The knowledge and experience of such Purchaser in financial and
business matters is such that it is capable of evaluating the risk of the
investment in the Securities. Such Purchaser acknowledges that it has had access
to such financial and other information, and has been afforded the opportunity
to ask such questions of representatives of the Company and receive answers
thereto, as such Purchaser has deemed necessary in connection with its decision
to purchaser the Securities, and that no representation or warranty, express or
implied, is being made by the Company with respect to the Company or the
Securities, other than those expressly set forth herein;
(g) Such Purchaser has been advised and understands that the
Securities have not been registered under the Act, on the grounds that no
distribution or public offering of the Securities is to be effected, and that in
this connection, the Company is relying in part on the representations of such
Purchaser set forth in this Article V;
(h) Such Purchaser has been further advised and understands
that no public market now exists for any of the securities issued by the Company
and that a public market may never exist for the Securities;
(i) Such Purchaser is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities; PROVIDED, HOWEVER, that nothing in this Section
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5.1 shall be deemed to vitiate or limit the representations, warranties and
covenants of the Company or the Principal Shareholders contained in this
Agreement; and
(j) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Purchasers or the Company or any of its Subsidiaries for any commission, fee or
other compensation as a finder or broker because of any act or omission by such
Purchaser.
5.2 PERMITTED TRANSFERS; LEGENDS. The Company agrees that it will
permit (i) a transfer of the Securities by a partnership to one or more of its
partners, where no consideration is exchanged therefor by such partners, or to a
retired or withdrawn partner who retires or withdraws after the date hereof in
full or partial distribution of his interest in such partnership, or to the
estate of any such partner or the transfer by gift will or intestate succession
of any partner to his spouse or to his siblings, lineal descendants or ancestors
of such partner of his spouse, or to a trust created for the benefit of one or
more of the foregoing and (ii) a sale or other transfer of any of the
Securities, if the transferee agrees in writing to be subject to the terms
hereof and the Related Documents to the same extent as if it were an original
Purchaser hereunder and thereunder and upon obtaining assurance satisfactory to
the Company that such transaction is exempt from the registration requirements
of, or is covered by an effective registration statement under the Act and
applicable state securities or "blue-sky" laws, including without limitation,
receipt of an unqualified opinion of counsel reasonably satisfactory to the
Company. The certificates representing the Securities shall bear a legend
evidencing such restriction on transfer substantially in the following form:
"These Securities have been acquired for investment and has
not been registered under the Securities Act of 1993 (the
"Act") or the securities laws of any state. These Securities
may not be transferred by sale, assignment, pledge or
otherwise unless (i) a registration statement for the
Securities under the Act is in effect or (ii) the corporation
has received an opinion of counsel, which opinion is
reasonably satisfactory to the corporation to the effect that
such registration is not required under the Act or the
securities laws of any state."
ARTICLE VI
SUBORDINATION OF DEBENTURES
6.1 AGREEMENT TO SUBORDINATE. The Company agrees, and each holder of
the Debentures by its acceptance thereof agrees, that notwithstanding any other
provision of this Agreement or the Debentures, the payment of the principal of
and interest on each and all of the Debentures shall be subordinate and junior
in right of payment, to the extent and in the manner
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set forth in a separate Subordination Agreement of even date among the Company,
the holders of the Debentures and the holder of the Senior Debt. Each holder of
a Debenture further agrees, upon request of any future holder of Senior Debt, to
enter into an intercreditor agreement for the benefit of such future holder of
Senior Debt; provided that such agreement shall be on terms no more onerous to
the holder of a Debenture than those contained in the Subordination Agreement of
even date.
ARTICLE VII
CONDITIONS OF PURCHASERS' OBLIGATIONS
7.1 EFFECT OF CONDITIONS. The obligations of the Purchaser to purchase
and pay for the Securities at the Closing shall be subject at its election to
the satisfaction of each of the conditions stated in the following Sections of
this Article.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and the Principal Shareholders contained in this Agreement shall
be true and correct in all material respects, and the Purchasers shall have
received a certificate dated as of such Closing Date and signed on behalf of the
Company and the Principal Shareholders to that effect.
7.3 PERFORMANCE. The Company and the Principal Shareholders shall have
performed and complied in all material respects with all of the agreements,
covenants and conditions contained in this Agreement required to be performed or
complied with by it and them at or prior to such Closing Date, and the
Purchasers shall have received a certificate dated as of such Closing Date and
signed on behalf of the Company and the Principal Shareholders to that effect.
7.4 NO MATERIAL ADVERSE CHANGE. The business, properties, assets or
financial condition of the Company shall not have been materially adversely
affected since the date of this Agreement, whether by fire, casualty, act of God
or otherwise, and there shall have been no other changes in the business,
properties, assets, financial condition, or management of the Company that would
have a Material Adverse Effect.
7.5 OPINION OF COUNSEL. The Purchasers shall have received opinions,
dated the Closing Date, from Goodwin, Procter & Hoar, LLP, counsel to the
Company and the Principal Shareholders, in the form attached as EXHIBIT D.
7.6 COMPLETION OF DUE DILIGENCE. The Purchasers shall have
satisfactorily completed their due diligence review with respect to the
financial condition, results of operations, business and prospects of the
Company.
7.7 COMPLETION OF AUDIT. The Company shall have provided to the
Purchasers audited financial statements, audited by Deloitte & Touche LLP
accompanied by management
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letters, for the fiscal years of the Company ended December 31, 1996 and
December 31, 1997, which financial statements shall have corroborated the
information previously furnished by the Company to the Purchasers with respect
to its financial condition and results of operation during such period.
7.8 EMPLOYMENT AGREEMENT. Michael Robichaud shall have entered into,
executed and delivered an Employment Agreement (the "Employment Agreement") in
form and substance as set forth in EXHIBIT E attached hereto.
7.9 NON COMPETITION AGREEMENTS. Michael Robichaud, John Devine, Rachel
Burnett and Alan Mathews shall each have entered into, executed and delivered
Non Competition Agreements with the Company (the "Non Competition Agreement") in
form and substance as set forth in EXHIBIT F attached hereto.
7.10 BOARD ELECTION. Concurrently with the Closing, the Board of
Directors of the Company shall have been expanded to nine members, four of whom
shall be designees of the Purchasers as provided in the Shareholders' Agreement.
7.11 ARTICLES OF INCORPORATION. The Articles of Incorporation of the
Company shall have been amended to provide for the authorization of the
Preferred Stock.
7.12 CONSENTS AND WAIVERS. The Company shall have obtained all consents
or waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein, to issue the Securities, and to carry out the
transactions contemplated hereby and thereby. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement and the
Related Documents and other agreements and instruments executed and delivered by
the Company in connection herewith shall have been made or taken.
7.13 REGISTRATION RIGHTS AGREEMENT. The Company, the Purchasers and the
Principal Shareholders shall have entered into a registration rights agreement
(the "Registration Rights Agreement") in the form of EXHIBIT G attached hereto.
7.14 SHAREHOLDERS' AGREEMENT. The Company, the Purchasers and the
Principal Shareholders shall have entered into a Shareholders' Agreement in the
form of EXHIBIT H attached hereto.
7.15 INJUNCTIONS, ETC.. There shall exist no injunction, restraining
order or other similar proceeding seeking to prevent consummation of the
transactions set forth in this Agreement and in the Related Documents.
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7.16 FIRPTA. The Principal Shareholder shall deliver FIRPTA certificate
under Section 1445 of the Code and Regulation Section 1.1445-2(b)(2) in the form
satisfactory to the Purchaser.
ARTICLE VIII
CONDITIONS OF THE OBLIGATIONS OF THE
COMPANY AND THE PRINCIPAL SHAREHOLDERS
8.1 EFFECT OF CONDITIONS. The obligation of the Company to sell the
Securities at the Closing and the obligation of the Principal Shareholders to
surrender their Redemption Shares shall be subject at their election to the
satisfaction of each of the conditions stated in the following Sections of this
Article.
8.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers contained in this Agreement shall be true and correct in all
material respects and the Company shall have received a certificate on the
Closing Date and signed on behalf of each Purchaser to that effect.
8.3 SHAREHOLDERS' AGREEMENT. The Shareholders' Agreement shall have
been executed and delivered by the Purchasers.
8.4 PERFORMANCE. The Purchasers shall have performed and complied in
all material respects with all of the agreements, covenants and conditions
contained in the Agreement required to be performed or complied with by them at
or prior to such Closing, and the Company shall have received a certificate
dated as of such Closing and signed on behalf of the Purchasers to that effect.
8.5 CONSENTS AND WAIVERS. The Purchasers shall have obtained all
consents or waivers necessary to execute this Agreement and the other agreements
and documents contemplated herein, and to carry out the transactions
contemplated hereby and thereby.
8.6 REGISTRATION RIGHTS AGREEMENT. The Company, the Purchasers and the
Principal Shareholders shall have entered into the Registration Rights
Agreement.
8.7 SENIOR CREDIT AGREEMENT. The Company shall have entered into the
Senior Credit Agreement with the lenders therein, and the lenders therein shall
have made financing available to the Company, all on terms and conditions
reasonably acceptable to the Company and the Principal Shareholders.
8.8 RESTRICTED STOCK AWARDS; FOUNDER OPTIONS. The Restricted Stock
Awards and Founder Options shall have been granted as provided in Section 1.6.
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8.9 DISTRIBUTIONS. The distributions described in Section 1.7 shall
have been made to the Principal Shareholders.
8.10 INJUNCTIONS, ETC.. There shall exist no injunction, restraining
order or other similar proceeding seeking to prevent consummation of the
transactions set forth in this Agreement and in the Related Documents.
8.11 BONUS PAYMENTS. The Company shall have made the bonus payments
provided for in Section 1.9.
ARTICLE IX
DEFAULTS AND REMEDIES
9.1 EVENTS OF DEFAULT; ACCELERATION.
An "Event of Default" occurs if:
(1) The Company defaults in the payment of any principal of any
Debenture when the same shall become due, either by the terms thereof or
otherwise as herein provided; or
(2) The Company defaults in the payment of interest on any Debenture
when the same becomes due and payable (provided that such payment is otherwise
permitted to be made under the terms of the Senior Credit Agreement) and the
default continues for a period of five days; or
(3) The Company or any Subsidiary shall fail to perform or observe any
covenant contained in Article IV of this Agreement and such default shall not
have been remedied within thirty days after such default shall first have become
known to any officer of the Company or written notice thereof shall have been
received by the Company (regardless of the source of such notice); or
(4) The Company or any of its Subsidiaries defaults in the performance
or observance of any other agreement, term or condition contained in the
Debentures, this Agreement or the Related Documents and such default shall not
have been remedied within sixty (60) days after such default shall first have
become known to any officer of the Company or written notice thereof shall have
been received by the Company (regardless of the source of such notice); or
(5) The Company or any Subsidiary shall default (subject to any
applicable grace period) in the payment of any principal of or premium, if any,
or interest on any other Indebtedness or obligation with respect to borrowed
money the outstanding principal of which is, at the time of such default, in an
aggregate amount greater than $400,000 or shall default in the performance of
any material term of any instrument evidencing such Indebtedness or of any
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mortgage, indenture or agreement relating thereto, and in each case the effect
of such default is to cause, such Indebtedness or obligation to become due and
payable prior to its stated maturity, unless such failure to pay or perform
shall have been waived in writing by the requisite holders of such Indebtedness
or other obligation; or
(6) The Company or any Material Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) is the debtor in an involuntary case which is not
dismissed within 60 days of the commencement thereof; or
(7) A court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) provides for relief against the Company or any Material
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Material
Subsidiary for all or substantially all of its property, or
(C) orders the liquidation of the Company or any Material
Subsidiary; or
(8) A final judgment for the payment of money in an amount in excess of
$250,000 shall be rendered against the Company or any of its Subsidiaries (other
than any judgment as to which a reputable insurance company shall have accepted
full liability (less any applicable deductible) in writing) and shall remain
undischarged for a period (during which execution shall not be effectively
stayed) of 30 days after the date on which the right to appeal has expired; or
(9) Any representation or warranty made by the Company in this
Agreement or in the Related Documents shall prove to be materially false or
incorrect on the date as of which made which has a Material Adverse Effect; then
and in any such case (a) upon the occurrence of any Event of Default described
in clause (6) or (7) above, the unpaid principal amount of and accrued and
unpaid interest on the Debentures shall automatically become due and payable,
without
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presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, and (b) upon the occurrence of any other Event of
Default, in addition to any other rights, powers and remedies permitted by law
or in equity, the holder or holders of greater than 50% in principal amount of
the Debentures then outstanding may, at its or their option, by notice in
writing to the Company, declare all of the Debentures to be, and all of the
Debentures shall thereupon be and become, immediately due and payable together
with interest accrued and unpaid thereon and all other sums due hereunder,
without presentment, demand, protest or other notice of any kind, all of which
are waived by the Company.
Upon the occurrence of any such Event of Default, the holders of
Debentures may, subject to the rights of holders of Senior Debt, proceed to
protect and enforce their rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in the Debentures held by them, for an injunction against a
violation of any of the terms hereof or thereof, or for the pursuit of any other
remedy which it may have by virtue of this Agreement or pursuant to applicable
law. The Company shall pay to the holders of Debentures upon demand the
reasonable costs and expenses of collection and of any other actions referred to
in this Article IX, including without limitation reasonable attorney's fees,
expenses and disbursements.
No course of dealing and no delay on the part of the holders of
Debentures in exercising any of their rights shall operate as a waiver thereof
or otherwise prejudice the rights of any holder of the Debentures, nor shall any
single or partial exercise of any right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. No right, power or remedy conferred hereby or by the Debentures on
the holders thereof shall be exclusive of any other right, power or remedy
referred to herein or therein or now or hereafter available at law, in equity,
by statute or otherwise.
9.2 RESCISSION OF ACCELERATION. At any time after any declaration of
acceleration of all the Debentures shall have been made pursuant to Section 9.1
by any holder or holders of the Debentures and before a judgment or decree for
the payment of money due has been obtained by such holder or holders, the holder
or holders of at least a majority in aggregate principal amount of the
Debentures at the time outstanding may, by written notice to the Company and to
the other holders of the Debentures rescind and annul such declaration and its
consequences, PROVIDED that (i) the principal of and accrued and unpaid interest
on the Debentures which shall have become due otherwise than by such declaration
of acceleration shall have been duly paid, and (ii) all Events of Default other
than the nonpayment of principal of and accrued and unpaid interest on the
Debentures which have become due solely by such declaration of acceleration
shall have been cured or waived by the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding. No rescission or
annulment referred to above shall affect any subsequent Default or any right,
power or remedy arising out of such subsequent Default.
ARTICLE X
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INDEMNIFICATION AND LIMITS ON LIABILITY
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Agreement shall survive the Closing until the
first to occur of (i) ten (10) days after receipt by the Purchasers of audited
financial statements of the Company for the year ending December 31, 1999 and
(ii) April 15, 2000; provided that if a claim is brought within such periods it
shall remain valid thereafter until ultimately resolved; and provided further;
that the time limitation set forth in this Section 10.1 shall not apply to
matters described in Sections 2.2, 2.4 (each of which shall survive
indefinitely) and 2.10 (which shall survive until the termination of the
applicable statute of limitations). The covenants of the Company contained in
Articles III and IV hereof shall survive the Closing in accordance with their
terms.
10.2 INDEMNIFICATION BY THE PRINCIPAL SHAREHOLDERS.
(a) Subject to the conditions and limitations set forth in
this Section 10.2, the Principal Shareholders shall jointly and severally
(except with respect to the representations in Section 2.2(b) with respect to
title to stock and 2.4 (the "Individual Representations"), as to which the
liability of the Principal Shareholders shall be several and not joint) defend,
indemnify and hold harmless the Company from and against any loss, liability,
damage, claim, action or cause of action, assessment, cost, penalty and expense,
including reasonable legal and accounting fees (a "Loss," and collectively, the
"Losses") to the extent not covered by insurance, asserted against, resulting
to, imposed upon or incurred by the Company by reason of or resulting from the
breach of any representation or warranty made by the Company or the Principal
Shareholders set forth in Article II of this Agreement, or any facts or
circumstances constituting such a breach. The Principal Shareholders each agree
that they shall have no right to seek damages, reimbursement, indemnification,
contribution or similar rights from the Company for any indemnification payments
for which the Principal Shareholder is liable under this Section 10.
(b) Notwithstanding the provisions of Section 10.2(a), the
Principal Shareholders shall not be required to provide indemnity under this
Section 10.2 unless, and then only to the extent that, the aggregate Losses
exceed $750,000 (the "Deductible"); provided, however, that the Deductible shall
not apply to a breach of a representation or warranty contained in Sections 2.2,
2.4, 2.10 or 2.21.
(c) Notwithstanding any other provision of this Agreement to
the contrary, each Principal Shareholder's indemnification obligations under
this Article X shall be limited as follows: (i) with regard to breaches of any
representations or warranties of the Company or the Principal Shareholders set
forth in Article II (other than the Individual Representations), each Principal
Shareholder's indemnification obligations shall be limited in the aggregate to
such Principal Shareholder's Pro Rata Share of $15,000,000; and (ii) with regard
to breaches of any Individual Representation by a particular Principal
Shareholder, such Principal Shareholder's indemnification obligation shall be
limited in the aggregate to his or her share of the Redemption
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Price. For purposes of this Section 10.2(c), "Pro Rata Share" shall mean the
percentage set forth opposite such Principal Shareholder's name on SCHEDULE 10.2
hereto.
10.3 NOTICE OF CLAIM.
(a) The Company or the Purchasers shall give the Principal
Shareholders prompt written notice of any threatened, potential or actual claim
or the commencement of any action in respect of which indemnity may be sought
hereunder, enclosing a copy of all papers served provided that the failure of
the Company or the Purchasers to give notice as provided herein shall not
relieve the Principal Shareholders of their obligations under this Article X
except if and to the extent the Principal Shareholders have been materially
prejudiced thereby.
(b) In the event that any action, suit or proceeding shall be
brought against the Company, it shall promptly notify the Principal Shareholders
of the commencement thereof, the Principal Shareholders shall be entitled to
participate therein and, to the extent that they desire to do so, to assume the
defense thereof, with counsel reasonably satisfactory to the Company and the
Purchasers. The Purchasers agree to cooperate fully with the Principal
Shareholders and its counsel in the defense against any such action, suit or
proceeding. In any event, the Company or the Purchasers shall have the right to
participate at their own expense in the defense of such action, suit or
proceeding. The indemnifying Principal Shareholder(s) shall have the right, with
the consent of the Company and the Purchasers, which consent shall not be
unreasonably withheld, to settle all indemnifiable matters related to claims by
third parties which are susceptible to being settled provided the Principal
Shareholders' obligations to indemnify the Company therefor will be fully
satisfied.
10.4 COMMENCEMENT OF ACTIONS. All actions by the Company to seek
indemnification pursuant hereto shall be controlled by a majority of the members
of the Board of Directors of the Company appointed by the Purchasers as provided
in the Shareholders Agreement.
10.5 ADJUSTMENT FOR TAXES AND INSURANCE. The amount which the Principal
Shareholders are required to pay pursuant to this Article X shall be adjusted
(i) by the amount of any tax benefit realized by the Company as a result of any
Loss, or the amount of any tax benefit received by the Company as a result of
any payment made pursuant to this Article X; and (ii) the proceeds of any
insurance coverage actually received by the Company with respect to any Loss.
10.6 EXCLUSIVE REMEDY. Notwithstanding anything contained herein or in
any Related Document to the contrary, the rights and remedies of the Company or
the Purchasers against the Principal Shareholders shall be limited to the
indemnification provisions contained in this Article X, which shall be the sole
and exclusive rights and remedies with respect to any breach of any
representation or warranty by the Company or the Principal Shareholders, whether
at law or in equity; provided, however, that nothing herein shall limit the
right of the Company or the
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Purchasers to pursue an action against any Principal Shareholder which is based
on fraud or knowing and willful misrepresentations.
ARTICLE XI
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" means the Securities Act of 1933, as amended.
"Affiliate" when used with respect to a Person means a Person
controlling, controlled by, or under common control with such person.
"Agreement" means this Securities Purchase and Redemption Agreement as
from time to time amended and in effect between the parties.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Business Day" shall mean a day other than Saturday or Sunday which is
not a legal holiday in the Commonwealth of Massachusetts or the City of Boston.
"Capitalized Leases" means leases under which the Company or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
"Cash and Cash Equivalents" means cash and investments in certificates
of deposit, money market funds and obligations issued or guaranteed by the
United States Government or any instrumentality thereof, in each case only if
due and payable on demand or within thirty (30) days after the date of purchase.
"Closing" shall have the meaning set forth in Section 1.6.
"Closing Date" shall have the meaning set forth in Section 1.6.
"Commission" shall have the meaning set forth in Section 2.3.
"Company" means and shall include Stride & Associates, Inc., a Delaware
corporation, and its successors and assigns.
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"Consolidated Current Assets" means all assets of the Company and its
Subsidiaries on a consolidated basis that, in accordance with generally accepted
accounting principles, are properly classified as current assets, provided that
(a) notes and accounts receivable shall be included only if good and collectible
as determined by the Company in accordance with established practice
consistently applied and, with respect to such notes, only if payable on demand
or within one (1) year from the date as of which Consolidated Current Assets are
to be determined and if not directly or indirectly renewable or extendible at
the option of the debtors, by their terms, or by the terms of any instrument or
agreement relating thereto, beyond such year, and, with respect to such accounts
receivable, only if payable and outstanding not more than ninety (90) days after
the date of the shipment of goods or other transaction out of which any such
account receivable arose; and such notes and accounts receivable shall be taken
at their face value less reserves determined to be sufficient in accordance with
generally acceptable accounting principles; and (b) inventory shall be included
only if and to the extent that the same shall consist of saleable finished goods
ready and available for shipment to purchasers thereof.
"Consolidated Current Liabilities" means all liabilities and other
Indebtedness of the Company and its Subsidiaries on a consolidated basis
maturing on demand or within one (1) year from the date as of which Consolidated
Current Liabilities are to be determined, and such other liabilities as may
properly be classified as current liabilities in accordance with generally
accepted accounting principles.
"Consolidated Operating Cash Flow" means, for any period, an amount
equal to (a) EBITDA for such period, less (b) the sum of (i) cash payments for
all taxes paid during such period, PLUS (ii) to the extent not already deducted
in the determination of EBITDA, capital expenditures made during such period.
"Consolidated Total Debt Service" means, for any fiscal period with
respect to the Company and its Subsidiaries, the sum of (a) Consolidated Total
Interest Expense for such period, PLUS (b) any and all mandatory or required
payments of principal in respect of Indebtedness of the Company and its
Subsidiaries made or required to be made in such period.
"Consolidated Total Interest Expense" means, for any period, the
aggregate amount of interest required to be paid or accrued by the Company and
its Subsidiaries during such period on all Indebtedness of the Company and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease or any synthetic lease, and including commitment fees, agency
fees, facility fees, balance deficiency fees, and similar fees or expenses in
connection with the borrowing of money.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
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"Default" shall mean an Event of Default or any event which, with
notice or lapse of time or both, would become an Event of Default.
"Debt Service Coverage Ratio" means, as at any date of determination,
the ratio of (a) Consolidated Operating Cash Flow of the Company and its
Subsidiaries for the fiscal quarter most recently ended to (b) Consolidated
Total Debt Service of the Company and its Subsidiaries for the fiscal quarter
most recently ended.
"EBITDA" means, with respect to the Company and its Subsidiaries for
any fiscal period, an amount equal to consolidated net income for such period,
PLUS, to the extent deducted in the calculation of consolidated net income and
without duplication, (a) depreciation and amortization for such period, (b)
other noncash charges for such period, (c) income tax expense for such period,
(d) consolidated total interest expense for such period, and MINUS, to the
extent added in computing consolidated net income and without duplication, all
noncash gains (including income tax benefits) for such period, all as determined
in accordance with generally accepted accounting principles.
"Event of Default" shall have the meaning set forth in Section 9.1.
"Last Balance Sheet" shall mean the balance sheet of the Company as of
April 30, 1998.
"Leverage Ratio" means, as of any date of determination, the ratio of
(a) Senior Funded Indebtedness of the Company and its Subsidiaries outstanding
on such date to (b) the EBITDA of the Company and its Subsidiaries for the
period ended on such date; provided, however, for purposes of determining the
Leverage Ratio for purposes of calculating compliance with ss.4.11 hereof for
the period from the Closing date through March 31, 1999, EBITDA for the quarter
ending (i) June 30, 1998, shall be $2,147,200; (ii) September 30, 1998, shall be
$2,557,500; (iii) December 31, 1998, shall be $1,382,000; and (iv) March 31,
1999, shall be $2,068,300.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction).
"Liquidity Event" shall mean any one or more of the following: (i) a
liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary; (ii) a sale, merger or similar transaction involving the Company,
as the result of which those Persons who held 100% of the voting stock of the
Company immediately prior to such transaction do not hold more than 50% of the
voting stock of the Company (or the surviving or resulting entity) after giving
effect to such transaction; (iii) the sale of all or substantially all of the
assets of the Company; or (iv) a Qualified Public Offering.
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"Material Adverse Effect" means a material and adverse effect on the
assets, liabilities, properties, business, results of operation, or financial
condition of the Company and its Subsidiaries, taken as a whole.
"Material Subsidiary" shall mean a Subsidiary of the Company which,
during the immediately preceding fiscal quarter accounted for at least ten
percent (10%) of the consolidated revenues or net income of the Company or its
Subsidiaries for such period.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Qualified Public Offering" means a public offering of equity
securities of the Company effected pursuant to a registration statement filed
under the Act where the gross proceeds to the Company are at least $20,000,000
and the price per share is at least $210,000.
"Related Documents" shall mean the Registration Rights Agreement, the
Shareholders' Agreement, the Plan, the Restricted Stock Award Agreement, the
Founder Options, the Debentures and the Warrant Agreement.
"Senior Credit Agreement" means the credit agreement entered into as of
the date hereof between the Company and BankBoston, N.A., for itself and as
agent for the other lenders named therein and any other agreement hereafter
entered into by the Company with respect to the issuance of Senior Debt.
"Senior Debt" shall mean the Indebtedness incurred pursuant to the
Senior Credit Agreement executed on the date hereof, as supplemented or
modified, any any replacement or refinancing thereof which does not extend the
maturity or increase the principal amount of, or the interest rate payable with
respect to the Senior Debt.
"Subordination Agreement" shall mean the Intercreditor and
Subordination Agreement executed on the date hereof by the holder of the
Debentures for the benefit of the holder of Senior Debt, and any comparable
agreement executed in the future for future holders of Senior Debt.
"Subsidiary" or "Subsidiaries" means any corporation, association or
other business entity of which the Company and/or any of its other Subsidiaries
(as herein defined) directly or indirectly owns at the time more than fifty
percent (50%) of the outstanding voting shares of every class of such
corporation or trust other than directors' qualifying shares.
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ARTICLE XII
MISCELLANEOUS
12.1. DEBENTURE PAYMENTS. The Company agrees that, so long as any
Purchaser shall hold any Debentures, it will make payments of principal and
interest on any Debenture held by such Purchaser not later than 2:00 p.m.,
Boston, Massachusetts time, on the date such payment is due, in immediately
available federal funds, by credit to the Purchaser's account, as specified in
SCHEDULE 1.1 hereto, or such other account or accounts as the Purchaser may
designate in writing not less than two (2) Business Days prior to the payment
date, notwithstanding any contrary provision contained herein or any Debenture
with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Debenture, it or its nominee will make a notation thereon of
all principal payments previously paid thereon and of the date to which interest
thereon has been paid, and will notify the Company of the name and address of
the transferee of such Debenture. At the election of any subsequent holder of
any Debenture which has made the same agreements relating to such Debenture as
the Purchaser has made in this Section 12.1, the Company will make payments of
principal and interest to the account of such successor holder in the same
manner as set forth above.
12.2 FORM, REGISTRATION, TRANSFER AND EXCHANGE OF DEBENTURES. The
Debentures are issuable as registered notes and in denominations of not less
than $10,000. The Company shall keep at its principal office the register in
which the Company shall provide for the registration of the Debentures and for
transfers of the Debentures. Upon surrender for registration of transfer of any
Debenture at such office, the Company shall execute and deliver, at its expense,
one or more new such Debenture or Debentures of like tenor and of like aggregate
principal amount, which new Debenture or Debentures shall each be a registered
Debenture. At the option of the holder of any Debenture, such Debenture may be
exchanged for other Debentures, of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Debenture to be exchanged at
the office of the Company. Whenever any Debenture is so surrendered for
exchange, the Company shall execute and deliver, at its expense, the Debentures
which the holder thereof making the exchange is entitled to receive. Every
Debenture presented or surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed by
the holder of such Debenture or such holder's attorney-in-fact duly authorized
in writing. Any Debenture issued in exchange for any Debenture or upon transfer
thereof shall carry the rights to unpaid interest and interest to accrue which
were carried by the Debenture so exchanged or transferred, and neither gain nor
loss of interest shall result from any such transfer or exchange. Upon receipt
by the Company of an affidavit of the treasurer, assistant treasurer, or other
responsible official of any Purchaser (or, in the case of holders of Debentures
other than a Purchaser, evidence reasonably satisfactory to the Company) of the
ownership of and the loss, theft, destruction or mutilation of a Debenture and
(i) in case of loss, theft or destruction of a Debenture, of indemnity
reasonably satisfactory to it or (ii) in the
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case of the mutilation of any Debenture, upon surrender and cancellation
thereof, the Company, at its expense, shall execute and deliver in lieu thereof
a new Debenture of like tenor and of a like principal amount and dated and
bearing interest from the date to which interest has been paid on such lost,
stolen, destroyed or mutilated Debenture.
12.3 PARTIES IN INTEREST. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the parties
hereto and the respective successors and assigns of the parties hereto
(including transferees of any of the Debentures).
12.4 DEBENTURES OWNED BY AFFILIATES. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
principal amount of Debentures, the Debentures or shares owned of record by any
affiliate of a Purchaser shall be deemed to be owned by such Purchaser. For the
purpose of this Agreement, the term "affiliate" shall mean any Person
controlling, controlled by or under common control with, a Purchaser and any
general or limited partner of any Purchaser. Without limiting the foregoing,
each Purchaser shall be considered an affiliate of each other Purchaser.
12.5 AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of not less than a majority in aggregate principal amount of the
Debentures at the time outstanding, or, at such time as no Debentures remain
outstanding, of the holder or holders of not less than a majority of the shares
of Preferred Stock outstanding, or, at such time as no Debentures or Preferred
Stock remain outstanding, if the holder or holders of a majority of the shares
of Common Stock then outstanding and held by the Purchaser, and each holder of
any Debenture, share of Preferred Stock or share of Common Stock at the time
outstanding shall be bound by any consent authorized by this Section 12.5,
whether or not such Debenture, share of Preferred Stock or share of Common Stock
shall have been marked to indicate such consent; PROVIDED that notwithstanding
anything in this Section 12.5 to the contrary, without the written consent of
the holder or holders of all Debentures at the time outstanding, no consent,
amendment or waiver to or under this Agreement shall (i) extend or reduce the
maturity of any Debenture, or (ii) reduce the rate or affect the time of payment
of interest with respect to any Debenture, or (iii) affect the time, amount or
allocation of any required prepayments, or (iv) reduce the proportion of the
principal amount of the Debentures required with respect to any consent,
amendment or waiver, or (v) affect the provisions of Article VI. The Company
shall promptly send copies of any amendment, consent or waiver (and any requests
for any such amendment, consent or waiver) relating to this Agreement or the
Debentures, Preferred Stock or Common Stock to each Purchaser which holds
Debentures, Preferred Stock or Common Stock and, to the extent practicable,
shall consult with holders of the Debentures, in connection with each such
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amendment, consent and waiver. No course of dealing between the Company and the
holder of any of the Debentures, Preferred Stock or Common Stock nor any delay
in exercise any rights hereunder or any of the Debentures shall operate as a
waiver of any rights of any holder of such Debentures, Preferred Stock or Common
Stock. The Company will reimburse the Purchasers for the reasonable fees and
expenses of counsel incurred in connection with any amendment or modification of
this Agreement or any of the Related Documents or any waiver hereof or thereof.
12.6 NOTICES. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Company or to the
Purchasers at the address set forth below or to such other address as may be
furnished in writing to the other parties hereto:
The Company: Stride & Associates, Inc.
222 Berkeley Street
Suite 1620
Boston, Massachusetts 02716
Attention: President
Fax:
The Principal
Shareholders: The address set forth opposite the Principal
Shareholder's name on Schedule 1.4 attached
hereto.
in each case,
with copy to: Goodwin, Procter & Hoar, LLP
53 State Street
Boston, MA 02109
Attention: John J. Egan III, Esquire
H. David Henken, Esquire
Fax: (617) 523-1231
The Purchasers: The address set forth opposite the
Purchaser's name on SCHEDULE 1.1 attached
hereto.
with copy to: Hutchins, Wheeler & Dittmar,
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esquire
Fax: (617) 951-1295
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12.7 EXPENSES. Immediately upon consummation of the Closing, the Company
shall pay all reasonable costs and expenses of the Purchasers and the Principal
Shareholders in connection with the investigation, preparation, execution and
delivery of this Agreement and the Related Documents, the Senior Credit
Agreement (and due diligence related thereto) and the other instruments and
documents to be delivered hereunder and thereunder and the transactions
contemplated hereby and thereby, including the reasonable fees and disbursements
of Hutchins, Wheeler & Dittmar, A Professional Corporation, special counsel to
the Purchasers.
12.8 COUNTERPARTS. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.
12.9 EFFECT OF HEADINGS. The article and section headings herein are for
convenience only and shall not affect the construction hereof.
12.10 GOVERNING LAW. This Agreement shall be deemed a contract made
under the laws of The Commonwealth of Massachusetts and together with the rights
and obligations of the parties hereunder, shall be construed under and governed
by the laws of such Commonwealth.
12.11 TAX MATTERS.
(a) S CORPORATION STATUS. Prior to the Closing, the Company and the
Principal Shareholders will not revoke the Company's election to be taxed as
an S corporation within the meaning of Code Sections 1361 and 1362. Prior to
the Closing, the Company and the Principal Shareholders will not take or
allow any action other than the sale of the Company's stock pursuant to this
agreement that would result in the termination of the Company's status as
a validly electing S corporation within the meaning of Code Sections 1361
and 1362.
(b) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The Company
shall prepare, and shall permit the Purchasers and the Principal Shareholders
to review and comment on, each such tax return for fiscal year 1998 prior to
filing. To the extent permitted by applicable law, the Principal Shareholders
shall include any income, gain, loss, deduction or other tax items for such
periods on their tax returns in a manner consistent with the Schedule K-1s
furnished by the Company to the Principal Shareholders for such periods.
Income tax returns for the S termination year as defined under Section
1362(e)(4) of the Code shall be prepared using the closing of the books
method of accounting on the Closing Date and the Principal Shareholders and
Purchasers shall make any required elections under Federal or state
law to use such method of accounting, including the election under
Section 1362(e)(3) of the Code, if necessary.
(c) COOPERATION ON TAX MATTERS.
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(i) The Purchasers, the Company and the Principal
Shareholders shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of tax returns pursuant to this
section and any audit, litigation or other proceeding with respect to taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company and the Principal Shareholders
agree (A) to retain all books and records with respect to tax matters pertinent
to the Company relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by the Purchasers or the Principal Shareholders, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or the
Principal Shareholders, as the case may be, shall allow the other party to take
possession of such books and records.
(ii) The Purchasers and the Principal Shareholders further
agree, upon request, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(d) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with the execution of this agreement (including
any corporate-level gains tax triggered by the sale of Company stock, New York
City transfer tax and any similar tax imposed in other states or subdivisions),
shall be paid by the Principal Shareholders when due, and the Principal
Shareholders will, at their own expense, file all necessary tax returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other taxes and fees, and, if required by applicable
law, the Purchasers will, and will cause their affiliates to, join in the
execution of any such tax returns and other documentation.
* * * * *
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STRIDE & ASSOCIATES, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichaud
-------------------------------------
Name: Michael Robichaud
Title: President
PRINCIPAL SHAREHOLDERS:
/s/ John Devine
----------------------------------------
John Devine
/s/ Rachel Burnett
----------------------------------------
Rachel Burnett
/s/ Alan Matthews
----------------------------------------
Alan Matthews
/s/ Michael Robichaud
----------------------------------------
Michael Robichaud
S-2
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STRIDE & ASSOCIATES, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
PURCHASERS:
Summit Ventures IV, L.P.
By: Summit Partners IV, L.P.
Its General Partner
By: Stamps, Woodsum & Co., IV
Its General Partner
By: /s/ Tom Roberts
------------------------------------
General Partner
Summit Ventures V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: /s/ Tom Roberts
------------------------------------
Member
Summit V Advisors Fund, L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ Tom Roberts
------------------------------------
Member
S-3
<PAGE>
Summit V Advisors Fund (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ Tom Roberts
------------------------------------
Member
Summit Subordinated Debt Fund II, L.P.
By: Summit Partners SD II, LLC
Its General Partner
By: /s/ Tom Roberts
------------------------------------
Summit Investors III, L.P.
By: /s/ Tom Roberts
------------------------------------
General Partner
S-4
<PAGE>
Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
STRIDE & ASSOCIATES, INC.
STRIDE & ASSOCIATES, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Stride & Associates, Inc. The date of
the filing of its original Certificate of Incorporation with the Secretary of
State of the State of Delaware was October 7, 1994.
2. This Second Amended and Restated Certificate of Incorporation
amends, restates and integrates the provisions of the First Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on June 3, 1998, as heretofore amended, and (i)
was duly adopted by the Board of Directors in accordance with the provisions of
Section 245 of the Delaware General Corporation Law (the "DGCL"), (ii) was
declared by the Board of Directors to be advisable and in the best interests of
the Corporation and was directed by the Board of Directors to be submitted to
and be considered by the stockholders of the Corporation entitled to vote
thereon for approval by the affirmative vote of such stockholders in accordance
with Section 242 of the DGCL and (iii) was duly adopted by a stockholder consent
in lieu of a meeting of the stockholders, with the holders of a majority of the
outstanding shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), and the holders of a majority of the outstanding shares of the
Company's Series A Convertible Participating Preferred Stock, par value $.01 per
share (the "Series A Convertible Preferred Stock"), in addition to the holders
of a majority of the outstanding shares of Common Stock and Series A Convertible
Preferred Stock (on an as converted basis) voting as a single class, consenting
to the adoption of this Second Amended and Restated Certificate of Incorporation
in accordance with the provisions of Sections 228 and 242 of the DGCL and the
terms of the First Amended and Restated Certificate of Incorporation, as
amended, such holders being all of the holders of the Corporation's capital
stock entitled to vote thereon.
3. The text of the First Amended and Restated Certificate of
Incorporation is hereby amended and restated in its entirety to provide as
herein set forth in full.
ARTICLE I
The name of the Corporation is Stride & Associates, Inc.
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ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
A. NUMBER OF SHARES.
The total number of shares of capital stock which the Corporation shall
have the authority to issue is 55,000,000 shares, of which 5,000,000 shares
shall be preferred stock, par value $.01 per share (the "Preferred Stock") and
50,000,000 shares shall be common stock, par value $.01 per share (the "Common
Stock"). As set forth in this Article IV, the Board of Directors or any
authorized committee thereof is authorized from time to time to establish and
designate one or more series of Preferred Stock, to fix and determine the
variations in the relative rights, preferences and powers as between the
different series of Preferred Stock in the manner hereinafter set forth in this
Article IV, and to fix or alter the number of shares comprising any such series
and the designation thereof to the fullest extent permitted by law.
B. COMMON STOCK.
Subject to all of the rights, powers and preferences of the Preferred
Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Preferred Stock):
(a) the holders of the Common Stock shall have the
exclusive right to vote for the election of directors and on all other matters
requiring stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart
for payment upon the Common Stock out of any assets or funds of the Corporation
legally available for the payment of dividends, but only when and as declared by
the Board of Directors or any authorized committee thereof; and
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(c) upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the net assets of the Corporation
shall be distributed pro rata to the holders of the Common Stock in accordance
with their respective rights and interests.
C. PREFERRED STOCK.
Subject to any limitations prescribed by law, the Board of Directors or
any authorized committee thereof is expressly authorized to provide for the
issuance of the shares of Preferred Stock in one or more series of such stock,
and by filing a certificate pursuant to applicable law of the State of Delaware,
to establish or change from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences and the
relative, participating, optional or other special rights of the shares of each
series and any qualifications, limitations and restrictions thereof. Any action
by the Board of Directors or any authorized committee thereof under this Section
C of this Article IV shall require the affirmative vote of a majority of the
directors then in office or a majority of the members of such committee. The
Board of Directors or any authorized committee thereof shall have the right to
determine or fix one or more of the following with respect to each series of
Preferred Stock to the fullest extent permitted by law:
(a) The distinctive serial designation and the number
of shares constituting such series;
(b) The dividend rates or the amount of dividends to
be paid on the shares of such series, whether dividends shall be cumulative and,
if so, from which date or dates, the payment date or dates for dividends, and
the participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of
the shares of such series;
(d) Whether the shares of such series shall be
redeemable and, if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed;
(e) The amount or amounts payable upon the shares of
such series and any preferences applicable thereto in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be
entitled to the benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the amount of such
fund and the manner of its application, including the price or prices at which
such shares may be redeemed or purchased through the application of such fund;
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(g) Whether the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if any,
at which such conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(h) The price or other consideration for which the
shares of such series shall be issued;
(i) Whether the shares of such series which are
redeemed or converted shall have the status of authorized but unissued shares of
Preferred Stock (or series thereof) and whether such shares may be reissued as
shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights,
qualifications, limitations and restrictions thereof as the Board of Directors
or any authorized committee thereof may deem advisable.
D. DESIGNATED PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The Corporation shall designate
24,802.5 shares of Preferred Stock as Series A Convertible Preferred Stock, par
value $.01 per share ("Series A Preferred Stock"), and 24,802.5 shares of
Preferred Stock as Series B Redeemable Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock" and, together with the Series A Preferred Stock
the "Designated Preferred Stock"). The Designated Preferred Stock shall have the
preferences, limitations and rights set forth below.
2. DIVIDENDS.
(a) DIVIDENDS. The Corporation shall pay dividends on
the Designated Preferred Stock, when and as declared by the Board of Directors,
at the per-annum rate of 9.0% of the Base Liquidation Amount (as herein defined)
thereof. To the extent not paid, dividends shall cumulate and compound annually.
Upon conversion of the Series A Preferred Stock as herein provided, any
dividends which have cumulated and not been paid with respect to the Series A
Preferred Stock shall attach to the Series B Preferred Stock into which such
Series A Preferred Stock is convertible, and thereafter shall be payable with
respect to such Series B Preferred Stock.
(b) LIMITATION ON RESTRICTIONS. The Corporation shall
not, and shall not permit any Subsidiaries to, agree to any provision in any
agreement (other than any agreement executed in connection with a senior loan
from a bank or other financial institution (a "Senior Loan Agreement") which
would prohibit or impose any material restrictions on the Corporation's right to
make any mandatory redemption of the Designated Preferred Stock.
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(c) RESTRICTIONS. The Corporation may not, without
the consent of holders of a majority in number of the shares each of the Series
A and Series B of Preferred Stock outstanding, declare or pay a dividend, in
cash or in kind, on any share of capital stock other than Designated Preferred
Stock (other than any dividends permitted under the Securities Purchase and
Redemption Agreement pursuant to which the Series A Preferred Stock was issued
(the "Purchase Agreement")). In the event the holders of the Series A Preferred
Stock consent to the payment of a dividend to holders of Common Stock,
concurrently with the payment of a dividend to holders of Common Stock there
shall be paid a dividend to holders of Series A Preferred Stock in an amount
equal to that which would have been paid to them had they held the shares of
Common Stock into which the Series A Preferred Stock is convertible immediately
prior to the record date for payment of such dividends.
3. LIQUIDATION, DISSOLUTION, WINDING UP OR OTHER LIQUIDITY EVENT.
(a) TREATMENT AT LIQUIDATION, DISSOLUTION AND WINDING
UP. In the event of a Liquidity Event (as herein defined), before any
distribution or payment may be made with respect to the Common Stock or any
other series or class of capital stock ranking on liquidation junior to the
Designated Preferred Stock, holders of each share of Designated Preferred Stock
shall be entitled to be paid out of the assets of the Corporation available for
distribution to holders of the Corporation's capital stock of all classes,
whether such assets are capital, surplus, or capital earnings, an amount in cash
equal to (x) in the case of the Series A Preferred Stock, an amount equal to the
sum of (i) $1,209.56 per share of Preferred Stock (the "Base Liquidation
Amount") (which amount, together with the other share and per share numbers used
herein shall be subject to equitable adjustment whenever there shall occur a
stock split, combination, reclassification or other similar event involving the
class or series of stock in question), plus (ii) $260.57 per share of Preferred
Stock, plus (iii) all accumulated and unpaid dividends, plus (iv) the amount
which would have been payable with respect to the shares of, Common Stock
issuable upon conversion of such shares of Series A Preferred Stock had such
Series A Preferred Stock been converted into shares of Series B Preferred Stock
and Common Stock immediately prior to such Liquidity Event (collectively, the
"Series A Liquidation Amount"), and (y) in the case of the Series B Preferred
Stock, an amount equal to the sum of (i) the Base Liquidation Amount per share
of Series B Preferred Stock, (ii) $260.57 per share of Preferred Stock, plus
(iii) all accumulated and unpaid dividends (collectively, the "Series B
Liquidation Amount" and, together with the Series A Liquidation Amount, the
"Liquidation Amount"). The term "Liquidity Event" shall mean any one or more of
the following: (i) a liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary; (ii) a sale, merger or similar transaction
involving the Corporation, as the result of which those persons who held 100% of
the voting stock of the Corporation immediately prior to such transaction do not
hold more than 50% of the voting stock of the Corporation (or the surviving or
resulting entity) after giving effect to such transaction; (iii) the sale of all
or substantially all of the assets of the Corporation; or (iv) consummation of
the first sale of securities of the Corporation pursuant to a registration
statement filed under the Securities Act of 1933, as amended (the "Initial
Public Offering").
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If upon any such Liquidity Event the assets of the Corporation
available for distribution to its shareholders shall be insufficient to permit
payment to the holders of the Designated Preferred Stock of the full Liquidation
Amount to which they are entitled to be paid, the holders of shares of
Designated Preferred Stock shall share ratably in any distribution of assets
according to the amounts which would be payable with respect to the shares of
Designated Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full.
After the payment of the Liquidation Amount shall have been made in
full to the holders of the Designated Preferred Stock, the holders of the
Designated Preferred Stock shall be entitled to no further participation in the
distribution of the assets of the Corporation, and the remaining assets of the
Corporation legally available for distribution to its shareholders shall be
distributed among the holders of other classes of securities of the Corporation
in accordance with their respective terms.
(b) DISTRIBUTIONS IN CASH. The Liquidation Amount
shall in all events be paid in cash.
4. VOTING POWER. Except as otherwise expressly provided in
Section D.7 of this Article IV, or as required by law, the holders of the
Designated Preferred Stock shall not be entitled to vote on any corporate
matters.
5. CONVERSION OF SERIES A PREFERRED STOCK. Each share of
Series A Preferred Stock may, at any time at the election of the holder thereof,
be converted into (i) one share of Series B Preferred Stock and (ii) 0.0016127
shares of Common Stock. Any holder of Series A Preferred Stock who wishes to
exercise such right of conversion shall give written notice thereof to the
Corporation, setting forth the number of shares of Series A Preferred Stock to
be converted, and shall exchange with the Corporation its certificates
evidencing shares of Series A Preferred Stock for certificates evidencing the
shares of Series B Preferred Stock and Common Stock issuable upon conversion
thereof. Once a holder of Series A Preferred Stock has given notice of his
intent to convert, it shall be deemed to have effected such conversion and shall
be deemed to be the record holder of the Series B Preferred Stock and, Common
Stock, issuable upon such conversion; provided, however, that if such holder has
elected to convert in connection with a proposed Liquidity Event, and such
Liquidity Event is not consummated, such election to convert may be rescinded.
6. REDEMPTION.
(a) NO REDEMPTION OF SERIES A PREFERRED STOCK. Except
as otherwise provided in Section D.6(c) of this Article IV, the shares of Series
A Preferred Stock shall not be redeemable; provided that upon a Liquidity Event
holders of Series A Preferred Stock shall be entitled to receive the Series A
Liquidation Amount as provided in Section D.3 of this Article IV.
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(b) OPTIONAL REDEMPTION OF DESIGNATED PREFERRED STOCK
BY HOLDERS UPON A LIQUIDITY EVENT. In the event of a Liquidity Event, the
holders of a majority of the Series B Preferred Stock may, at their election,
require the Corporation to redeem all (and not less than all, other than
pursuant to Section D.6(d) of this Article IV) of the Series B Preferred Stock.
The Corporation shall give the holders of the Designated Preferred Stock thirty
(30) days' written notice of the pendency of a transaction constituting a
Liquidity Event. Such notice shall be mailed by the Corporation, postage
prepaid, to each holder of record of Designated Preferred Stock at its address
shown on the records of the Corporation. If the holders of a majority of the
Series B Preferred Stock elect to require the redemption of their Preferred
Stock, they shall so notify the Corporation in writing within fifteen (15) days
of receipt of the Corporation's notice of the Liquidity Event and specify that
all shares of Preferred Stock be redeemed. The holders' election to require the
redemption of the Series B Preferred Stock will be contingent upon the
consummation of the Liquidity Event. The Corporation will be required to redeem
the shares of Series B Preferred Stock concurrently with the closing of the
event constituting the Liquidity Event at the Series B Liquidation Amount. In
the event of a Liquidity Event, the Company may, by notice to the Holders of
Series B Preferred Stock at least ten (10) days prior to such Liquidity Event,
elect to redeem all, but not less than all, shares of Series B Preferred Stock
then outstanding.
(c) AUTOMATIC REDEMPTION. Immediately upon and as of
the closing of the Initial Public Offering, the Corporation shall redeem all
(and not less than all) of the outstanding shares of Designated Preferred Stock
at the Liquidation Amount; provided that with respect to the Series A Preferred
Stock, the Company shall issue the shares of Common Stock into which shares are
convertible in lieu of the payment otherwise required under Section
D.3(a)(x)(iv) of this Article IV.
(d) REDEMPTION PROHIBITED. In the event the
Corporation is obligated to redeem shares of Designated Preferred Stock
hereunder, but the Corporation is prohibited under the General Corporation Law
of the State of Delaware or under a Senior Loan Agreement from redeeming such
shares, then it shall redeem to the maximum permitted extent such shares on a
pro-rata basis among the holders of Designated Preferred Stock in proportion to
the full respective redemption amounts to which they are entitled hereunder and
shall redeem the remaining shares to be redeemed as soon as the Corporation is
not prohibited from redeeming some or all of such shares under the General
Corporation Law of the State of Delaware or under a Senior Loan Agreement. Any
shares of Designated Preferred Stock not redeemed shall remain outstanding and
entitled to all of the rights and preferences provided herein. In the event that
the Corporation fails to redeem shares for which redemption is required pursuant
to Section D.6 of this Article IV, then during the period from the date on which
the Corporation was obligated to redeem shares of Designated Preferred Stock
through the date on which such shares are redeemed, the dividend rate on such
shares shall, notwithstanding anything to the contrary herein, be increased to
12% per annum, compounded annually, which dividend rate shall be subject to
additional increases of 1% per annum every six months thereafter until the
Liquidation Amount (as so increased) is paid in full, subject to a maximum
dividend rate of 15% per annum.
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(e) SURRENDER OF CERTIFICATES. Each holder of shares
of Designated Preferred Stock to be redeemed under this Section D.6 of this
Article IV shall surrender the certificate or certificates representing such
shares to the Corporation at its principal office, and thereupon the Liquidation
Amount shall be paid to the order of the person whose name appears on such
certificate or certificates.
7. RESTRICTIONS AND LIMITATIONS.
(a) CORPORATE ACTION. Except as expressly provided
herein or as required by law, so long as any shares of Designated Preferred
Stock remain outstanding, the Corporation shall not, and shall not permit any
subsidiary (which shall mean any corporation, association or other business
entity of which the Corporation and/or any of its other subsidiaries directly or
indirectly owns at the time more than fifty percent (50%) of the outstanding
voting securities, other than directors' qualifying shares) to, without the
approval by vote or written consent by the holders of at least a majority of the
then outstanding shares of each of the Series A and Series B Preferred Stock,
voting as separate classes:
(i) redeem, purchase or otherwise acquire for value
(or pay into or set aside for a sinking fund for such purpose), or declare and
pay or set aside funds for the payment of any dividend or other distribution
with respect to, any shares of capital stock, except as required or permitted
under the terms of the Designated Preferred Stock or the redemption, purchase or
other acquisition in connection with an employee benefit plan;
(ii) authorize or issue, or obligate itself to
authorize or issue, additional shares of Designated Preferred Stock;
(iii) authorize or issue, or obligate itself to
authorize or issue, any equity security senior to or on parity with the
Designated Preferred Stock as to liquidation preferences, redemption rights or
dividend rights;
(iv) merge or consolidate with any other corporation,
or sell, assign, lease or otherwise dispose of or voluntarily part with the
control of (whether in one transaction or in a series of transactions) all, or
substantially all, of its assets (whether now owned or hereinafter acquired), or
consent to any liquidation, dissolution or winding up of the Corporation, or
permit any subsidiary to do any of the foregoing, EXCEPT for (1) the merger or
consolidation of any wholly-owned subsidiary into any other wholly-owned
subsidiary or the Corporation; (2) the transfer by any wholly-owned subsidiary
of assets to another wholly-owned subsidiary or to the Corporation; or
(v) amend, restate, modify or alter the by-laws of
the Corporation in any way which adversely affects the rights of the holders of
the Designated Preferred Stock.
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(b) AMENDMENTS TO CHARTER. The Corporation shall not
amend its Certificate of Incorporation without the approval, by vote or written
consent, by the holders of at least a majority of the then outstanding shares of
Designated Preferred Stock, voting together as a separate class, if such
amendment would amend any of the rights, preferences, privileges of or
limitations provided for herein for the benefit of any shares of Designated
Preferred Stock. Without limiting the generality of the preceding sentence, the
Corporation will not amend its Certificate of Incorporation without the approval
by the holders of at least a majority of the then outstanding shares of
Designated Preferred Stock, voting as a separate class, if such amendment would:
(i) change the relative seniority rights of the
holders of Designated Preferred Stock as to the payment of dividends in relation
to the holders of any other capital stock of the Corporation, or create any
other class or series of capital stock entitled to seniority as to the payment
of dividends in relation to the holders of Designated Preferred Stock;
(ii) reduce the amount payable to the holders of
Designated Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or change the relative seniority
of the liquidation preferences of the holders of Designated Preferred Stock to
the rights upon liquidation of the holders of other capital stock of the
Corporation, or change the dividend rights of the holders of Designated
Preferred Stock;
(iii) cancel or modify the redemption rights of the
holders of the Designated Preferred Stock provided for in Section D.6 of this
Article IV; or
(iv) cancel or modify the rights of the holders of
the Designated Preferred Stock provided for in this Section D.7 of this Article
IV.
8. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation,
any reclassification or recapitalization of the capital stock of the
Corporation, any merger of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other corporation, or
any other entity or person; or
(c) any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, then and in each such event the
Corporation shall mail or cause to be mailed to each holder of Designated
Preferred Stock a notice specifying (i) the date on which
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any such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding up. Such notice shall be
mailed at least ten (10) business days prior to the date specified in such
notice on which such action is to be taken.
9. NO REISSUANCE OF DESIGNATED PREFERRED STOCK. No share or
shares of Designated Preferred Stock acquired by the Corporation by reason of
conversion, redemption, purchase or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Designated Preferred Stock accordingly.
10. WAIVER. The holders of a majority of the then outstanding
shares of any series of Designated Preferred Stock may, at any time upon written
notice to the Corporation waive any of the provisions herein for the benefit of
all holders of such series of Designated Preferred Stock.
ARTICLE V
EXISTENCE
The Corporation shall have perpetual existence.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
make, alter or repeal the Bylaws of the Corporation.
ARTICLE VII
MEETINGS; BOOKS AND ELECTION OF BOARD
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the Bylaws
of the Corporation. Election of directors need not be by written ballot unless
the Bylaws of the Corporation so provide.
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ARTICLE VIII
LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL or (d) for any transaction
from which the director derived an improper personal benefit. If the DGCL is
amended after the effective date of this First Amended and Restated Certificate
of Incorporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VIII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a director at the time of such repeal or
modification.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this First
Amended and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this First Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
*****
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THIS SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is
executed as of this 17th day of March, 1999.
STRIDE & ASSOCIATES, INC.
By: /s/ Michael C. Robichaud
------------------------------
Name:
Title:
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Exhibit 3.2
FORM OF
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
STRIDE & ASSOCIATES, INC.
STRIDE & ASSOCIATES, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Stride & Associates, Inc. The date of
the filing of its original Certificate of Incorporation with the Secretary of
State of the State of Delaware was October 7, 1994.
2. This Third Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Second Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on June 3, 1998, as heretofore amended, and (i)
was duly adopted by the Board of Directors in accordance with the provisions of
Section 245 of the Delaware General Corporation Law (the "DGCL"), (ii) was
declared by the Board of Directors to be advisable and in the best interests of
the Corporation and was directed by the Board of Directors to be submitted to
and be considered by the stockholders of the Corporation entitled to vote
thereon for approval by the affirmative vote of such stockholders in accordance
with Section 242 of the DGCL and (iii) was duly adopted by a stockholder consent
in lieu of a meeting of the stockholders, with the holders of a majority of the
outstanding shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), and the holders of a majority of the outstanding shares of the
Company's Series A Convertible Participating Preferred Stock, par value $.01 per
share (the "Convertible Preferred Stock"), in addition to the holders of a
majority of the outstanding shares of Common Stock and Convertible Preferred
Stock (on an as converted basis) voting as a single class, consenting to the
adoption of this Third Amended and Restated Certificate of Incorporation in
accordance with the provisions of Sections 228 and 242 of the DGCL and the terms
of the Second Amended and Restated Certificate of Incorporation, as amended,
such holders being all of the holders of the Corporation's capital stock
entitled to vote thereon.
3. The text of the Second Amended and Restated Certificate of
Incorporation is hereby amended and restated in its entirety to provide as
herein set forth in full.
ARTICLE I
The name of the Corporation is Stride & Associates, Inc.
<PAGE>
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the DGCL.
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is Fifty-Five Million (55,000,000) shares, of which (a)
Fifty Million (50,000,000) shares shall be common stock, par value $.01 per
share (the "Common Stock"), and (b) Five Million (5,000,000) shares shall be
undesignated preferred stock, par value $.01 per share (the "Undesignated
Preferred Stock").
Except as otherwise restricted by this Third Amended and Restated
Certificate of Incorporation, the Corporation is authorized to issue, from time
to time, all or any portion of the capital stock of the Corporation which may
have been authorized but not issued, to such person or persons and for such
lawful consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has
been paid or delivered shall be deemed fully paid shares of capital stock, and
the holder of such shares shall not be liable for any further call or assessment
or any other payment thereon.
The number of authorized shares of the class of Undesignated Preferred
Stock may from time to time be increased or decreased (but not below the number
of shares outstanding) by the affirmative vote of the holders of a majority of
the shares of Common Stock entitled to vote, without a vote of the holders of
the Undesignated Preferred Stock.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, this Article
IV.
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A. COMMON STOCK
1. DESIGNATION; RANKING. A total of 50,000,000 shares of the
Corporation's common stock shall be designated as Common Stock, $.01 par value
per share (the "Common Stock").
2. VOTING. Each holder of record shall be entitled to one vote for each
share of Common Stock standing in his name on the books of the Corporation.
Except as required by law or as set forth herein, the holders of Common Stock
(to the extent permitted by this Section 2) and Undesignated Preferred Stock (to
the extent permitted by Article B hereof) shall vote together as a single class
on all matters submitted to the stockholders for a vote.
3. DIVIDENDS. The holders of Common Stock shall be entitled to receive
dividends out of funds legally available therefor at such times and in such
amounts as the Board of Directors may determine in its sole discretion.
4. LIQUIDATION. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), after the
payment or provision for payment of all debts and liabilities of the Corporation
and all preferential amounts to which the holders of Undesignated Preferred
Stock are entitled with respect to the distribution of assets in liquidation,
the holders of Common Stock shall be entitled to share ratably in the remaining
assets of the Corporation available for distribution.
B. UNDESIGNATED PREFERRED STOCK
1. AUTHORITY TO ISSUE. Subject to any limitations prescribed by law,
the Board of Directors or any authorized committee thereof is expressly
authorized to provide for the issuance of the shares of Undesignated Preferred
Stock in one or more series of such stock, and by filing a certificate pursuant
to applicable law of the State of Delaware, to establish or change from time to
time the number of shares to be included in each such series, and to fix the
designations, powers, preferences and the relative, participating, optional or
other special rights of the shares of each series and any qualifications,
limitations and restrictions thereof. Any action by the Board of Directors or
any authorized committee thereof under this Article B shall require the
affirmative vote of a majority of the directors then in office or a majority of
the members of such committee.
2. POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTION OF EACH SERIES OF UNDESIGNATED PREFERRED STOCK. The Board of
Directors or any authorized committee thereof shall have the right to determine
or fix one or more of the following with respect to each series of Undesignated
Preferred Stock to the fullest extent permitted by law:
(a) The distinctive serial designation and the number of
shares constituting such series;
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(b) The dividend rates or the amount of dividends to be paid
on the shares of such series, whether dividends shall be cumulative
and, if so, from which date or dates, the payment date or dates for
dividends, and the participating and other rights, if any, with respect
to dividends;
(c) The voting rights and powers, full or limited, if any, of
the shares of such series;
(d) Whether the shares of such series shall be redeemable and,
if so, the price or prices at which, and the terms and conditions on
which, such shares may be redeemed;
(e) The amount or amounts payable upon the shares of such
series and any preferences applicable thereto in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase
or redemption of such shares, and if so entitled, the amount of such
fund and the manner of its application, including the price or prices
at which such shares may be redeemed or purchased through the
application of such fund;
(g) Whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or of
any other series of the same or any other class or classes of stock of
the Corporation and, if so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(h) The consideration for which the shares of such series
shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Undesignated Preferred Stock (or series thereof) and whether such
shares may be reissued as shares of the same or any other class or
series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any
authorized committee thereof may deem advisable.
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ARTICLE V
STOCKHOLDER ACTION
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
ARTICLE VI
DIRECTORS
1. GENERAL. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors except as otherwise
provided herein or required by law.
2. ELECTION OF DIRECTORS. Election of Directors need not be by written
ballot unless the By-laws of the Corporation shall so provide.
3. TERMS OF DIRECTORS. The number of Directors of the Corporation shall
be fixed by resolution duly adopted from time to time by the Board of Directors.
The Directors, other than those who may be elected by the holders of any series
of Undesignated Preferred Stock of the Corporation, shall be classified, with
respect to the term for which they severally hold office, into three classes, as
nearly equal in number as possible. The initial Class I Directors of the
Corporation shall be Rachel Burnett and Thomas Roberts; the initial Class II
Directors of the Corporation shall be Scott Collins, John Devine and Alan
Matthews; and the initial Class III Directors of the Corporation shall be James
New and Michael Robichaud. The initial Class I Directors shall serve for a term
expiring at the annual meeting of stockholders to be held in 2000, the initial
Class II Directors shall serve for a term expiring at the annual meeting of
stockholders to be held in 2001, and the initial Class III Directors shall serve
for a term expiring at the annual meeting of stockholders to be held in 2002. At
each annual meeting of stockholders, the successor or successors of the class of
Directors whose term expires at that meeting shall be elected by a plurality of
the votes cast at such meeting and shall hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election. The Directors elected to each class shall hold office until
their successors are duly elected and qualified or until their earlier
resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Third Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Undesignated Preferred Stock shall have the
right, voting separately as a series or together with holders of other such
series, to elect Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
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directorships shall be governed by the terms of this Third Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto, and such Directors so elected shall not be divided into classes
pursuant to this Article V.3.
During any period when the holders of any series of Undesignated
Preferred Stock have the right to elect additional Directors as provided for or
fixed pursuant to the provisions of Article IV hereof, then upon commencement
and for the duration of the period during which such right continues: (i) the
then otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board of Directors in the
resolution or resolutions establishing such series, whenever the holders of any
series of Undesignated Preferred Stock having such right to elect additional
Directors are divested of such right pursuant to the provisions of such stock,
the terms of office of all such additional Directors elected by the holders of
such stock, or elected to fill any vacancies resulting from the death,
resignation, disqualification or removal of such additional Directors, shall
automatically terminate and the total and authorized number of Directors of the
Corporation shall be reduced accordingly.
4. VACANCIES. Subject to the rights, if any, of the holders of any
series of Undesignated Preferred Stock to elect Directors and to fill vacancies
in the Board of Directors relating thereto, any and all vacancies in the Board
of Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect Directors, when the number of Directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of Directors shall be
apportioned; provided, however, that no decrease in the number of Directors
shall shorten the term of any incumbent Director. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
5. REMOVAL. Subject to the rights, if any, of any series of
Undesignated Preferred Stock to elect Directors and to remove any Director whom
the holders of any such stock have the right to elect, any Director (including
persons elected by Directors to fill vacancies in the Board of Directors) may be
removed from office (i) only with cause and (ii) only by the
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affirmative vote of at least two-thirds of the total votes which would be
eligible to be cast by stockholders in the election of such Director. At least
30 days prior to any meeting of stockholders at which it is proposed that any
Director be removed from office, written notice of such proposed removal shall
be sent to the Director whose removal will be considered at the meeting. For
purposes of this Third Amended and Restated Certificate of Incorporation,
"cause," with respect to the removal of any Director shall mean only (i)
conviction of a felony, (ii) declaration of unsound mind by order of court,
(iii) gross dereliction of duty, (iv) commission of any action involving moral
turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (a) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL or (d) for any transaction
from which the Director derived an improper personal benefit. If the DGCL is
amended after the effective date of this Third Amended and Restated Certificate
of Incorporation to authorize corporate action further eliminating or limiting
the personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
1. AMENDMENT BY DIRECTORS.
Except as otherwise provided by law, the By-laws of the Corporation may
be amended or repealed by the Board of Directors by the affirmative vote of a
majority of the Directors then in office.
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2. AMENDMENT BY STOCKHOLDERS.
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose as provided in the Bylaws, by the affirmative vote of at least
two-thirds of the total votes eligible to be cast on such amendment or repeal by
holders of voting stock, voting together as a single class; provided, however,
that if the Board of Directors recommends that stockholders approve such
amendment or repeal at such meeting of stockholders, such amendment or repeal
shall only require the affirmative vote of a majority of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Third
Amended and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this Third Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this Third Amended and
Restated Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever any
vote of the holders of voting stock is required, and in addition to any other
vote of holders of voting stock that is required by this Third Amended and
Restated Certificate of Incorporation or by law, the affirmative vote of a
majority of the total votes eligible to be cast by holders of voting stock with
respect to such amendment or repeal, voting together as a single class, at a
duly constituted meeting of stockholders called expressly for such purpose shall
be required to amend or repeal any provisions of this Third Amended and Restated
Certificate of Incorporation; provided, however, that the affirmative vote of
not less than 80% of the total votes eligible to be cast by holders of voting
stock, voting together as a single class, shall be required to amend or repeal
any of the provisions of Article V, Article VI, Article VII or Article IX of
this Third Amended and Restated Certificate of Incorporation.
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THIS THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is
executed as of this ____ day of _________, 1999.
STRIDE & ASSOCIATES, INC.
By:
-------------------------------
Name:
Title:
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Exhibit 3.3
STRIDE & ASSOCIATES, INC.
B Y L A W S
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of New York, State of New York, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1995, shall be held on the fifteenth day of September if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 12 P. M., or
at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting,
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at which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
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Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is
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required in which case such express provision shall govern and control the
decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be four. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
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Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally
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to constitute the meeting, provided a quorum shall be present. In the event of
the failure of the stockholders to fix the time or place of such first meeting
of the newly elected board of directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on one day's notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
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Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
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Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation) adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
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COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
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THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all
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meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so
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requires, an account of all his transactions as treasurer and of the financial
condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.
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Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
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made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
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REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
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ARTICLE VIII
AMENDMENTS
Section 8. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
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Exhibit 3.4
FORM OF
AMENDED AND RESTATED
BY-LAWS
OF
STRIDE & ASSOCIATES, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of stockholders shall be
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. MATTERS TO BE CONSIDERED AT ANNUAL MEETINGS. At any annual
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (a) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (b) be present at such meeting, either in
person or by a representative. For the first Annual Meeting following the
initial public offering of common stock of the Corporation, a stockholder's
notice shall be timely if
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delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the later of (a) the
75th day prior to the scheduled date of such Annual Meeting or (b) the 15th day
following the day on which public announcement of the date of such Annual
Meeting is first made or sent by the Corporation. For all subsequent Annual
Meetings, a stockholder's notice shall be timely if delivered to, or mailed to
and received by, the Corporation at its principal executive office not less than
75 days nor more than 120 days prior to the anniversary date of the immediately
preceding Annual Meeting (the "Anniversary Date"); provided, however, that in
the event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before an Annual Meeting: (a) a brief description
of the business the stockholder desires to bring before such Annual Meeting and
the reasons for conducting such business at such Annual Meeting, (b) the name
and address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (d) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (e) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (f) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If neither the Board of Directors nor
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such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2. If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If the Board of Directors, a designated committee thereof
or the presiding officer determines that a stockholder proposal was made in
accordance with the requirements of this Section 2, the presiding officer shall
so declare at the Annual Meeting.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. SPECIAL MEETINGS. Except as otherwise required by law and
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the President or the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office.
SECTION 4. MATTERS TO BE CONSIDERED AT SPECIAL MEETINGS. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. NOTICE OF MEETINGS; ADJOURNMENTS. A written notice of each
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Certificate of Incorporation of the
Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be given when
hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
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Notice of all special meetings of stockholders shall be given in the
same manner as provided for Annual Meetings, except that the written notice of
all special meetings shall state the purpose or purposes for which the meeting
has been called.
Notice of an Annual Meeting or special meeting of stockholders need not
be given to a stockholder if a written waiver of notice is signed before or
after such meeting by such stockholder or if such stockholder attends such
meeting, unless such attendance was for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any Annual Meeting or special meeting of stockholders need
be specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously
scheduled Annual Meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall the
public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these Bylaws.
When any meeting is convened, the presiding officer may adjourn the
meeting if (a) no quorum is present for the transaction of business, (b) the
Board of Directors determines that adjournment is necessary or appropriate to
enable the stockholders to consider fully information which the Board of
Directors determines has not been made sufficiently or timely available to
stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any Annual Meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who, by
law or under the Certificate or these By-laws, is entitled to such notice.
SECTION 6. QUORUM. The holders of shares of voting stock representing a
majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned
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meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally noticed. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 7. VOTING AND PROXIES. Stockholders shall have one vote for
each share of stock entitled to vote owned by them of record according to the
books of the Corporation, unless otherwise provided by law or by the
Certificate. Stockholders may vote either in person or by proxy, but no proxy
shall be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a stockholder shall be deemed valid, and the
burden of proving invalidity shall rest on the challenger.
SECTION 8. ACTION AT MEETING. When a quorum is present, any matter
before any meeting of stockholders shall be decided by the vote of a majority of
the voting power of shares of voting stock present in person or represented by
proxy at such meeting and entitled to vote on such matter, except where a larger
vote is required by law, by the Certificate or by these By-laws. Any election of
directors by stockholders shall be determined by a plurality of the votes cast,
except where a larger vote is required by law, by the Certificate or by these
Bylaws. The Corporation shall not directly or indirectly vote any shares of its
own stock that belong to the Corporation; provided, however, that the
Corporation may vote shares which it holds in a fiduciary capacity to the extent
permitted by law.
SECTION 9. STOCKHOLDER LISTS. The Secretary or an Assistant Secretary
(or the Corporation's transfer agent or other person authorized by these By-laws
or by law) shall prepare and make, at least 10 days before every Annual Meeting
or special meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
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SECTION 10. PRESIDING OFFICER. The Chairman of the Board, if one is
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time, subject to Sections 5 and 6 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
SECTION 11. VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. The
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
DIRECTORS
SECTION 1. POWERS. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. NUMBER AND TERMS. The number of directors of the Corporation
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. DIRECTOR NOMINATIONS. Nominations of candidates for election
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the
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record date for the Annual Meeting in question) of any shares of the capital
stock of the Corporation entitled to vote at such Annual Meeting who complies
with the timing, informational and other requirements set forth in this Section
3. Any stockholder who has complied with the timing, informational and other
requirements set forth in this Section 3 and who seeks to make such a
nomination, or his, her or its representative, must be present in person at the
Annual Meeting. Only persons nominated in accordance with the procedures set
forth in this Section 3 shall be eligible for election as directors at an Annual
Meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 3. For the first
Annual Meeting following the initial public offering of common stock of the
Corporation, a stockholder's notice shall be timely if delivered to, or mailed
to and received by, the Corporation at its principal executive office not later
than the close of business on the later of (a) the 75th day prior to the
scheduled date of such Annual Meeting or (b) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made or
sent by the Corporation. For all subsequent Annual Meetings, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not less than 75 days nor more
than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A stockholder's notice to the Secretary shall set forth as to each
person whom the stockholder proposes to nominate for election or re-election as
a director: (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (d) the consent
of each nominee to serve as a director if elected. A stockholder's notice to the
Secretary shall further set forth as to the stockholder giving such notice: (a)
the name and address, as they appear on the Corporation's stock transfer books,
of such stockholder and of the beneficial owners (if any) of the Corporation's
capital stock registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s),
(b) the class and number of shares of the Corporation's capital stock which are
held of record, beneficially owned or represented by proxy by such stockholder
and by any other stockholders known by such stockholder to be supporting such
nominee(s) on the record date for the Annual Meeting in question (if such date
shall then have been made publicly available) and on the date of such
stockholder's notice, and (c) a description of all arrangements or
understandings between such stockholder and each nominee
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and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this Section 3 or that the information provided in a stockholder's notice does
not satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
a timely fashion in accordance with the terms of this Section 3 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3 in any material respect, then such
nomination shall not be considered at the Annual Meeting in question. If the
Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such notice shall be delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
SECTION 4. QUALIFICATION. No director need be a stockholder of the
Corporation.
SECTION 5. VACANCIES. Subject to the rights, if any, of the holders of
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating
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thereto, any and all vacancies in the Board of Directors, however occurring,
including, without limitation, by reason of an increase in size of the Board
of Directors, or the death, resignation, disqualification or removal of a
director, shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even if less than a quorum of the Board
of Directors. Any director appointed in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred
and until such director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of preferred stock to elect
directors, when the number of directors is increased or decreased, the Board
of Directors shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided, however, that
no decrease in the number of directors shall shorten the term of any
incumbent director. In the event of a vacancy in the Board of Directors, the
remaining directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
SECTION 6. REMOVAL. Directors may be removed from office in the manner
provided in the Certificate.
SECTION 7. RESIGNATION. A director may resign at any time by giving
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. REGULAR MEETINGS. The regular annual meeting of the Board of
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may be
held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. NOTICE OF MEETINGS. Notice of the hour, date and place
of all special meetings of the Board of Directors shall be given to each
director by the Secretary or an Assistant Secretary, or in case of the death,
absence, incapacity or refusal of such persons, by the Chairman of the Board,
if one is elected, or the President or such other officer designated by the
Chairman of the Board, if one is elected, or the President. Notice of any
special meeting of the Board of Directors shall be given to each director in
person, by telephone, or by facsimile, telex, telecopy, telegram, or other
written form of electronic communication, sent to
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his or her business or home address, at least 24 hours in advance of the
meeting, or by written notice mailed to his or her business or home address,
at least 48 hours in advance of the meeting. Such notice shall be deemed to
be delivered when hand delivered to such address, read to such director by
telephone, deposited in the mail so addressed, with postage thereon prepaid
if mailed, dispatched or transmitted if faxed, telexed or telecopied, or when
delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken of the hour, date and place to which the
meeting is adjourned.
A written waiver of notice signed before or after a meeting by a
director and filed with the records of the meeting shall be deemed to be
equivalent to notice of the meeting. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because such meeting is not lawfully
called or convened. Except as otherwise required by law, by the Certificate or
by these By-laws, neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Directors need be specified in the notice or waiver
of notice of such meeting.
SECTION 11. QUORUM. At any meeting of the Board of Directors, a
majority of the directors then in office shall constitute a quorum for the
transaction of business, but if less than a quorum is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice, except as provided
in Section 10 of this Article II. Any business which might have been transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
SECTION 12. ACTION AT MEETING. At any meeting of the Board of Directors
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
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SECTION 14. MANNER OF PARTICIPATION. Directors may participate in
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. COMMITTEES. The Board of Directors, by vote of a majority
of the directors then in office, may elect from its number one or more
committees, including, without limitation, an Executive Committee, a
Compensation and Option Committee and an Audit Committee, and may delegate
thereto some or all of its powers except those which by law, by the Certificate
or by these By-laws may not be delegated. Except as the Board of Directors may
otherwise determine, any such committee may make rules for the conduct of its
business, but unless otherwise provided by the Board of Directors or in such
rules, its business shall be conducted so far as possible in the same manner as
is provided by these By-laws for the Board of Directors. All members of such
committees shall hold such offices at the pleasure of the Board of Directors.
The Board of Directors may abolish any such committee at any time. Any committee
to which the Board of Directors delegates any of its powers or duties shall keep
records of its meetings and shall report its action to the Board of Directors.
The Board of Directors shall have power to rescind any action of any committee,
to the extent permitted by law, but no such rescission shall have retroactive
effect.
SECTION 16. COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
OFFICERS
SECTION 1. ENUMERATION. The officers of the Corporation shall consist
of a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board, a Chief Executive Officer and one
or more Vice Presidents (including Executive Vice Presidents or Senior Vice
Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may determine.
SECTION 2. ELECTION. At the regular annual meeting of the Board
following the Annual Meeting of stockholders, the Board of Directors shall elect
the President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
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SECTION 3. QUALIFICATION. No officer need be a stockholder or a
director. Any person may occupy more than one office of the Corporation at any
time. Any officer may be required by the Board of Directors to give bond for the
faithful performance of his or her duties in such amount and with such sureties
as the Board of Directors may determine.
SECTION 4. TENURE. Except as otherwise provided by the Certificate or
by these Bylaws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. RESIGNATION. Any officer may resign by delivering his or her
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. REMOVAL. Except as otherwise provided by law, the Board of
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. ABSENCE OR DISABILITY. In the event of the absence or
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. VACANCIES. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 9. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, if
one is elected, shall, subject to the direction of the Board of Directors, have
general supervision and control of the Corporation's business. If there is no
Chairman of the Board or if he or she is absent, the Chief Executive Officer
shall preside, when present, at all meetings of stockholders and of the Board of
Directors. The Chief Executive Officer shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
SECTION 11. PRESIDENT. The President shall generally have such powers
and shall perform such duties as the Board of Directors may from time to time
designate. However, if no Chief Executive Officer is elected, the President
shall have general supervision and control of the Corporation's business. If
there is neither a Chairman of the Board nor a Chief
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Executive Officer or if both such officers are absent, the President shall
preside, when present, at all meetings of stockholders and of the Board of
Directors.
SECTION 12. VICE PRESIDENTS AND ASSISTANT VICE PRESIDENTS. Any Vice
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall,
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have such
other duties and powers as may be designated from time to time by the Board of
Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. OTHER POWERS AND DUTIES. Subject to these By-laws and to
such limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
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ARTICLE IV
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled to
a certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every certificate
for shares of stock which are subject to any restriction on transfer and every
certificate issued when the Corporation is authorized to issue more than one
class or series of stock shall contain such legend with respect thereto as is
required by law.
SECTION 2. TRANSFERS. Subject to any restrictions on transfer and
unless otherwise provided by the Board of Directors, shares of stock may be
transferred only on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or accompanied by a written assignment or power of attorney properly
executed, with transfer stamps (if necessary) affixed, and with such proof of
the authenticity of signature as the Corporation or its transfer agent may
reasonably require.
SECTION 3. RECORD HOLDERS. Except as may otherwise be required by law,
by the Certificate or by these By-laws, the Corporation shall be entitled to
treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
Corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of
his or her post office address and any changes thereto.
SECTION 4. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date: (a) in the case of
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determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (b) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. REPLACEMENT OF CERTIFICATES. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
INDEMNIFICATION
SECTION 1. DEFINITIONS. For purposes of this Article:
(a) "Director" means any person who serves or has served the
Corporation as a director on the Board of Directors of the Corporation.
(b) "Officer" means any person who serves or has served the Corporation
as an officer appointed by the Board of Directors of the Corporation;
(c) "Non-Officer Employee" means any person who serves or has served as
an employee of the Corporation, but who is not or was not a Director or Officer;
(d) "Proceeding" means any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, inquiry,
investigation, administrative hearing or other proceeding, whether civil,
criminal, administrative, arbitrative or investigative;
(e) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment
bankers), travel expenses, duplicating costs, printing and binding costs, costs
of preparation of demonstrative evidence and other courtroom presentation aids
and devices, costs incurred in connection with document review, organization,
imaging and computerization, telephone charges, postage, delivery service fees,
and all other disbursements, costs or expenses of the type customarily incurred
in connection
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with prosecuting, defending, preparing to prosecute or defend, investigating,
being or preparing to be a witness in, settling or otherwise participating in, a
Proceeding;
(f) "Corporate Status" describes the status of a person who (i) in the
case of a Director, is or was a director of the Corporation and is or was acting
in such capacity, (ii) in the case of an Officer, is or was an officer, employee
or agent of the Corporation or is or was a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such Officer is or was serving at the request of
the Corporation, and (iii) in the case of a Non-Officer Employee, is or was an
employee of the Corporation or is or was a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such Non- Officer Employee is or was serving at
the request of the Corporation. For purposes of subsection (ii) of this Section
1(f), an officer or director of the Company who is serving as a director,
partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to
be serving at the request of the Company;
(g) "Disinterested Director" means, with respect to each Proceeding in
respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding; and
(h) "Subsidiary" shall mean any corporation, partnership, limited
liability company, joint venture, trust or other entity of which the Corporation
owns (either directly or through or together with another Subsidiary of the
Corporation) either (i) a general partner, managing member or other similar
interest or (ii) (A) 50% or more of the voting power of the voting capital
equity interests of such corporation, partnership, limited liability company,
joint venture or other entity, or (B) 50% or more of the outstanding voting
capital stock or other voting equity interests of such corporation, partnership,
limited liability company, joint venture or other entity.
SECTION 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subject to the
operation of Section 4 of this Article V, each Director and Officer shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment) against any and
all Expenses, judgments, penalties, fines and amounts reasonably paid in
settlement that are incurred by such Director or Officer or on such Director's
or Officer's behalf in connection with any threatened, pending or completed
Proceeding or any claim, issue or matter therein, which such Director or Officer
is, or is threatened to be made, a party to or participant in by reason of such
Director's or Officer's Corporate Status, if such Director or Officer acted in
good faith and in a manner such Director or Officer reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe
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his or her conduct was unlawful. The rights of indemnification provided by
this Section 2 shall continue as to a Director or Officer after he or she has
ceased to be a Director or Officer and shall inure to the benefit of his or
her heirs, executors, administrators and personal representatives.
Notwithstanding the foregoing, the Corporation shall indemnify any Director
or Officer seeking indemnification in connection with a Proceeding initiated
by such Director or Officer only if such Proceeding was authorized by the
Board of Directors of the Corporation, unless such Proceeding was brought to
enforce an Officer or Director's rights to Indemnification under these
by-laws.
SECTION 3. INDEMNIFICATION OF NON-OFFICER EMPLOYEES. Subject to the
operation of Section 4 of this Article V, each Non-Officer Employee may, in the
discretion of the Board of Directors of the Corporation, be indemnified by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended, against any or all Expenses, judgments, penalties,
fines and amounts reasonably paid in settlement that are incurred by such
Non-Officer Employee or on such Non-Officer Employee's behalf in connection with
any threatened, pending or completed Proceeding, or any claim, issue or matter
therein, which such Non-Officer Employee is, or is threatened to be made, a
party to or participant in by reason of such Non-Officer Employee's Corporate
Status, if such Non-Officer Employee acted in good faith and in a manner such
Non-Officer Employee reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The rights of
indemnification provided by this Section 3 shall exist as to a Non-Officer
Employee after he or she has ceased to be a Non-Officer Employee and shall inure
to the benefit of his or her heirs, personal representatives, executors and
administrators. Notwithstanding the foregoing, the Corporation may indemnify any
Non-Officer Employee seeking indemnification in connection with a Proceeding
initiated by such Non-Officer Employee only if such Proceeding was authorized by
the Board of Directors of the Corporation.
SECTION 4. GOOD FAITH. Unless ordered by a court or required by Section
145(c) of the DGCL, no indemnification shall be provided pursuant to this
Article V to a Director, to an Officer or to a Non-Officer Employee unless a
determination shall have been made that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal Proceeding, such
person had no reasonable cause to believe his or her conduct was unlawful. Such
determination shall be made by (a) a majority vote of the Disinterested
Directors, even though less than a quorum of the Board of Directors, (b) a
committee comprised of Disinterested Directors, such committee having been
designated by a majority vote of the Disinterested Directors (even though less
than a quorum), (c) if there are no such Disinterested Directors, or if a
majority of Disinterested Directors so directs, by independent legal counsel in
a written opinion, or (d) by the stockholders of the Corporation.
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SECTION 5. ADVANCEMENT OF EXPENSES TO DIRECTORS PRIOR TO FINAL
DISPOSITION. The Corporation shall advance all Expenses incurred by or on behalf
of any Director in connection with any Proceeding in which such Director is
involved by reason of such Director's Corporate Status within 10 days after the
receipt by the Corporation of a written statement from such Director requesting
such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by such Director and shall be preceded or
accompanied by an undertaking by or on behalf of such Director to repay any
Expenses so advanced if it shall ultimately be determined that such Director is
not entitled to be indemnified against such Expenses.
SECTION 6. ADVANCEMENT OF EXPENSES TO OFFICERS AND NON-OFFICER
EMPLOYEES PRIOR TO FINAL DISPOSITION.
(a) ADVANCEMENT TO OFFICERS. The Corporation may, at the discretion of
the Board of Directors of the Corporation, advance any or all Expenses incurred
by or on behalf of any Officer in connection with any Proceeding in which such
is involved by reason of such Officer's Corporate Status upon the receipt by the
Corporation of a statement or statements from such Officer requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by such Officer and shall be preceded or
accompanied by an undertaking by or on behalf of such to repay any Expenses so
advanced if it shall ultimately be determined that such Officer is not entitled
to be indemnified against such Expenses.
(b) ADVANCEMENT TO NON-OFFICER EMPLOYEES. The Corporation may, at the
discretion of the Board of Directors or of any Officer who is authorized to act
on behalf of the Corporation, advance any or all Expenses incurred by or on
behalf of any Non-Officer Employee in connection with any Proceeding in which
such Non-Officer Employee is involved by reason of such Non-Officer Employee's
Corporate Status upon the receipt by the Corporation of a statement or
statements from such Non-Officer Employee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by such Non-Officer Employee and shall be preceded or accompanied by an
undertaking by or on behalf of such Non-Officer Employee to repay any Expenses
so advanced if it shall ultimately be determined that such Non-Officer Employee
is not entitled to be indemnified against such Expenses.
SECTION 7. CONTRACTUAL NATURE OF RIGHTS. The foregoing provisions of
this Article V shall be deemed to be a contract between the Corporation and each
Director and Officer entitled to the benefits hereof at any time while this
Article V is in effect, and any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state of facts then
or theretofore existing or any Proceeding theretofore or thereafter brought
based in whole or in part upon any such state of facts. If a claim for
indemnification or
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advancement of Expenses hereunder by a Director or Officer is not paid in full
by the Corporation within (a) 60 days after receipt by the Corporation's of a
written claim for indemnification, or (b) in the case of a Director, 10 days
after receipt by the Corporation of documentation of Expenses and the required
undertaking, such Director or Officer may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim, and if
successful in whole or in part, such Director or Officer shall also be entitled
to be paid the expenses of prosecuting such claim. The failure of the
Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or, in the case of a Director,
advancement of Expenses, under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 8. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
advancement of Expenses set forth in this Article V shall not be exclusive of
any other right which any Director, Officer, or Non-Officer Employee may have or
hereafter acquire under any statute, provision of the Certificate or these
Bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise.
SECTION 9. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, Officer or Non-Officer Employee
against any liability of any character asserted against or incurred by the
Corporation or any such Director, Officer or Non-Officer Employee, or arising
out of any such person's Corporate Status, whether or not the Corporation would
have the power to indemnify such person against such liability under the DGCL or
the provisions of this Article V.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. Except as otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. SEAL. The Board of Directors shall have power to adopt and
alter the seal of the Corporation.
SECTION 3. EXECUTION OF INSTRUMENTS. All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or Executive Committee may
authorize.
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SECTION 4. VOTING OF SECURITIES. Unless the Board of Directors
otherwise provides, the Chairman of the Board, if one is elected, the President
or the Treasurer may waive notice of and act on behalf of this Corporation, or
appoint another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. RESIDENT AGENT. The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or proceeding
against the Corporation.
SECTION 6. CORPORATE RECORDS. The original or attested copies of the
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. CERTIFICATE. All references in these By-laws to the
Certificate shall be deemed to refer to the Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. AMENDMENT OF BY-LAWS.
(a) AMENDMENT BY DIRECTORS. Except as provided otherwise by law, these
By-laws may be amended or repealed by the Board of Directors.
(b) AMENDMENT BY STOCKHOLDERS. These By-laws may be amended or repealed
at any Annual Meeting of stockholders, or special meeting of stockholders called
for such purpose, by the affirmative vote of at least two-thirds of the total
votes eligible to be cast on such amendment or repeal by holders of voting
stock, voting together as a single class; provided, however, that if the Board
of Directors recommends that stockholders approve such amendment or repeal at
such meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
Adopted October 7, 1998 and effective as of _______________, 1999.
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Exhibit 10.1
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 4th day of June, 1998, by and among STRIDE &
ASSOCIATES, INC., a Delaware corporation (the "Company"), those persons
identified on the signature pages hereof as principal shareholders
(collectively, the "Principal Shareholders"), those persons identified on the
signature page hereof as employee shareholders, and any other employee
shareholder who hereafter becomes a party to this Agreement (collectively, the
"Management Shareholders" and together with the Principal Shareholders, the
"Non-Investor Shareholders"), and those persons identified on the signature page
hereof as investor shareholders (collectively, the "Investors" and, together
with the Principal Shareholders and the Management Shareholders, the
"Shareholders").
WHEREAS, the Investors are acquiring an aggregate of 24,802.5 shares of
Series A Convertible Preferred Stock, par value $.01 per share, of the Company
(the "Preferred Stock") and 49.5 shares of Common Stock, par value $.01 per
share, pursuant to the terms of a Securities Purchase and Redemption Agreement
dated as of June 4, 1998, among the Company, the Investors, and the Principal
Shareholders (the "Purchase Agreement");
WHEREAS, upon consummation of the transactions pursuant to the Purchase
Agreement, the Principal Shareholders own an aggregate of 80 shares of Common
Stock and the Management Shareholders own an aggregate of 11.3 shares of Common
Stock; and
WHEREAS, it is a condition to the obligations of the parties under the
Purchase Agreement that this Agreement be executed by the parties hereto, and
the parties are willing to execute this Agreement and to be bound by the
provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. DEFINITION OF SHARES. As used in this Agreement, "Shares" shall mean
and include all shares of the Common Stock of the Company now owned or hereafter
acquired by a Shareholder, including, without limitation, shares of Common Stock
issued upon exercise of options now owned or hereafter acquired. Other terms
used as defined terms herein and not otherwise defined shall have the meanings
set forth in the Purchase Agreement.
2. PROHIBITED TRANSFERS. No Non-Investor Shareholder shall sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of
his or her Shares except in
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compliance with the terms of this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, (a) a Non-Investor Shareholder may
transfer without the necessity of prior approval all or any of his or her Shares
by way of gift to his or her spouse or children (including adopted children), to
any of his or her lineal descendants or ancestors, or to any trust for the
benefit of any one or more of such Non-Investor Shareholder, his or her spouse
or children (including adopted children), or his or her lineal descendants or
ancestors, (b) a Shareholder may transfer all or any of his or her Shares by
will or the laws of descent and distribution, (c) a Non-Investor Shareholder may
transfer up to an aggregate of 20% (except in the case of Mr. Devine such
percentage shall be 25%) of the Shares owned on the date hereof to one or more
Persons in one or more bona fide gift transactions, including without limitation
to charitable institutions, and (d) any Investor Shareholder may transfer Shares
to an Affiliate of such transferor; provided that any such transferee under
clause (a), (b), (c) or (d) of this Section 2 (referred to herein as "Permitted
Transferees") shall agree in writing with the Company and the other
Shareholders, as a condition to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
Shareholder transferring such Shares.
3. RIGHT OF FIRST REFUSAL ON DISPOSITIONS.
(a) If at any time a Non-Investor Shareholder (a "Selling
Non-Investor Shareholder") desires to sell or otherwise transfer all or any part
of his or her Shares pursuant to a bona fide offer from a third party (the
"Proposed Transferee"), the Selling Non-Investor Shareholder shall submit a
written offer (the "Offer") by delivering the Offer to the Company and the
Investors to sell such Shares (the "Offered Shares") to the Company and the
Investors on the terms and conditions, including price, that the Selling
Non-Investor Shareholder proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Shares
owned by the Selling Non-Investor Shareholder, the terms and conditions,
including price, of the proposed sale, and any other material facts relating to
the proposed sale. The Offer shall further state (i) that the Company and the
Investors may acquire, in accordance with the provisions of this Agreement, all
(but not less than all) of the Offered Shares for the price and upon the other
terms and conditions set forth therein and (ii), if all such Offered Shares are
not purchased by the Company and the Investors, the Investors who have not
purchased any such Offered Shares pursuant to this Section 3 may exercise their
rights provided pursuant to Section 4 hereof.
(b) The Company shall have the first right to purchase the
Offered Shares. If the Company desires to purchase all of the Offered Shares, it
shall communicate in writing its election to purchase any of the Offered Shares
to the Selling Non-Investor Shareholder and the Investors, which communication
shall state the number of Offered Shares that the Company desires to purchase
and the number of Offered Shares, if any, remaining for purchase by the
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Investors pursuant to Section (c) below, and shall be given within 10 days of
the date the Offer was made.
(c) If the Company does not elect to purchase all of the Offered
Shares within the time period specified above, each Investor shall have the
right to purchase that number of remaining Offered Shares as shall be equal to
the number of such remaining Offered Shares multiplied by a fraction, the
numerator of which shall be the number of Shares which each such Investor owns
or has the right to acquire upon the exercise of options or warrants which are
then exercisable, and the denominator of which shall be the aggregate number of
Shares which all of the Investors who elect to purchase the Offered Shares own
or have the right to acquire upon the exercise of options or warrants which are
then exercisable. The amount of such Offered Shares that each Investor is
entitled to purchase under this Section 3(c) shall be referred to as its "Pro
Rata Fraction."
(d) The Investors shall have a right of oversubscription such
that if any Investor fails to accept the Offer as to its full Pro Rata Fraction,
the remaining Investors shall, among them, have the right to purchase up to the
balance of the remaining Offered Shares not so purchased. The Investors may
exercise such right of oversubscription by accepting the Offer for the remaining
Offered Shares as to more than their Pro Rata Fraction. If, as a result thereof,
such oversubscriptions exceed the total number of the Offered Shares available
in respect of such oversubscription privilege, the oversubscribing Investors
shall be cut back with respect to over subscriptions on a pro rata basis in
accordance with their respective Pro Rata Fractions or as they may otherwise
agree among themselves.
(e) Those Investors who desire to purchase all of the remaining
Offered Shares shall communicate in writing their election to purchase to the
Selling Non-Investor Shareholder, which communication shall state the number of
remaining Offered Shares which each such Investor desires to purchase and shall
be provided to the Selling Non-Investor Shareholder within 15 days of the date
the Offer was made. Such communication, together with the communication of the
Company specified above, shall, when taken in conjunction with the Offer and
subject to the condition that the Company and the Investors agree in the
aggregate to purchase no less than all of the Offered Shares, be deemed to
constitute a valid, legally binding and enforceable agreement for the sale and
purchase of such Offered Shares. Sales of such Offered Shares to be sold to the
Company and the Investors pursuant to this Section 3 shall be made at the
offices of the Company within 30 days following the date the Offer was made.
(f) If the Company and the Investor Shareholders do not purchase
all of the Offered Shares, all, but not fewer than all, of the Offered Shares
may be sold by the Selling Non- Investor Shareholder at any time within 120 days
after the date the Offer was made, subject to the provisions of Section 4. Any
such sale shall be to the Proposed Transferee, at not less than the price and
upon other terms and conditions, if any, not more favorable to the Proposed
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<PAGE>
Transferee than those specified in the Offer. If the Offered Shares are not sold
within such 120- day period, they shall continue to be subject to the
requirements of a prior offer pursuant to this Section 3, and may not be
transferred except in compliance with the provisions of this Section 3. If
Offered Shares are sold pursuant to this Section 3 to any purchaser who is not a
party to this Agreement, the purchaser of such Offered Shares shall execute a
counterpart of this Agreement as a precondition of the purchase of such Offered
Shares and any Offered Shares sold to such purchaser shall continue to be
subject to the provisions of this Agreement.
4. RIGHT OF PARTICIPATION IN SALES.
(a) If at any time any Shareholder desires to sell all or any
part of the Shares owned by him, her or it to any third party (the "Selling
Shareholder") and those Shares to be transferred (in the case of the Selling
Non-Investor Shareholder) have not been purchased by the Company and the
Investors under Section 3, each Investor Shareholder and Principal Shareholder
shall have the right to sell to the third party, as a condition to such sale by
the Selling Shareholder, at the same price per share and on the same terms and
conditions as involved in such sale by the Shareholder, a PRO RATA portion of
the amount of Shares proposed to be sold to the third party. The "PRO RATA
portion" of Shares which the Shareholder shall be entitled to sell to the third
party shall be that number of Shares as shall equal the number of Shares
proposed to be sold to the third party multiplied by a fraction, the numerator
of which is the aggregate of all shares of Common Stock which the Investor
Shareholder or Principal Shareholder wishing to participate in the sale then
holds or has the right to acquire upon exercise of options or warrants which are
then exercisable, and the denominator of which is the aggregate of all shares of
Common Stock which are held by all Shareholders wishing to participate in any
sale under this Section 4 and the Selling Shareholder, or which such Persons
have the right to acquire upon exercise of options or warrants which are then
exercisable.
(b) If the Selling Shareholder wishes to make a sale to a third
party which is subject to this Section 4, the Selling Shareholder shall, after
complying with the provisions of Section 3, give to each other Investor
Shareholder and each Principal Shareholder notice of such proposed sale, and
stating that all Shares were not purchased pursuant to the Offer as discussed in
Section 3. Such notice shall be given at least 20 days prior to the date of the
proposed sale to the third party. Each Investor Shareholder and Principal
Shareholder wishing to so participate in any sale under this Section 4 shall
notify the Selling Shareholder in writing of such intention within 15 days after
such Investor Shareholder and Principal Shareholder's receipt of the notice
described in the preceding sentence.
(c) The Selling Shareholder and each participating Investor
Shareholder and Principal Shareholder shall sell to the third party all, or at
the option of the third party, any part of the Shares proposed to be sold by
them at not less than the price and upon other terms and conditions, if any, not
more favorable to the third party than those in the notice provided by the
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<PAGE>
Selling Shareholder under subparagraph (b) above; PROVIDED, HOWEVER, that any
purchase of less than all of such Shares by the third party shall be made from
the Selling Shareholder and each participating Investor Shareholder and
Principal Shareholder PRO RATA based upon the relative number of the Shares that
the Selling Shareholder and each participating Shareholder is otherwise entitled
to sell pursuant to Section 4(a).
(d) If any Shares are sold pursuant to this Section 4 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
5. TAKE ALONG, COME ALONG AND FORCED SALE RIGHTS.
(a) If any one or more of the Investors (the "Selling
Investors") wish to sell to an unaffiliated third party at least 90% of the
Shares owned by such Selling Investors (a "Sale") which represent at least
fifty-one percent (51%) of the number of Shares then outstanding, and the Board
of Directors of the Company has approved of such Sale, then, upon the written
request of the Selling Investors (the "Sale Request"), each Shareholder shall be
obligated to, and shall (i) sell, transfer and deliver, or cause to be sold,
transferred and delivered, to such third party, the same percentage of Shares
owned by such Shareholder as equals the number of Shares being sold by the
Investors who give the sale request divided by the total number of Shares owned
by such Investors, at the same price per share and on the same terms, including,
without limitation, representations, warranties, and covenants, applicable to
the Investors, and (ii) if, stockholder approval of the transaction is required,
vote his or her Shares in favor thereof.
(b) In the event of a Sale to an unaffiliated third party as
contemplated in Section 5(a) above, each Principal Shareholder shall, if the
Selling Investors do not exercise their "take-along" rights in Section 5(a)
above, have the right to require the Selling Investors to include such Principal
Shareholder's Shares in the Sale on the same terms as the Selling Investors'
Shares, which such right shall be exercisable by the delivery of written notice
to the Company and the Selling Investors at least twenty (20) days prior to the
date proposed for the closing of the Sale.
(c) Not less than thirty (30) days prior to the date proposed
for the closing of any Sale, the Selling Investors shall give written notice to
Principal Shareholders and each other Investor, setting forth in reasonable
detail the name or names of the buyer, the terms and conditions of the Sale,
including the purchase price, and the proposed closing date.
(d) At any time after June 4, 2004, each of (i) Investors owning
at least a majority of the Shares owned by all Investors and (ii) Principal
Shareholders owning at least a majority of the Shares owned by all Principal
Shareholders, acting separately, may elect to cause
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<PAGE>
the Company to effect a Liquidity Event (as defined in the Purchase Agreement)
in which event each of the Shareholders agrees to cooperate fully with any and
all actions taken by the Company or others to effectuate such a Liquidity Event,
including exercising his, her or its voting and consent rights to approve such
event.
6. ELECTION OF DIRECTORS.
(a) At each annual meeting of the shareholders of the Company,
and at each special meeting of the shareholders of the Company called for the
purpose of electing directors of the Company, and at any time at which
shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders (and all
transferees of their shares) shall vote all Shares owned by them for the
election of a Board of Directors consisting initially of not more than nine
directors, subject to enlargement in accordance with the provisions of
subparagraph (a)(ii) and subparagraph (b) of this Section 6, designated as
follows:
(i) Each Principal Shareholder shall be entitled to
designate one (1) Director, who shall initially be such
Principal Shareholder; provided, however, that if any Principal
Shareholder ceases to own at least fifty percent (50%) of the
Shares owned by him or her as of the date of this Agreement, the
Director to be designated by such Principal Shareholder shall
thereafter be designated by a majority in interest of all
Principal Shareholders;
(ii) A majority in interest of the Investors shall have
the right to designate four (4) Directors, two of whom shall
initially be Thomas S. Roberts and Scott Collins; provided that,
in the event a Director is added to the Board pursuant to
Section (b) hereof, the Investors shall have the right to
designate an additional Director bringing the total number of
Directors to eleven (11); and
(iii) A majority of the Directors named pursuant to
clause (i) above and a majority of the Directors named pursuant
to clause (ii) above shall designate one (1) Director who shall
be an independent director unaffiliated with any of the
Shareholders.
(b) At such time, if ever, as the Board of Directors appoints a
Chief Executive Officer who is not designated as a Director in accordance with
the foregoing provisions, then the Board of Directors shall be expanded to
eleven members and such Chief Executive Officer shall be elected to the Board of
Directors and a majority in interest of the Investors shall designate an
additional Director pursuant to subparagraph (a)(ii) hereof.
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<PAGE>
(c) Each Investor and Principal Shareholder (and all transferees
of their Shares) agrees to vote his, her or its Shares, in such manner as shall
be necessary or appropriate for the removal of any designee described above upon
the request of the person entitled to designate such designee and for the
election of a substitute designee nominated by such person, and to otherwise
ensure that any vacancy occurring for any reason in any one of the board
positions held by designees of a person as contemplated by Section 6(a) shall be
filled only by an individual who (i) is nominated directly or indirectly by such
person and (ii) causes the requirements described in Section 6(a) relating to
the composition of the Company's Board of Directors to be satisfied.
7. PREEMPTIVE RIGHT.
(a) The Company hereby grants to each Investor Shareholder and
Principal Shareholder, so long as he, she, or it shall own, of record or
beneficially, or have the right to acquire from the Company, any Shares, the
right to purchase all or part of his, her, or its pro rata share of New
Securities (as defined in Section 7(b)) which the Company, from time to time,
proposes to sell and issue. An Investor Shareholder and Principal Shareholder's
pro rata share, for purposes of this preemptive right, is the ratio of the
number of shares of Common Stock which such Investor Shareholder and Principal
Shareholder owns or has the right to acquire from the Company upon the exercise
of any option or warrant which is then exercisable to the total number of shares
of Common Stock then outstanding or issuable upon exercise of options or
warrants which are then exercisable. The Investor Shareholder and Principal
Shareholders shall have a right of over-allotment pursuant to this Section 7
such that, to the extent an Investor Shareholder and Principal Shareholder does
not exercise his or her or its preemptive right in full hereunder, such
additional shares of New Securities which such Investor Shareholder and
Principal Shareholder did not purchase may be purchased by the other Investor
Shareholder and Principal Shareholders in proportion to the total number of
shares of Common Stock which each such other Investor Shareholder and Principal
Shareholder owns or has the right to acquire from the Company upon exercise of
options or warrants which are then exercisable, compared to the total number of
shares of Common Stock which all such other Investor Shareholder and Principal
Shareholders own or have the right to acquire from the Company.
(b) "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and rights, options, or warrants to
purchase capital stock, and securities of any type whatsoever that are or may
become convertible into or exchangeable for capital stock, issued on or after
the date hereof; provided that the term "New Securities" does not include (i)
Common Stock issued as a stock dividend to holders of Common Stock or upon any
stock split, subdivision, or combination of shares of Common Stock, (ii) the
aggregate number of shares of Common Stock issuable upon exercise of options and
Restricted Stock permitted under the Purchase Agreement or any employee benefit
plan approved by vote of the Board of Directors, (iii) Common Stock issued in
connection with a public offering made pursuant to a
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<PAGE>
registration statement filed under the Act, and (iv) Common Stock issued in
connection with an acquisition, merger, senior loan financing or other
transaction which has been approved by vote of the Board of Directors.
(c) In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Investor Shareholder and each Principal
Shareholder written notice of its intention, describing the type of New
Securities and the price and the terms upon which the Company proposes to issue
the same. Each Investor Shareholder and each Principal Shareholder shall have
ten (10) business days from the date of receipt of any such notice to agree to
purchase up to the Investor Shareholder and each Principal Shareholder's pro
rata share of such New Securities (and any over-allotment amount pursuant to the
operation of Section 7(a) hereof) for the price and upon the terms specified in
the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
(d) In the event any Investor Shareholder and each Principal
Shareholder fails to exercise in full his or her or its preemptive right (after
giving effect to the over-allotment provision of Section 7(a) hereof), the
Company shall have one hundred twenty (120) days thereafter to sell the New
Securities with respect to which the Shareholder's option was not exercised, at
a price and upon terms no more favorable to the purchasers thereof than
specified in the Company's notice. To the extent the Company does not sell all
the New Securities offered within said 120-day period, the Company shall not
thereafter issue or sell such New Securities without first again offering such
securities to the Shareholders in the manner provided above.
(e) The rights granted to the Shareholders under this Section 7
shall expire immediately prior to, and shall not apply in connection with, the
consummation of the first Qualified Public Offering.
8. INSURANCE. The Company shall at all times maintain for the benefit of
its officers and directors liability insurance in scope and amount, and from an
insurer, reasonably acceptable to the Investors; provided, however, that the
Company shall not be obligated to maintain such insurance if in the good faith
judgment of its Board of Directors such insurance is not available at a
reasonable cost.
9. COMMITTEES.
(a) There shall be established at all times during the term of
this Agreement a Compensation Committee of the Board of Directors (the
"Compensation Committee") which will consist of four members, one of whom shall
be a designee pursuant to Section 6(a)(i) of this Agreement, a second of whom
shall be a designee pursuant to Section 6(a)(ii) of this Agreement, and a third
of whom shall be a designee pursuant to Section 6(a)(iii) of this Agreement and
a fourth of whom shall be the Chief Executive Officer of the Company; provided,
however, that
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<PAGE>
until a Director designee is appointed pursuant to Section 6(a)(iii), that
position shall be filled by a second Director designee appointed pursuant to
Section 6(a)(ii). The initial members of the Compensation Committee shall be
Michael Robichaud, Scott Collins, Thomas S. Roberts and Alan Matthews. The
Compensation Committee will determine the compensation of all senior employees
and consultants of the Company (including salary, bonus, equity participation
and benefits). The compensation of senior employees and consultants shall be
reviewed by the Compensation Committee on an annual basis, and the decision by a
majority of the members of the Compensation Committee will control the
Committee's actions.
(b) There shall be established at all times during the term of
this Agreement an Audit Committee of the Board of Directors (the "Audit
Committee") which will consist of two members, one of whom shall be a designee
pursuant to Section 6(a)(ii) of this Agreement, and the second of whom shall be
a designee pursuant to Section 6(a)(iii) of this Agreement. The initial members
of the Audit Committee shall be Thomas S. Roberts and Scott Collins. The Audit
Committee will meet with the independent accountants of the Company and will
discuss and review any issues arising out of the annual audits of the Company by
such independent accountants.
10. TERM. This Agreement shall terminate immediately prior to (a) the
consummation of the first Qualified Public Offering, or (b) the tenth
anniversary of the date of this Agreement, whichever occurs first.
11. FAILURE TO DELIVER SHARES. If any Shareholder becomes obligated to
sell any Shares to another Shareholder under this Agreement and fails to deliver
such Shares in accordance with the terms of this Agreement, such other
Shareholder may, at its option, in addition to all other remedies it may have,
send to the defaulting Shareholder the purchase price for such Shares as is
herein specified. Thereupon, the Company, upon written notice to the defaulting
Shareholder, (a) shall cancel on its books the certificate or certificates
representing the Shares to be sold and (b) shall issue, in lieu thereof, in the
name of such other Shareholder, a new certificate or certificates representing
such Shares, and thereupon all of the defaulting Shareholder's rights in and to
such Shares shall terminate.
12. SPECIFIC ENFORCEMENT. Each Shareholder expressly agrees that the
other Shareholders and the Company may be irreparably damaged if this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by any Shareholder, the other
Shareholders and the Company shall, in addition to all other remedies, each be
entitled to apply for a temporary or permanent injunction, and/or a decree for
specific performance, in accordance with the provisions hereof.
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<PAGE>
13. LEGEND. Each certificate evidencing any of the Shares now owned or
hereafter acquired by the Shareholders shall bear in addition to any other
legends required by other agreements or by law a legend substantially as
follows:
"Any sale, assignment, transfer or other disposition of the
shares represented by this certificate is restricted by, and
subject to, the terms and provisions of a certain Shareholders'
Agreement dated as of June 4, 1998, as amended from time to
time. A copy of said Agreement is on file with the Secretary of
the Corporation."
14. NOTICES. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery or on the date of postmark if mailed by
certified or registered mail, return receipt requested, to the party being
notified at his or its address specified on SCHEDULE I hereto or such other
address as the addressee may subsequently notify the other parties of in
writing.
15. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the Investors and the
Principal Shareholders; PROVIDED, HOWEVER, that Investors owning at least a
majority of the Shares owned by all Investors may effect any such waiver,
modification, amendment or termination on behalf of all of the Investors and
Principal Shareholders owning at least a majority of the Shares owned by all
Principal Shareholders may effect any such waiver, modification, amendment or
termination on behalf of all of the Principal Shareholders PROVIDED FURTHER,
HOWEVER, that if any such waiver, modification, amendment or termination affects
any Principal Shareholder disproportionately to other Principal Shareholders,
the consent of such Principal Shareholder shall be required. Each of the
Shareholders represents that he, she or it is not a party to any other agreement
which would prevent him or it from performing his, her or its obligations
hereunder. No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
16. GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by the internal laws of The Commonwealth of Massachusetts without
giving effect to the conflicts of laws principles thereof and, except as
otherwise provided herein, shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties.
17. SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other
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<PAGE>
provision of this Agreement, and this Agreement shall be carried out as if any
such illegal, invalid or unenforceable provision were not contained herein.
18. CAPTIONS. Captions are for convenience only and are not deemed to be
part of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * * * * * * * * * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, this Shareholders Agreement has been executed as of
the date and year first above written.
Stride & Associates, Inc.
By: /s/ Michael Robichaud
----------------------------------
Name: Michael Robichaud
Title: President
SUMMIT VENTURES, IV, L.P.
BY: SUMMIT PARTNERS IV, L.P.
ITS GENERAL PARTNER
BY: STAMPS, WOODSUM & CO.
ITS GENERAL PARTNER
By: /s/ Tom Roberts
----------------------------------
Name:
Title:
SUMMIT VENTURES V, L.P.
BY: SUMMIT PARTNERS V, L.P.
ITS GENERAL PARTNER
BY SUMMIT PARTNERS LLC
ITS GENERAL PARTNER
By: /s/ Tom Roberts
----------------------------------
Name:
Title:
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<PAGE>
SUMMIT V ADVISORS FUND, L.P.
BY: SUMMIT PARTNERS, LLC
ITS GENERAL PARTNER
By: /s/ Tom Roberts
----------------------------------
Name:
Title:
SUMMIT V ADVISORS FUND (QP), L.P.
BY: SUMMIT PARTNERS, LLC
ITS GENERAL PARTNER
By: /s/ Tom Roberts
----------------------------------
Name:
Title:
SUMMIT SUBORDINATED DEBT FUND II, L.P.
BY: STAMPS, WOODSUM & CO. IV
ITS GENERAL PARTNER
By: /s/ Tom Roberts
----------------------------------
Name:
Title:
SUMMIT INVESTORS III, L.P.
By: /s/ Tom Roberts
----------------------------------
Name:
Title:
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<PAGE>
MANAGEMENT SHARHOLDERS:
/s/ John Devine
-----------------------------------
John Devine
/s/ Rachel Burnett
-----------------------------------
Rachel Burnett
/s/ Alan Matthews
-----------------------------------
Alan Matthews
/s/ Michael Robichaud
-----------------------------------
Michael Robichaud
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<PAGE>
EMPLOYEE SHAREHOLDERS:
---------------------------
Name:
Address:
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<PAGE>
SCHEDULE 1
COMPANY
STRIDE & ASSOCIATES, INC.
ATTN: ANTHONY GROVES, CHIEF FINANCIAL OFFICER
FAX: 212-697-6399
MANAGEMENT SHAREHOLDERS
JOHN DEVINE
1614 THE STRAND
HERMOSA BEACH, CA
RACHEL BURNETT
400 E 84TH STREET, APT. 39B
NEW YORK, NEW YORK 10028
ALAN MATTHEWS
8 QUEENS GROVE
LONDON NW8 8EL
UNITED KINGDOM
MICHAEL ROBICHAUD
45 BRONSON WAY
CONCORD, MA 01742
INVESTORS
600 ATLANTIC AVENUE, SUITE 2800
BOSTON, MA 02210-2227
ATTN: THOMAS S. ROBERTS
FAX: 617-824-1100
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<PAGE>
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, made as of the 4th day of June, 1998, by and among Stride &
Associates, Inc., a corporation organized and existing under the laws of
Delaware (the "Company"), those persons whose names appear on the signature page
hereof and who are designated as investors (collectively, the "Investors"), and
those persons whose names appear on the signature page hereof and who are
designated as Principal Shareholders (the "Principal Shareholders" and, together
with the Investors, the "Shareholders").
WHEREAS, the Investors are entering into a Securities Purchase and
Redemption Agreement (the "Purchase Agreement") pursuant to which they are
acquiring shares of Common Stock, par value $.01 per share, of the Company (the
"Common Stock"); and
WHEREAS, the Principal Shareholders own shares of Common Stock of the
Company; and
WHEREAS, the execution of this Agreement by the Company is a condition
precedent to the obligations of the Investors and the Principal Shareholders to
perform their obligations under the Purchase Agreement; and
WHEREAS, the execution of this Agreement by the Company is a condition
precedent to the obligations of the Investors to perform their obligations under
the Purchase Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Act" means the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE>
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"Initiating Holders" means any Shareholders and their assignees who in
the aggregate are holders of at least twenty-five percent (25%) of the
outstanding Registrable Securities held by the Shareholders and their assignees.
"Registrable Securities" means (i) all shares of Common Stock now owned
or hereafter acquired by a Shareholder; and (ii) any shares of Common Stock
issued in respect of the shares described in clause (i) upon any stock split,
stock dividend, recapitalization or other similar event.
The term "register" means to register under the Act and applicable state
securities laws for the purpose of effecting a public sale of securities.
2. REQUESTED REGISTRATIONS
(a) If any time and from time to time after the date hereof, the
Company shall receive from one or more Initiating Holders a written request that
the Company effect the registration of Registrable Securities representing at
least fifteen percent (15%) of the outstanding Registrable Securities held by
all the Holders (or any lesser percentage if the reasonably anticipated
aggregate price to the public of the Registrable Securities to be included in
such registration would exceed $15,000,000) in connection with a firm commitment
underwriting, the Company will:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) use its commercially reasonable efforts to cause such
Registrable Securities specified in such a written request (together
with such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given
within ten (10) days after receipt of such written notice from the
Company) to be registered as soon as practicable so as to permit the
sale thereof and in connection therewith prepare and file a registration
statement on Form S-1 under the Securities Act (or on such other form as
may be appropriate) to effect such registration and seek to have such
registration statement become effective as promptly as practicable;
provided, however, that such written requests shall (w) specify the
number of Registrable Securities intended to be offered and sold, (x)
express the present intention of the Holders to offer or cause the
offering of such Registrable Securities for distribution, (y) describe
the nature or method of the proposed offer and sale thereof, and (z)
contain the undertaking of the Holders to provide all such information
and materials and take all such action as may be reasonably required in
order to permit the Company to comply with all applicable requirements
of the Commission and to obtain any desired acceleration of the
effective date of such registration statement. Upon any registration
becoming effective
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<PAGE>
pursuant to this Section 2(a), the Company shall use reasonable efforts
to keep such registration statement current for a period of 90 days. The
obligation of the Company to register any Registrable Securities on
demand by the Holders shall continue only until the Company has effected
two (2) demand registrations on behalf of the Investors and two (2)
demand registrations on behalf of Holders other than the Investors
pursuant to this Section 2(a). If the underwriter managing the offering
advises the Holders who have requested inclusion of their Registrable
Securities in such registration that marketing considerations require a
limitation on the number of Registrable Securities offered, such
limitation shall be imposed PRO RATA among such Holders who requested
inclusion of Registrable Securities in such registration according to
the number of Registrable Securities then held by such Holders
(b) Notwithstanding the other provisions of this Section 2,
Holders other than Investors may not exercise the right to demand a registration
under this Section 2 until at least twelve (12) months after the Company has
consummated its first sale of equity securities pursuant to a registration
statement filed under the Act.
(c) The underwriter of any underwriting requested under this
Section 2 shall be selected by the Holders, as the case may be, holding a
majority of the Registrable Securities included therein; provided that such
underwriter must be reasonably acceptable to the Company with the Company
specifying in writing the reasons for any rejection of an underwriter selected
by the Holders.
3. "PIGGY BACK" REGISTRATIONS.
(a) The rights contained in this Section 3 shall be in addition
to the rights provided in Section 2 hereof. If the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their registration rights (subject to the
provisions of Section 2), other than a registration relating solely to employee
benefit plans or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
shares or pursuant to Form S-4, the Company will:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of
the proposed underwriter); and
(ii) Use its commercially reasonable efforts to include in such
registration all the Registrable Securities specified in a written
request or requests made by any Holder within ten (10) days after the
date of delivery of the written notice from the Company described in
clause (i) above. If in the good faith judgment of the managing
underwriter of such public offering, the inclusion of all or any portion
of the shares held by the Holders originally included in a
- 3 -
<PAGE>
request for registration would reduce the number of shares to be offered
by the Company (or by another holder of shares that initiated the
offering by exercising rights to demand such registration) or interfere
with the successful marketing of the securities offered by the Company
(or by such other holder that initiated the offering), the number of
shares otherwise to be included by the Holders in the underwritten
public offering may be reduced or excluded altogether; provided,
however, that (i) in any such offering by the Company, the shares to be
included by the Holders cannot be excluded altogether but must be
treated in the same manner as all other selling security holders, and
(ii) in any such offering initiated by another holder pursuant to demand
registration rights exercised by such holder, the shares otherwise to be
included by the Holders can be excluded altogether but shall be treated
in the same manner as all selling security holders other than those
selling pursuant to the exercise of demand registration rights provided
further, however, that as among the Holders, any such reduction or
exclusion of Registrable Securities shall be imposed PRO RATA among such
Holders who requested inclusion of their Registrable Securities in such
registration according to the number of Registrable Securities then held
by such Holders. .
(b) The Company shall select the underwriter for an offering made
pursuant to this Section 3; provided that such underwriter must be reasonably
acceptable to the Holders of a majority of the Registrable Securities being
registered in such offering, with such Holders specifying in writing the reason
for any rejection of an underwriter selected by the Company.
3. FORM S-3 REGISTRATIONS.
(a) After the first public offering of its securities registered
under the Act, the Company shall use commercially reasonable efforts to qualify
and remain qualified to register securities on Form S-3 (or any successor form)
under the Act. So long as the Company is qualified to register securities on
Form S-3 (or any successor form), Shareholders holding at least 20% of the
Registrable Securities outstanding at that time shall have the right to request
on any number of occasions registration on Form S-3 (or any successor form) for
the Registrable Securities held by such requesting Shareholders, including
registrations for the sale of such Registrable Securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act. Such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of such
shares by such Shareholders.
(b) Upon receipt of the request pursuant to subparagraph (a) to
register Registrable Securities on a registration statement on Form S-3 (or any
successor form), the Company shall give prompt notice thereof to all Holders,
and shall use its commercially reasonable efforts to include in such
registration statement all Registrable Securities specified in such written
request (together with all other Registrable Securities of any Holder or Holders
joining such request as are specified in a written request given within ten days
after receipt of such written notice from the Company). The Company will use its
commercially reasonable
- 4 -
<PAGE>
efforts to cause such registration statement to become effective as soon as
practicable, and shall maintain such registration statement in effect for a
period of ninety days, or such shorter period as may be required to sell all
Registrable Securities covered by such registration statement.
(c) The underwriter of any underwriting requested under this
Section 3 shall be selected by the Holders holding a majority of the Registrable
Securities included therein; provided that such underwriter must be reasonably
acceptable to the Company with the Company specifying in writing the reasons for
any rejection of an underwriter selected by the Holders.
5. EXPENSES. The Company shall pay all out-of-pocket costs in connection
with any registration pursuant to this Agreement. The costs and expenses of any
such registration shall include, without limitation, the fees and expenses of
the Company's counsel and its accountants and all other out-of-pocket costs and
expenses of the Company incident to the preparation, printing and filing under
the Act of the registration statement and all amendments and supplements thereto
and the cost of furnishing copies of each preliminary prospectus, each final
prospectus and each amendment or supplement thereto to underwriters, dealers and
other purchasers of the securities so registered, the costs and expenses
incurred in connection with the qualification of such securities so registered
under the "blue sky" laws of various jurisdictions, the fees and expenses of the
Company's transfer agent, the fees and expenses of one counsel for the Holders,
expenses of all marketing and promotional efforts requested by the managing
underwriter and all other costs and expenses of complying with the foregoing
provisions hereof with respect to such registration. The Holders shall bear
underwriting discounts, selling commissions and transfer taxes with respect to
the shares sold by them pursuant to the registration.
6. REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder of
Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company will do the following for the benefit of such Holders:
(a) Keep such registration effective for as long as the Company
is required to keep such registration effect pursuant to the terms hereof and
amend or supplement such registration statement and the prospectus contained
therein from time to time to the extent necessary to comply with the Act and
applicable state securities laws. If at any time the Commission should institute
or threaten to institute any proceedings for the purpose of issuing, or should
issue a stop order suspending the effectiveness of any such registration
statement, the Company will promptly notify the Holder and will use reasonable
efforts to prevent the issuance of any such stop order or to obtain the
withdrawal thereof as soon as possible;
- 5 -
<PAGE>
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling Holders may reasonably request;
provided, that the Company shall not be obligated to qualify to do business in
any jurisdiction where it is not then so qualified or otherwise required to be
so qualified or to take any action which would subject it to the service of
process in suits other than those arising out of such registration;
(c) Furnish such number of prospectuses and other documents
incident thereto as a Holder or the underwriter from time to time may reasonably
request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Sections 2 or 4 hereof, the Company
will enter into any underwriting agreement reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holder and provided
further that, if the underwriter so requests, the underwriting agreement will
contain customary contribution provisions on the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, use its best efforts to obtain a comfort letter from
the Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters and an opinion from
the Company's counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case addressed
to the Holders, and provide copies thereof to the Holders; and
(f) Permit the counsel to the selling Holders whose expenses are
being paid pursuant to Section 5 hereof to inspect and copy such corporate
documents as he may reasonably request.
7. INDEMNIFICATION.
(a) The Company will, and hereby does, indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
person controlling such Holder within the meaning of the Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls such
underwriter within the meaning of the Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Act or the Exchange Act or
- 6 -
<PAGE>
securities act of any state or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, whether or not resulting in any liability; provided
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is (x) based upon any
such untrue statement or omission or alleged untrue statement or omission made
in reliance upon information furnished in writing to the Company by the Holders
or any underwriter or any controlling person of the Holders or any such
underwriter specifically for use therein, or (v) made in any preliminary
prospectus, if the prospectus contained in the registration statement as
declared effective or in the form filed by the Company with the Commission
pursuant to Rule 424 under the Act shall have corrected such statement or
omission, ample copies of such prospectus (together with a statement that such
corrected prospectus must be used in lieu of all prior prospectuses) shall have
been provided by the Company to the Holders or underwriter, and a copy of such
prospectus shall not have been sent or otherwise delivered to such person by the
Holders or underwriter at or prior to the confirmation of such sale to such
person.
(b) By requesting registration under this Agreement each Holder
shall agree in the same manner and to the same extent as set forth in the
preceding paragraph, to indemnify and to hold harmless the Company and its
directors and officers and each person, if any, who controls the Company within
the meaning of the Act and any underwriter (as defined in the Act) of any shares
offered by the Holders, against any such claim, loss, damage, liability or
expense, joint or several, to which any of such persons may be subject under the
Securities Act or otherwise, and to reimburse any of such persons for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending against any such claim, loss, damage, liability or expense, but
only to the extent it arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission of a material fact in
any registration statement under which the Holders' shares were registered under
the Act pursuant to this Agreement, any prospectus contained therein, or any
amendment or supplement thereto, which was based upon and made in conformity
with information furnished in writing to the Company by the Holders or such
underwriter expressly for use therein; provided however, that the obligations of
each Holder hereunder shall be limited to an amount equal to the net proceeds
received by such Holder upon the sales of the securities.
(c) Each party entitled to indemnification under this Section 7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought. The
failure of any Indemnified Party to give such notice
- 7 -
<PAGE>
shall not relieve the Indemnifying Party of its obligations under this Section
7, except and to the extent the Indemnifying Party has been prejudiced as a
consequence thereof and in no event shall such failure relieve the underlying
party from any other liability which it may have to such indemnified party. The
Indemnifying Party will be entitled to participate in, and to the extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall (i) furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom and
(ii) shall reasonably assist the Indemnifying Party in any such defense,
provided that the Indemnified Party shall not be required to expend its funds in
connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Sections 2, 3 or 4 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Sections 2, 3 or 4 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
8. LOCK-UP AGREEMENT. If requested by the underwriter in any registered
public offering by the Company, each Holder agrees not to sell or otherwise
transfer any Registrable Securities for such period of time after the date of
such offering as may be requested by the underwriter, but in no event to exceed
180 days from the close of the initial registered public offering and 90 days
from the close of any subsequent registered public offering, provided that all
executive officers and directors of the Company enter into similar agreements.
- 8 -
<PAGE>
9. INFORMATION BY HOLDER. Each Holder of Registrable Securities included
in any registration shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Agreement
or otherwise required by applicable state or federal securities laws.
10. LIMITATIONS ON REGISTRATION RIGHTS. From and after the date of this
Agreement, the Company shall not, without the prior written consent of a
majority of the Investors and a majority of the Principal Shareholders, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would give any such holder or prospective holder the right to
require the Company, upon any registration of any of its securities, to include,
among the securities which the Company is then registering, securities owned by
such holder, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of its securities will not limit the number of
Registrable Securities sought to be included by the Holders of Registrable
Securities or reduce the offering price thereof.
11. EXCEPTION TO REGISTRATION. The Company shall not be required to
effect a demand registration pursuant to Section 2 of this Agreement if (i) in
the written opinion of counsel for the Company, which counsel and the opinion so
rendered shall be reasonably acceptable to the Holders of Registrable
Securities, such Holders may sell without registration under the Act all
Registrable Securities for which they requested registration under the
provisions of the Act and in the manner and in the quantity in which the
Registrable Securities were proposed to be sold, or (ii) the Company shall have
obtained from the Commission a "no-action" letter to that effect; provided that
this Section 10 shall not apply to sales made under Rule 144(k) or any successor
rule promulgated by the Commission until after the effective date of the
Company's initial registration of shares under the Act. Notwithstanding the
foregoing, in no event shall the provisions of this Section 10 be construed to
preclude a Holder of Registrable Securities from exercising rights under Section
3 for a period of three years after the effective date of the Company's initial
registration of shares under the Act.
12. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms
are understood and defined in Rule 144 under the Act, at all times from and
after ninety days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
- 9 -
<PAGE>
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Shareholder owns any restricted securities,
furnish to the Shareholder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Act and Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as a Shareholder may reasonably request in availing itself
of any rule or regulation of the Commission allowing to sell any such securities
without registration.
13. LISTING APPLICATION. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Shareholder.
14. DAMAGES. The Company recognizes and agrees that the Holder of
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance.
15. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Registrable Securities), whether so expressed or
not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telecopied or sent by other
facsimile method addressed as follows:
If to the Company, or a Shareholder, at the address of such
party set forth on SCHEDULE I hereto or the most recent address as is
shown on the stock records of the Company; and
- 10 -
<PAGE>
If to any subsequent Holder of Registrable Securities, to it at
such address as may have been furnished to the Company in writing by
such Holder; or, in any case, at such other address or addresses as
shall have been furnished in writing to the Company (in the case of a
Holder of Registrable Securities) or to the Holders of Registrable
Securities (in the case of the Company) in accordance with the
provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to the conflicts of laws principles thereof.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company, a
majority of the Principal Shareholders and a majority of the Investors.
(e) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 11 -
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
representation of each of the signatories hereto as of the date and year first
above written.
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichaud
-----------------------------------
Name: Michael Robichaud
Title: President
INVESTORS
SUMMIT VENTURES IV, L.P.
BY: SUMMIT PARTNERS IV, L.P.
ITS GENERAL PARTNER
BY: STAMPS, WOODSUM & CO., IV
ITS GENERAL PARTNER
By: /s/ Tom Roberts
-----------------------------------
Name:
Title:
SUMMIT VENTURES V, L.P.
BY: SUMMIT PARTNERS V, L.P.
ITS GENERAL PARTNER
BY: SUMMIT PARTNERS LLC
ITS GENERAL PARTNER
By: /s/ Tom Roberts
-----------------------------------
Name:
Title:
- 12 -
<PAGE>
SUMMIT V ADVISORS FUND, L.P.
BY: SUMMIT PARTNERS, LLC
ITS GENERAL PARTNER
By: /s/ Tom Roberts
-----------------------------------
Name:
Title:
SUMMIT V ADVISORS FUND (QP), L.P.
BY: SUMMIT PARTNERS, LLC
ITS GENERAL PARTNER
By: /s/ Tom Roberts
-----------------------------------
Name:
Title:
SUMMIT SUBORDINATED DEBT FUND II, L.P.
BY: STAMPS, WOODSUM & CO. IV
ITS GENERAL PARTNER
By: /s/ Tom Roberts
-----------------------------------
Name:
Title:
SUMMIT INVESTORS III, L.P.
By: /s/ Tom Roberts
-----------------------------------
Name:
Title:
- 13 -
<PAGE>
MANAGEMENT SHAREHOLDERS:
/s/ John Devine
------------------------------
John Devine
/s/ Rachel Burnett
------------------------------
Rachel Burnett
/s/ Alan Matthews
------------------------------
Alan Matthews
/s/ Michael Robichaud
------------------------------
Michael Robichaud
- 14 -
<PAGE>
Exhibit 10.3
WARRANT AGREEMENT
STRIDE & ASSOCIATES, INC.
DATED AS OF JUNE 4, 1998
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. ISSUE OF WARRANT TO PURCHASERS; FORM OF WARRANTS ......................... - 1 -
2. REGISTRATION ............................................................. - 1 -
3. TRANSFER OF WARRANTS ..................................................... - 2 -
4. TERM: EXERCISE ........................................................... - 2 -
5. SURRENDER OF WARRANT CERTIFICATES ........................................ - 3 -
6. MUTILATED OR MISSING WARRANT CERTIFICATE ................................. - 3 -
7. RESERVATION OF COMMON STOCK, ETC. ........................................ - 3 -
8. ANTI-DILUTION ADJUSTMENTS ................................................ - 4 -
8.1 EXTRAORDINARY DISTRIBUTIONS ........................................ - 4 -
8.2 EQUITABLE ADJUSTMENTS .............................................. - 4 -
8.3 NOTICE OF ADJUSTMENT ............................................... - 5 -
8.4 REFLECTION OF ADJUSTMENTS ON CERTIFICATES .......................... - 5 -
9. MARKET PRICE ............................................................. - 5 -
10. CONSOLIDATION OF MERGER .................................................. - 6 -
11. CERTAIN EVENTS ........................................................... - 7 -
12. ABSENCE OF REGISTRATION .................................................. - 8 -
13. INFORMATION COVENANTS .................................................... - 9 -
13.1 NOTICE OF STOCKHOLDER MEETINGS ..................................... - 9 -
13.2 NOTICE OF DISTRIBUTIONS ............................................ - 9 -
13.3 FINANCIAL STATEMENTS, ETC. ......................................... - 9 -
13.4 PROPER BOOKS AND RECORDS: INSPECTION ............................... - 9 -
14. NOTICES .................................................................. - 10 -
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
15. WARRANT OBLIGATIONS INDEPENDENT OF DEBT OBLIGATIONS ...................... - 10 -
16. FRACTIONAL INTERESTS ..................................................... - 10 -
17. BINDING EFFECT: SURVIVAL ................................................. - 10 -
18. COUNTERPARTS ............................................................. - 10 -
19. GOVERNING LAWS ........................................................... - 10 -
EXHIBIT A
WARRANT CERTIFICATE ...................................................... - 13 -
ASSIGNMENT ............................................................... - 17 -
SCHEDULE I ............................................................... - 18 -
</TABLE>
- ii -
<PAGE>
WARRANT AGREEMENT dated as of June 4, 1998 between Stride & Associates,
Inc., a Delaware corporation (the "Company"), and the purchasers set forth on
SCHEDULE I attached hereto (each individually a Purchaser and collectively
the "Purchasers"). The Purchasers, so long as they are holders of any
warrants hereunder, together with any permitted transferees or assignees who
are registered holders of any warrant issued hereunder or a like warrant or
warrants issued upon the transfer of such warrant (each individually a
"Warrant" and collectively the "Warrants") are referred to collectively as
the "Holders" and individually as a "Holder."
WHEREAS, pursuant to the terms of a Securities Purchase and Redemption
Agreement dated as of June 4, 1998 among the Company, certain of its
shareholders and the Purchasers (the "Purchase Agreement"), the Company has
agreed to issue to each Purchaser Units comprised of Series A Preferred
Stock, Common Stock and Warrants (as such terms and other terms used herein
but not defined are defined in the Purchase Agreement), upon the terms and
subject to the conditions set forth in the Purchase Agreement; and
WHEREAS, the Company wishes to set forth, among other things, the
provisions of such Warrants and the terms and conditions on which such
Warrants may be issued, exchanged, exercised and replaced;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. ISSUE OF WARRANT TO PURCHASERS; FORM OF WARRANTS. The Company shall
on the dates set forth in the Purchase Agreement issue and deliver to the
Purchasers Warrants to purchase an aggregate of 30.5 shares of Common Stock,
subject to adjustment pursuant to Section 8 hereof. Each Purchaser shall
receive a Warrant to purchase the number of shares of such Common Stock set
forth opposite such Purchaser's name on SCHEDULE I attached hereto. Each
Warrant, and any additional Warrants which may be issued upon partial
exercise, replacement or transfer of such Warrant or Warrants, shall be
evidenced by, and subject to the terms of, a Warrant Certificate (including
the Forms of Election to Purchase and Assignment attached thereto, a "Warrant
Certificate") in the form of EXHIBIT A attached hereto, in each case executed
on behalf of the Company by the manual or facsimile signature of the
President or Vice President of the Company, under its corporate seal affixed
or in facsimile, and attested by the Secretary or an Assistant Secretary of
the Company. A Warrant Certificate evidencing the original Warrant issued to
each Purchaser shall be executed and delivered to such Purchaser
simultaneously with the execution of this Agreement. The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrants and
the issuance of Common Stock upon the exercise of Warrants provided, however,
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue or delivery of any
Warrants in a name other than that of the Holder of such Warrants.
<PAGE>
2. REGISTRATION. All Warrant Certificates shall be numbered and shall be
registered in a warrant register (the "Warrant Register") as they are issued.
Subject to its compliance with the foregoing, the Company shall be entitled
to treat the registered Holder of any Warrant on the Warrant Register as the
owner in fact of such Warrant for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person or entity, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered
in the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust
in requesting such registration or transfer, or with the knowledge of such
facts that its participation therein amounts to bad faith.
3. TRANSFER OF WARRANTS. Any Warrant may be transferred or endorsed to
another party in whole or in part by giving written notice thereof to the
Company at its principal office. If a new Warrant Certificate is requested in
connection with such transfer, surrendering to the Company, or its duly
authorized agent, for cancellation the existing Warrant Certificate
evidencing the Warrant to be transferred shall be surrendered for
cancellation, endorsed or accompanied by a written instrument of transfer, in
form satisfactory to the Company, duly executed by the Holder thereof in
person or by a duly authorized representative, agent or attorney-in-fact
appointed in writing. Any transferee of a Warrant must sign an agreement in
form reasonably acceptable to the Company agreeing to be bound by the terms
of this Agreement. Upon receipt thereof, the Company shall issue and deliver,
in the name of the transferee, a new Warrant Certificate containing the same
terms as the surrendered Warrant Certificate. In the case of the transfer of
fewer than all of the rights evidenced by the surrendered Warrant
Certificate, the Company shall issue a new Warrant Certificate to the Holder
thereof for the remaining number of shares specified in the Warrant
Certificate so surrendered.
4. TERM; EXERCISE. A Warrant entitles the Holder thereof to purchase the
number of shares of Common Stock specified in the Warrant Certificate held by
such Holder at a purchase price of $115,500 per share (the "Exercise Price")
at any time on or before 5:00 p.m. Boston Time on June 4, 2008 (the
"Expiration Date"). If the Company redeems the Series A or Series B Preferred
Stock outstanding, it may upon at least ten (10) days prior notice to all
Holders of Warrants irrevocably cause such holders to exercise any Warrants
then outstanding in full and, in the event of any breach of the obligations
hereunder, the Company may off-set the Exercise Price due from such Holder
against any redemption proceeds payable to such Holder on account of any
Series A or Series B Preferred Stock held by it. The Exercise Price and the
number of shares issuable upon exercise of any Warrant are subject to
adjustment upon the occurrence of certain events, pursuant to the provisions
of Section 8 of this Agreement. Subject to the provisions of this Agreement,
the Holder of a Warrant shall have the right, which may be exercised in whole
or in part, to purchase from the Company, and the Company shall issue and
sell to such Holder, the number of fully paid and non-assessable shares of
Common Stock (together with any other shares of the Company's Common Stock
issuable upon exercise of Warrants, the "Shares")
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specified in the Warrant Certificate held by such Holder. Such right shall be
exercised by surrender to the Company, or its duly authorized agent, of such
Warrant Certificate, with the Form of Election to Purchase attached thereto
duly completed and signed, and upon payment to the Company of the Exercise
Price, as adjusted in accordance with the provisions of Section 8, for the
number of Shares in respect of which the Warrant is then exercised. Payment
of such Exercise Price may be made (i) in cash, be certified check or bank
draft payable to the order of the Company, by wire transfer of immediately
available funds, (ii) by tender of an equivalent face amount of the Company's
Debentures, or (iii) by cancellation of such number of Warrants held by the
holder thereof such that the product of (x) the number of Warrants cancelled
times (y) the Market Price (as herein defined) of the shares of Common Stock
issuable upon exercise thereof, equals the aggregate Exercise Price of the
Warrants which are being exercised. Upon such surrender of the Warrant
Certificate and payment of the Exercise Price as aforesaid, the Company shall
issue and and cause to be delivered with all reasonable dispatch to or upon
the written order of the Holder of such Warrant, in such name or names as
such Holder may designate, a certificate or certificates for the number of
full Shares so purchased. Such certificate or certificates shall be deemed to
have been issued and any person or entity so designated to be named therein
shall be deemed to have become a holder of record of such Shares as of the
date of the surrender of the Warrant Certificate and payment of the Exercise
Price as aforesaid; PROVIDED, HOWEVER, that if, at the date of surrender of a
Warrant Certificate and payment of such Exercise Price the transfer books for
the Common Stock (or, upon adjustment, such other class of stock as may be
purchasable upon the exercise of the Warrant) shall be closed, the
certificates for the Shares in respect of which such Warrant is then
exercised shall be issued as of the date on which such books shall next be
opened (whether before, on or after the Expiration Date) and until such date
the Company shall be under no duty to deliver any certificate for such
Shares; PROVIDED FURTHER, however, that the transfer books shall not be
closed at any time for a period longer than forty-eight (48) hours unless
otherwise required by law. A Warrant shall be exercisable, at the election of
the Holder thereof, either for all or for part only of the Shares specified
in the Warrant Certificate and if any Warrant is exercised in part prior to
the Expiration Date, the Company shall issue a new Warrant Certificate for
the remaining number of Shares specified in the Warrant Certificate so
surrendered.
5. SURRENDER OF WARRANT CERTIFICATES. Any surrender of a Warrant
Certificate for transfer pursuant to Section 3 above or upon exercise
pursuant to Section 4 above shall be made (a) to the Company at its principal
office or (b) to the Company at such other place or to such agent of the
Company as the Company shall hereafter notify the Holders.
6. MUTILATED OR MISSING WARRANT CERTIFICATE. If a Warrant Certificate is
mutilated, lost, stolen or destroyed, the Company shall issue and deliver (a)
in exchange and substitution for and upon cancellation of any mutilated
Warrant Certificate or (b) in lieu of and in substitution for any Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor representing an equivalent right or interest; but, in the case of a
Holder other than a Purchaser
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only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant Certificate.
7. RESERVATION OF COMMON STOCK, ETC. The Company shall reserve for so
long as any Warrant remains outstanding a number of authorized and unissued
Shares sufficient to provide for the exercise of all such Warrants, and the
transfer agent for the Common Stock, which may be the Company (the "Transfer
Agent"), is hereby irrevocably authorized and directed at all times until
the Expiration Date to reserve such number of authorized and unissued Shares
as necessary for such purpose. The Company shall keep copies of this
Agreement on file with the Transfer Agent and shall supply the Transfer Agent
with duly executed stock certificates for such purpose and will itself
provide or otherwise make available any cash payable as provided in Section
17 of this Agreement. All Warrant Certificates surrendered upon the exercise
of Warrants shall be cancelled, and such cancelled Warrant Certificates shall
constitute sufficient evidence of the number of Shares which have been issued
upon the exercise of Warrants. The Company shall furnish to the Transfer
Agent a copy of all notices of adjustment, and certificates related thereto,
required to be transmitted to each Holder pursuant to Section 8.3 hereof.
8. ANTI-DILUTION ADJUSTMENTS. The number and kind of Shares purchasable
upon exercise of the Warrants shall be subject to adjustments from time to
time upon the happening of the events hereinafter specified. No adjustment
shall be made for any cash dividends or any Shares issued or issuable upon
exercise of the Warrants, and if any adjustment results in an Exercise Price
which is less than the stated par value per share of the Shares issuable upon
such exercise, the Company agrees that such stated par value shall also be
adjusted such that the Exercise Price shall at no time be less than the par
value of such Shares. Notwithstanding any other provision hereof or of any
Warrant, the Exercise Price, as adjusted from time to time shall not in any
event be less than the par value (if any) of the Common Stock. The Company
hereby covenants that, to the extent permitted by law, the par value of each
share of Common Stock shall not be more than $0.1 and the Company will not
increase such par value so long as any Warrant is outstanding.
8.1 EXTRAORDINARY DISTRIBUTIONS. If the Company makes any
distribution of its assets upon or with respect to its Common Stock after the
date hereof, as a liquidating or partial liquidating dividend, or other than
as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the jurisdiction of incorporation of the Company,
each Holder of a Warrant shall, upon the exercise of such Warrant after the
record date for such distribution or, in the absence of a record date, after
the date of such distribution, receive, in addition to the shares subscribed
for, the amount of such assets (or, at the option of the Company, a sum equal
to the value thereof at the time of distribution as reasonably determined in
good faith by the board of directors of the Company) which would have been
distributed to such Holder if such Holder had exercised such Holder's Warrant
immediately prior to the record date
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for such distribution or, in the absence of a record date, immediately prior
to the date of such distribution.
8.2 EQUITABLE ADJUSTMENTS. If the Company (i) declares or pays a
dividend on its Common Stock in shares of its capital stock or makes a
distribution in shares of Common Stock (including the 5,000 for one stock
split described in the Purchase Agreement), (ii) subdivides its outstanding
Common Stock, (iii) combines its outstanding Common Stock into a smaller
number of shares of Common Stock or (iv) issues any shares of its capital
stock in a reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing entity), the number of Shares of Common Stock for
which Warrants are exercisable in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification and the Exercise Price shall be proportionately adjusted so
that the Holder of any Warrant exercised after such date shall be entitled to
receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, it would have owned upon such
exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification and upon payment of the aggregate Exercise
Price. Such adjustment shall be made successively whenever any event listed
above shall occur, but no duplicative adjustment shall be made hereunder.
8.3 NOTICE OF ADJUSTMENT. Whenever an adjustment is made pursuant
to this Section 8, the Company shall promptly cause a notice setting forth
the adjusted Exercise Price and adjusted number of Shares issuable upon
exercise of each Warrant to be mailed to each Holder at such Holder's last
address appearing on the Warrant Register and shall cause a certified copy
thereof to be mailed to the Transfer Agent, if such Transfer Agent is not the
Company. The Company shall, upon the request in writing of the Holders of a
majority of the Warrants, retain a nationally recognized firm of independent
public accountants of recognized standing selected by the board of directors
of the Company to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment, which shall be binding on the Holders and the
Company.
8.4 REFLECTION OF ADJUSTMENTS ON CERTIFICATES. Notwithstanding any
adjustments in the Exercise Price or the number or kind of Shares purchasable
upon exercise of Warrants, any Warrant Certificate theretofore or thereafter
issued may continue to express the same price and number and kind of Shares
as are stated in the Warrant Certificate initially issuable pursuant to this
Agreement.
9. MARKET PRICE. The Market Price of any shares of Common Stock on
any date shall be, in the event there is an active trading market which
consists of at least 25% of the shares of Common Stock (determined on a fully
diluted basis) being held publicly with a minimum market value of at least
$15,000,000 at the time of determination thereof, as
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determined in clause (a) or (b) below, for each of the twenty (20) Business
Days prior to the date in question, and otherwise shall be as determined in
clause (c) below.
(a) if such shares are listed on a national securities
exchange or admitted to unlisted trading privileges on such an
exchange, the last reported sale price of a share of Common Stock
on such exchange on each of such days or if no such sale is made on
any such day, the mean of the closing bid and asked prices for such
day on such exchange; or
(b) if such shares are not so listed or admitted to unlisted
trading privileges, the mean of the last bid and asked prices
reported for a share of Common Stock on each of such days (i) by
the National Association of Securities Dealers Automatic Quotation
System or (ii) if reports are unavailable under clause (i) above
by the National Quotation Bureau Incorporated; or
(c) if such share are not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
the Market Price of such shares shall be such value as agreed upon
by the Company (as determined by a majority of the members of the
Board of Directors who are not affiliates of Holders of Warrants)
and the Holders of more than 50% of the Shares issuable under the
Warrants then outstanding or, in the absence of such agreement, the
Market Price as determined by an Independent Financial Expert (as
hereinafter defined) selected by the Holders of more than 50% of
the aggregate Shares issuable under the Warrants then outstanding
from a group consisting of three Independent Financial Experts
chosen by the Company (as determined by a majority of the members
of the Board of Directors who are not affiliates of Holders of
Warrants). The costs and expenses of any such appraiser or
investment banking firm in making such valuation shall be paid by
the Company. "Independent Financial Expert" shall mean a nationally
recognized appraiser or investment banking firm that does not (and
whose affiliates do not) have a direct or indirect financial
interest in the Company, any of the Holders (other than in its
trading accounts or as a participating underwriter in an offering
of securities) or any of the stockholders of the Company, that has
not been, and at the time it is called upon to determine Market
Price, is not (and none of whose affiliates is) a promoter,
director or officer of the Company or any of its affiliates or any
of the Holders or the stockholders of the Company or an underwriter
with respect to any of the securities of the Company or any of the
stockholders of the Company, and that has not provided any advice
or opinions to the Company or any of the stockholders of the
Company during the two years prior to the date it is called upon to
serve as Independent Financial Expert except as an Independent
Financial Expert pursuant hereto; PROVIDED, that if any Holder or
stockholders of the
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Company is a commercial bank, an institutional investor or an
affiliate thereof, the conduct by such investment banking firm of
investment banking transactions in the ordinary course of its
business (including, without limitation, underwritings of
securities, private placements, broker-dealer transactions and
mergers and acquisitions) in which such Holder or stockholder of
the Company is a participant shall not by itself result in the
disqualification of such firm from being an Independent Financial
Expert pursuant hereto.
10. CONSOLIDATION OR MERGER. If the Company shall at any time prior to
the Expiration Date consolidate with or merge with or into another entity,
each Holder of a Warrant shall thereafter be entitled to receive, upon the
exercise thereof and payment of the Exercise Price in accordance with the
terms of this Agreement, the aggregate number of kind of securities and
property (including any cash), if any, which if such Warrant had been
exercised immediately prior to such consolidation or merger and at a time
when the transfer books of the Company were open, it would have owned upon
such exercise and been entitled to receive upon such merger or consolidation.
The Company shall take such steps in connection with such consolidation or
merger as may be necessary to ensure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities or property (including any cash) thereafter deliverable upon the
exercise of the Warrants; PROVIDED, HOWEVER, that if upon such consolidation
or merger different holders of Common Stock shall be entitled to receive
different forms of consideration for their Common Stock, the form of such
consideration thereafter deliverable upon the exercise of the Warrants shall
be as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive. A sale of all or substantially all
the assets of the Company for a consideration (apart from the assumption of
obligations) consisting primarily of securities shall be deemed a
consolidation or merger for the purposes of this Section 10. The Company
shall not effect any such consolidation, merger or sale of all or
substantially all of its assets (in one or more transactions) unless prior to
or simultaneously with the consummation thereof, the successor or surviving
corporation or entity (if other than the Company) resulting from such
consolidation or merger, or the corporation or other entity to which such
assets are transferred, shall assume, by written agreement duly executed and
mailed to the Holders or delivered in accordance with Section 14 hereof, the
obligation to deliver to each Holder the Shares of stock, securities or
assets which such Holder is entitled to purchase in accordance with the
foregoing provisions. The provisions of this Section 10 shall also apply to
successive mergers or consolidations.
11. CERTAIN EVENTS. If any of the following occurs on or before the
Expiration Date:
(a) a consolidation or merger of the Company with or into another
entity (other than any merger as to which the Company is the surviving
corporation and there is no change in the Common Stock in connection
therewith),
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(b) a liquidating dividend with respect to the Common Stock, or
(c) a tender offer or exchange offer with respect to the Common
Stock (other than a tender offer opposed by the Company's board of
directors),
(each, an "Event"), then, in connection with any such Event, each Holder of a
Warrant shall have the right, in lieu of exercising such Warrant in advance
of such Event and receiving the consideration which a Holder of the Shares
issuable upon exercise of such Warrant would receive in connection with such
consolidation or merger, liquidating dividend or tender offer (the "Event
Consideration"), upon surrender of the Warrant Certificate evidencing such
Warrant to the Company or its duly authorized agent or to the depositary or
exchange agent, as the case may be, to receive the Event Consideration with
respect to the Shares for which such Warrant is exercisable reduced by the
Exercise Price. Such reduction in the Event Consideration shall first be
applied to any cash included in the Event Consideration and, to the extent
that such cash is less than the Exercise Price, the amount of the securities
or other property to be received by such Holder shall be reduced by an amount
that, together with any such cash, is (in the reasonable judgment of the
Company's board of directors) equal to the Exercise Price. The Company hereby
covenants.
(A) to give notice of any Event specified in (a) or (b) above to
each Holder of Warrants at least fifteen (15) business days in advance
of the record date for determining stockholders' rights with respect to
such Event, and
(B) that any agreements, resolutions, offers or other documents
with respect to any Event shall contain terms consistent with the
provisions of this Section 10 and, in the case of any Event specified
in (c) above, shall be forwarded to each Holder of Warrants.
The provisions of this Section 11 shall also apply to successive Events.
12. ABSENCE OF REGISTRATION. By acceptance of a Warrant Certificate
evidencing the Warrant, each Holder represents and agrees that such Holder is
acquiring the Warrant, and that upon exercise thereof it will acquire the
Share, with its own funds for its own account for investment, and not with a
view to any sale, distribution or transfer thereof in violation of the
Securities Act of 1933 (the "Securities Act").
Each Holder acknowledges that such Holder has been informed by the
Company or by the previous Holder of the Warrant that the Warrant may not,
under the Securities Act and applicable regulations thereunder, be re-sold,
transferred or otherwise disposed of without registration under the
Securities Act or an applicable exemption from the registration requirements
of the Securities Act.
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Warrant Certificates shall bear the following legend:
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). IT MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
Any Shares issued upon exercise of the Warrant shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THEY MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
13. INFORMATION COVENANTS.
13.1 NOTICE OF STOCKHOLDER MEETINGS. Nothing contained in this
Agreement shall be construed as conferring upon any Holder the right to vote
or to consent to or receive notice as a stockholder in respect to the
meetings of stockholders or the election of the directors of the Company or
any other matter, or any rights whatsoever as a stockholder of the Company;
PROVIDED, HOWEVER, that if a meeting of the stockholders of the Company is
called or if consents of the Company's stockholders are solicited to consider
and take action on a proposal for (i) the declaration of a dividend with
respect to Shares, other than in cash and payable out of its earned surplus,
(ii) the redemption or repurchase of any Shares, other than pursuant to
repurchase agreements with employees, (iii) the voluntary dissolution of the
Company or (iv) any consolidation, merger or sale of all or substantially all
of its property, assets, business and good will as an entirety, then the
Company shall cause a notice thereof to be sent by first class mail, postage
prepaid, at least twenty (20) business days prior to the record date for
determining stockholders entitled to vote at such meeting or to take action
with respect to such consent, to each Holder of Warrants at such Holder's
address appearing on the Warrant Register; but failure to mail or to receive
such notice or any defect therein or in the mailing thereof shall not affect
the validity of any action taken at such meeting or by such consent.
13.2 NOTICE OF DISTRIBUTIONS. If the Company determines to make
any distribution on its Common Stock, then the Company shall deliver a notice
of its intention to make such distribution by first class mail, postage
prepaid, at least twenty (20) business days prior to the record date for such
distribution to each registered Holder of Warrants at such Holder's address
appearing on the Warrant Register, but failure to mail or to receive such
notice
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or any defect therein or in the mailing thereof shall not affect the validity
of any action taken in connection with such distribution.
13.3 FINANCIAL STATEMENTS. ETC. Notwithstanding Section 13.1 above,
the Company shall promptly deliver to each Holder copies of all regular and
periodic financial information, proxy materials and other information and
reports, if any, which the Company is required to furnish to the Purchasers
under the Purchase Agreement.
13.4 PROPER BOOKS AND RECORDS: INSPECTION. The Company covenants
that it will keep proper books and records in which full, true and correct
entries in conformity with generally accepted accounting principles shall be
made of all dealings and transactions in relation to its business and
activities. The Company further covenants that it will permit, and will cause
each of its subsidiaries to permit, any person designated in writing by any
Holder to visit and inspect any of its properties, to examine its corporate,
financial and operating records and to make copies thereof or extracts
therefrom, and to discuss its affairs, finances and accounts with its
directors, officers, employees and independent accountants, all at such
times, upon reasonable notice, as may reasonably be desired.
14. NOTICES. Any notice pursuant to this Agreement to be given or made
by any Holder to or on the Company shall be made by hand delivery, prepaid
first-class mail (registered or certified, return receipt requested),
telegraph, facsimile transmission (receipt confirmed), or overnight air
courier guaranteeing next day delivery, addressed to: _____________________
____________ (facsimile transmission number: (___) _____________), with a
copy to, ________________________________ (facsimile transmission number:
(___) ____________).
Any notice or demand authorized by this Agreement to be given or made by the
Company to any Holder shall be sufficiently given or made (except as
otherwise provided in this Agreement) if sent as provided above, addressed
to such Holder's address appearing on the Warrant Register, with a copy, in
the case of a Purchaser, to James Westra, Hutchins, Wheeler & Dittmar, 101
Federal Street, Boston, Massachusetts 02110 (facsimile transmission number:
(617) 951-1295).
15. WARRANT OBLIGATIONS INDEPENDENT OF DEBT OBLIGATIONS. Pursuant to the
Purchase Agreement, the Company has issued Subordinated Notes to the
Purchasers. The obligations of the Company or its affiliates with respect to
the Warrants, including, without limitation, the obligations set forth in
this Agreement, are independent of any obligations of the Company under the
Subordinated Notes, and such obligations with respect to the Warrants shall
remain valid and binding notwithstanding the performance of, or any breach by
the Company or its affiliates with respect to, their obligations under the
Subordinated Notes.
Execution Copy
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16. FRACTIONAL INTERESTS. The Company shall issue fractions of Shares on
the exercise of Warrants.
17. BINDING EFFECT: SURVIVAL. This Agreement shall survive the exercise
of the Warrants and shall be binding upon the Company and its successors and
assigns and shall be binding upon and inure to the benefit of the Holders of
the Warrants and each holder of Shares issued upon exercise of the Warrants.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same
instrument.
19. GOVERNING LAW. This Agreement shall be governed by and constructed
in accordance with the internal laws of The Commonwealth of Massachusetts.
[The rest of this page intentionally left blank]
Execution Copy
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IN WITNESS WHEREOF, each of the parties hereto has caused this Warrant
Agreement to be duly executed as a sealed instrument as of the day, month and
year first above written.
COMPANY:
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichaud
------------------------------
Name: Michael Robichaud
Title: President
PURCHASERS:
Summit Ventures IV, L.P.
By: Summit Partners IV, L.P.
Its General Partner
By: Stamps, Woodsum & Co., IV
Its General Partner
By: /s/ Tom Roberts
------------------------------
General Partner
Summit Ventures V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: /s/ Tom Roberts
------------------------------
Member
Summit V Advisors Fund, L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ Tom Roberts
------------------------------
Member
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Summit V Advisors Fund (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ Tom Roberts
-----------------------------
Member
Summit Investors III, L.P.
By: /s/ Tom Roberts
-----------------------------
General Partner
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EXHIBIT A
WARRANT CERTIFICATE
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IT MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN
A STOCKHOLDERS AGREEMENT DATED June 4, 1998 A COPY OF WHICH WILL BE MADE
AVAILABLE BY THE ISSUER UPON REQUEST.
THE TRANSFER OR EXCHANGE OF THIS WARRANT MUST BE REGISTERED IN ACCORDANCE
WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. __ June 4, 1998
VOID AFTER 5:00 p.m. BOSTON
TIME ON June 4, 2008
STRIDE & ASSOCIATES, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received, ______________________, or its
registered assigns, is the owner of a Warrant which entitles it to purchase
at any time on or before 5:00 p.m. Boston Time on June 4, 2008 or on such
later date, if any, as provided in the Warrant Agreement (as hereinafter
defined) (the "Expiration Date"), _______ fully paid and nonassessable Shares
of the Common Stock, $.01 par value (the "Common Stock") of Stride &
Associates, Inc., a Delaware corporation (the "Company"), at the purchase
price of $23.10 per share (the "Exercise Price") upon presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase
attached hereto duly executed. The Expiration Date is subject to extension as
provided in said Warrant Agreement. The number of Shares which may be
purchased upon exercise of the Warrant evidenced by this Warrant Certificate
is the number as of the date of the original issue of such Warrant, based on
the Shares of Common Stock of the Company as constituted at such date. As
provided in the Warrant Agreement, the number and kind of Shares which may be
purchased
14
Execution Copy
<PAGE>
upon the exercise of the Warrant evidenced by this Warrant Certificate are,
upon the happening of certain events, subject to modification and adjustment.
This Warrant Certificate and the Warrant it represents are subject to,
and entitled to the benefits of, all of the terms, provisions and conditions
of a certain Warrant Agreement dated as of June 4, 1998 (the "Warrant
Agreement") between the Company and the original holder hereof, which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof
and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of the Company and the holder of this Warrant
Certificate. Copies of the Warrant Agreement are on file at the principal
office of the Company.
Subject to the terms of the Warrant Agreement, this Warrant Certificate,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing a Warrant or Warrants entitling the holder to purchase a like
aggregate number of Shares of Common Stock as the Warrant evidenced by the
Warrant Certificate surrendered entitled such holder to purchase.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained in the Warrant Agreement
or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, to give or withhold consent to any corporate action (whether upon
any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger,
conveyance or otherwise), to receive notice of meetings (except as provided
in the Warrant Agreement), or to receive dividends or subscription rights or
otherwise, until the Warrant evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise thereof
shall have become deliverable as provided in the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Company's Common Stock are
closed for any purpose, the Company shall not be required to make delivery of
certificates for Shares purchasable upon such exercise until the date of the
reopening of said transfer books.
15
<PAGE>
IN WITNESS WHEREOF, Stride & Associates, Inc. has caused the signature
(or facsimile signature) of its President and Secretary to be printed herein
and its corporate seal (or facsimile) to be printed herein.
Attest: STRIDE & ASSOCIATES, INC.
By:
- -------------------------------- ---------------------------------
President
Michael Robichand
16
<PAGE>
FORM OF ELECTION TO PURCHASE
To be executed if the Holder desires to exercise the Warrant.
TO STRIDE & ASSOCIATES, INC.
The undersigned hereby irrevocably elects to exercise the Warrant
evidenced by this Warrant Certificate No.____ to purchase ________Shares of
Common Stock issuable upon the exercise of such Warrant and requests that
certificates for such Shares be issued in the name of:
--------------------------------------
Name
--------------------------------------
Address
--------------------------------------
Social Security Number
If such number of Shares shall not be all the Shares with respect to
which this Warrant is exercisable, a new Warrant for the balance remaining of
such Shares will be registered in the name of and delivered to:
--------------------------------------
Name
--------------------------------------
Address
--------------------------------------
Social Security Number
Date:
--------------------------- --------------------------------------
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate)
17
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificates)
For value received, __________________hereby sells, assigns and
transfers unto _______________________the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ________________________ attorney, to
transfer said Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Dated: ,
-------------------- -----
---------------------------------------
NOTE: The above signature should
correspond exactly with the name
on the face of this Warrant
Certificate.
18
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
WARRANT PURCHASERS NUMBER PURCHASED
- ------------------ ----------------
<S> <C>
Summit Ventures IV, L.P. 15.51
Summit Ventures V, L.P. 15.51
Summit V Advisors Fund .027
Summit V Advisors Fund (Q.P.), L.P. .89
Summit III Investors, L.P. .32
</TABLE>
19
<PAGE>
Exhibit 10.4
STRIDE & ASSOCIATES, INC.
1998 STOCK OPTION AND GRANT PLAN
SECOND AMENDMENT AND RESTATEMENT AS OF OCTOBER 7, 1998
1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Stride & Associates, Inc. 1998 Stock Option
and Grant Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, directors, consultants, advisors and other key persons
(including consultants) of Stride & Associates, Inc. (the "Company") and its
Subsidiaries (as defined below) upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.
The following terms shall be defined as set forth below:
"ACT" means the Securities Exchange Act of 1934, as amended.
"AWARD" or "AWARDS," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards and Unrestricted Stock Awards.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"COMMITTEE" has the meaning specified in Section 2(a).
"FAIR MARKET VALUE" of the Stock on any given date means (i) if the
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall not be less than the average of the highest bid and lowest asked prices of
the Stock reported for such date or, if no bid and asked prices were reported
for such date, for the last day preceding such date for which such prices were
reported, or (ii) if the Stock is admitted to trading on a national securities
exchange or the NASDAQ National Market System, the Fair Market Value on any date
shall not be less than the closing price reported for the Stock on such exchange
or system for such date or, if no sales were reported for such date, for the
last date preceding such date for a sale was reported; or (iii) if the Stock is
not publicly traded on a securities exchange or traded in the over-the-counter
market or, if traded or quoted, there are no transactions or quotations
within the last
<PAGE>
ten trading days or trading has been halted for extraordinary reasons, the Fair
Market Value on any given date shall be determined in good faith by the
Committee with reference to the rules and principles of valuation set forth in
Section 20.2031-2 of the Treasury Regulations. Notwithstanding the foregoing,
the Fair Market Value of the stock on the first day of the Company's initial
public offering of Stock shall be the initial public offering price as set forth
in the final prospectus for the Company's initial public offering.
"INCENTIVE STOCK OPTION" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
"INDEPENDENT DIRECTOR" means a member of the Board who is neither an
employee or officer of the Company or any Subsidiary.
"INITIAL PUBLIC OFFERING" means the first underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Stock to the public.
"NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
"OPTION" or "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.
"RESTRICTED STOCK AWARD" means Awards granted pursuant to Section 6.
"STOCK" means the Common Stock, par value $.01 per share, of the
Company subject to adjustments pursuant to Section 3.
"SERVICE RELATIONSHIP" means any relationship as an employee, part-time
employee, director, consultant or advisor of the Company or any Subsidiary of
the Company such that, for example, a Service Relationship shall be deemed to
continue without interruption in the event a participant's status changes from
full-time employee to part-time employee or consultant.
"SUBSIDIARY" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50 percent or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
"UNRESTRICTED STOCK AWARD" means any Award granted pursuant to Section
7.
2
<PAGE>
2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) COMMITTEE. The Plan shall be administered by the Board of Directors
of the Company, or at the discretion of the Board, by a committee of the Board
comprised, except as contemplated by Section 2(c), solely of two or more
Independent Directors. All references herein to the Committee, whether or not
established, shall be deemed to refer to the entity then responsible for
administration of the Plan at the relevant time (i.e., the Board of Directors or
a committee of the Board, as applicable).
(b) POWERS OF THE COMMITTEE. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to
time be granted;
(ii) to determine the time or times of grant, and the extent,
if any, of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards and Unrestricted Stock Awards or any
combination of the foregoing granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered
by any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of
the Plan, of any Award, which terms and conditions may differ among
individual Awards and participants, and to approve the form of written
instruments evidencing the Awards and any amendments thereto;
(v) to accelerate at any time the exercisability or vesting of
all or any portion of any Award and/or to include provisions in Awards
for providing such acceleration;
(vi) subject to the provisions of Section 5(a)(ii), to extend
at any time the period in which Stock Options may be exercised;
(vii) to impose any limitations on Awards granted under the
Plan, including limitations on transfers, repurchase provisions and the
like and to exercise repurchase rights or obligations;
(viii) to determine at any time whether, to what extent, and
under what circumstances distribution or the receipt of Stock and other
amounts payable with respect to an Award shall be deferred either
automatically or at the election of the participant and whether and to
what extent the Company shall pay or credit amounts
3
<PAGE>
constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(ix) at any time to adopt, alter and repeal such rules,
guidelines and practices for administration of the Plan and for its own
acts and proceedings as it shall deem advisable; to interpret the terms
and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the administration
of the Plan.
All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.
(c) DELEGATION OF AUTHORITY TO GRANT AWARDS. The Board, in its
discretion, may appoint the Chief Executive Officer of the Company as a
one-person Committee in addition to the Committee contemplated by Section 2(a)
having authority (co-extensive with such other Committee) to grant Awards to
individuals who are not subject to the reporting and other provisions of Section
16 of the Act or "covered employees" within the meaning of Section 162(m) of the
Code. Any such delegation by the Board shall include a limitation as to the
amount of Awards that may be granted during the period of the delegation and
shall contain guidelines as to the determination of the exercise price of any
Stock Option, the conversion ratio or price or other Awards and the vesting
criteria. The Board may revoke or amend the terms of a delegation at any time
but such action shall not invalidate any prior actions of the Board's delegate
or delegates that were consistent with the terms of the Plan.
3. STOCK ISSUABLE UNDER THE PLAN; SUBSTITUTION
(a) STOCK ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 162,790 shares (subject to
adjustment as provided in Section 3(b) hereof). For purposes of this limitation,
the shares of Stock underlying any Awards which are forfeited, canceled,
reacquired by the Company, satisfied without the issuance of Stock or otherwise
terminated (other than by exercise) shall be added back to the shares of Stock
available for issuance under the Plan. Subject to such overall limitation,
shares of Stock may be issued up to such maximum number pursuant to any type or
types of Award. The shares available for issuance under the Plan may be
authorized but unissued shares of Stock or shares of Stock reacquired by the
Company and held in its treasury.
(b) CHANGES IN STOCK. Subject to Section 3(c) hereof, if, as a result
of any merger, consolidation, recapitalization, reclassification, reorganization
stock dividend, stock split (other than the 5,000-for-1 stock split effected by
the Company on June 4, 1998 which has been taken into account in calculating the
number of shares of Stock reserved under Section 3(a) above), reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock as a class are increased or decreased or are exchanged for a
different number or kind of shares or other securities of the Company or any
successor
4
<PAGE>
company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares
of Stock or other securities, the Committee shall make an appropriate or
proportionate adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, (ii) the number of shares subject to Stock Options that
can be granted to any one individual participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the exercise price and/or repurchase price for each share subject
to any then outstanding Awards under the Plan, without changing the aggregate
exercise or repurchase price (I.E., the exercise price multiplied by the number
of Stock Options) as to which such Awards remain outstanding. The adjustment by
the Committee shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the Plan resulting from any such adjustment, but the
Committee in its discretion may make a cash payment in lieu of fractional
shares.
The Committee may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Committee that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification extension
or renewal of the Option within the meaning of Section 424(h) of the Code.
(c) MERGERS AND OTHER TRANSACTIONS. In the case of (i) a merger,
reorganization or consolidation of the Company with or into another corporation
(with respect to which less than a majority of the outstanding voting power of
the surviving or consolidated corporation is held by shareholders of the Company
immediately prior to such event), (ii) the sale or transfer of all or
substantially all of the assets of the Company and its Subsidiaries, (iii) the
sale of all of the outstanding stock of the Company to an unrelated person or
entity or (iv) the liquidation or dissolution of the Company (in each case, a
"Transaction"), then (A) fifty percent (50%) of any outstanding Awards (other
than those Restricted Stock Awards granted as of June 4, 1998) that are not
vested and (B) 100% of any of the Restricted Stock Awards granted as of June 4,
1998 that are then outstanding and not vested, shall become fully vested and
exercisable as of the closing or consummation of such Transaction, provided that
such acceleration and any notice of exercise of Options that become vested as of
such closing or consummation shall in all cases be subject to and contingent
upon such closing or consummation. The Plan and the Awards issued hereunder
shall terminate upon the effectiveness of any such Transaction, unless provision
is made in connection with such transaction in the sole discretion of the
parties thereto for the assumption of Awards theretofore granted (after taking
into account any acceleration hereunder), or the substitution for such Awards of
new Awards of the successor entity or a parent or subsidiary thereof, with such
adjustment as to the number and kind of shares and the per share exercise prices
as such parties shall agree (after taking into account any acceleration
hereunder). In the event of such termination, each participant shall be
permitted to exercise for a period of at least 15 days prior to the date of such
termination all
5
<PAGE>
outstanding Options held by such participant which are then exercisable or
become exercisable upon the effectiveness of the Transaction.
(d) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances. Any substitute Awards granted under this Plan
shall not count against the share limitation set forth in Section 3(a).
4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and
other employees, directors, consultants, advisors and other key persons of the
Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries as are
selected from time to time by the Committee in its sole discretion.
5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be pursuant to a stock
option agreement which shall be in such form as the Committee may from time to
time approve. Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. NonQualified
Stock Options may be granted to officers, employees, directors, advisors,
consultants and other key persons of the Company and its Subsidiaries. To the
extent that any Option does not qualify as an Incentive Stock Option, it shall
be deemed a Non-Qualified Stock Option. No Incentive Stock Option shall be
granted under the Plan after the date which is ten years from the date the Plan
is approved by the Board.
(a) TERMS OF STOCK OPTIONS. Stock Options granted pursuant to this
Section 5 shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable. If the Committee so determines,
Stock Options may be granted in lieu of cash compensation at the participant's
election, subject to such terms and conditions as the Committee may establish,
as well as in addition to other compensation.
(i) EXERCISE PRICE. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5 shall be
determined by the Committee at the time of grant but shall not be less
than 100 percent of the Fair Market Value on the date of grant in the
case of Incentive Stock Options. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code)
more
6
<PAGE>
than 10 percent of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive
Stock Option is granted to such employee, the option price of such
Incentive Stock Option shall be not less than 110 percent of the Fair
Market Value on the grant date.
(ii) OPTION TERM. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years after the date the option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from
the date of grant.
(iii) EXERCISABILITY; RIGHTS OF A STOCKHOLDER. Stock Options
shall become vested and exercisable at such time or times, whether or
not in installments, as shall be determined by the Committee at or
after the grant date. The Committee may at any time accelerate the
exercisability of all or any portion of any Stock Option. An optionee
shall have the rights of a stockholder only as to shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock Options.
Prior to the consummation of an initial public offering by the Company,
the exercise of any Stock Options may be conditioned by the Company
upon such Stock being subject to the terms of any shareholders
agreement then in effect.
(iv) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. Notwithstanding
any other provision of the Plan, in no event shall the aggregate Fair
Market Value (determined as of the time an Incentive Stock Option is
granted) of the option shares with respect to which Incentive Stock
Options are exercisable for the first time by any individual during any
calendar year (under all plans of the Company and of all parent
corporations and subsidiary corporations, within the meaning of
Sections 424(e) and 424(f), respectively, of the Code) exceed $100,000.
Any Stock Option granted under the Plan in excess of the foregoing
limitation shall be deemed a Non-Qualified Stock Option.
(v) METHOD OF EXERCISE. Stock Options may be exercised in
whole or in part, by giving written notice of exercise to the Company,
specifying the number of shares to be purchased. Payment of the
purchase price may be made by one or more of the following methods;
PROVIDED, HOWEVER, that the methods set forth in subsections (B) and
(C) below shall become available only after the closing of the
Company's Initial Public Offering:
(A) In cash, by certified or bank check or other
instrument acceptable to the Committee;
(B) In the form of shares of Stock that are not then
subject to restrictions under any Company plan and that have
been held by the optionee
7
<PAGE>
free of such restrictions for at least six months, if
permitted by the Committee in its discretion, which such
surrendered shares shall be valued at Fair Market Value on the
exercise date;
(C) By the optionee delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company to pay
the purchase price; PROVIDED that in the event the optionee
chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment
procedure; or
(D) By the optionee delivering to the Company a
promissory note if the Board has authorized the loan of funds
to the optionee for the purpose of enabling or assisting the
optionee to effect the exercise of his Stock Option; PROVIDED
that at least so much of the exercise price as represents the
par value of the Stock shall be paid other than with a
promissory note.
Payment instruments will be received subject to collection.
The delivery of certificates representing the shares of Stock to be
purchased pursuant to the exercise of a Stock Option will be contingent
upon receipt from the optionee (or a purchaser acting in his stead in
accordance with the provisions of the Stock Option) by the Company of
the full purchase price for such shares and the fulfillment of any
other requirements contained in the Stock Option or applicable
provisions of law.
(b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.
(c) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the
Committee, in its sole discretion, may provide in the Award agreement regarding
a given Option that the optionee may transfer, without consideration for the
transfer, his Non-Qualified Stock Options to members of his immediate family, to
trusts for the benefit of such family members, or to partnerships in which such
family members are the only partners, provided that the transferee agrees in
writing with the Company to be bound by all of the terms and conditions of this
Plan and the applicable Option.
8
<PAGE>
(d) TERMINATION. If the participant's employment (or other Service
Relationship) with the Company or a Subsidiary is terminated, the period within
which to exercise the Option may be subject to earlier termination as set forth
below, except as otherwise expressly determined by the Committee in the case of
Non-Qualified Stock Options at the time of the grant of such Options and, if the
Company has not completed an initial public offering at the time of such
termination, any Stock previously issued upon exercise of Options held by such
participant shall be subject to repurchase by the Company at fair market value
as determined in good faith by the Board of Directors of the Company.
(i) TERMINATION DUE TO DEATH. If the participant's employment
terminates by reason of death, any Option held by the participant shall become
fully exercisable and may thereafter be exercised by the participant's legal
representative or legatee for a period of 12 months from the date of death or
until the expiration date of the Option, if earlier.
(ii) TERMINATION DUE TO DISABILITY OR RETIREMENT. If the
participant's employment terminates by reason of disability or retirement (after
attainment of age 60), any Option held by the participant shall become fully
exercisable and may thereafter be exercised by the participant for a period of
12 months from the date of termination or until the expiration date of the
Option, if earlier. The death of the participant during the 12-month period
provided in this Section 5(d)(ii) shall extend such period for another 12 months
from the date of death or until the expiration date of the Option, if earlier.
(iii) TERMINATION FOR CAUSE. If the participant's employment
(or other Service Relationship) is terminated for cause by the Company, or upon
breach by the participant of any covenant or agreement not to compete with the
Company or any of its Subsidiaries, all Options held by such participant shall
be terminated and the holder thereof shall have no further rights thereunder.
The following shall constitute "cause" for termination of employment (or other
Service Relationship) of a participant by the Company: (A) conviction of such
participant of a crime involving moral turpitude, deceit, dishonesty or fraud;
(B) failure to perform a substantial portion of such participant's duties and
responsibilities as an employee of the Company and to follow material
job-related instructions, which failure continues for thirty (30) days after
written notice given to such participant by the Company; (C) gross negligence or
wilful misconduct of such participant with respect to the Company or any
Subsidiary; or (D) the breach by such participant of any material term of an
agreement with the Company or any of its Subsidiaries, including covenants not
to compete and provisions relating to confidential information and intellectual
property rights.
(iv) OTHER TERMINATION. If the participant's employment
terminates for any reason other than for cause, death, disability or retirement
as provided above or if the participant's Service Relationship (other than as an
employee) terminates for any reason, and unless otherwise determined by the
Committee, any Option held by the participant may be exercised, to the extent
exercisable on the date of termination, for a period of 90 days from the date of
termination or until the expiration date of the Option, if earlier. Any Option
that is not exercisable at such time shall terminate immediately and be of no
further force or effect.
9
<PAGE>
The Board's determination of the reason for termination of the
participant's employment shall be conclusive and binding on the participant and
his or her representatives or legatees.
6. RESTRICTED STOCK AWARDS
(a) NATURE OF RESTRICTED STOCK AWARDS. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other purchase
price determined by the Committee, in its sole discretion, shares of Stock
subject to such restrictions and conditions as the Committee may determine at
the time of grant ("Restricted Stock"). The purchase price (if any) may be
payable in cash or by a promissory note (recourse or nonrecourse) acceptable to
the Committee. Restricted Stock Awards also may be granted or sold in respect of
past services or other valid consideration. Conditions may be based on
continuing employment (or other Service Relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Restricted
Stock Award is contingent on the participant executing the Restricted Stock
Award agreement. The terms and conditions of each such agreement shall be
determined by the Committee, in its sole discretion, and such terms and
conditions may differ among individual Awards and participants.
(b) RIGHTS AS A STOCKHOLDER. Upon execution of a written instrument
setting forth the Restricted Stock Award and payment of any applicable purchase
price (if any), a participant shall have the rights of a stockholder with
respect to the voting of the Restricted Stock, subject to such conditions
contained in the written instrument evidencing the Restricted Stock Award.
Unless the Committee shall otherwise determine, certificates evidencing the
Restricted Stock shall remain in the possession of the Company until such
Restricted Stock is vested as provided in Section 6(d) below, and the
participant shall be required, as a condition of the grant, to deliver to the
Company a stock power endorsed in blank.
(c) RESTRICTIONS. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award agreement. If a
participant's employment (or other Service Relationship) with the Company and
its Subsidiaries terminates under the conditions specified in the relevant
instrument relating to the Award, or upon such other event or events as may be
stated in the instrument evidencing the Award, the Company or its assigns shall
have the right to repurchase some or all of the shares of Stock subject to the
Award at such purchase price as set forth in such instrument.
(d) VESTING OF RESTRICTED STOCK. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the Restricted Stock
shall become vested, subject to such further rights of the Company or its
assigns as may be specified in the Restricted Stock Award agreement.
10
<PAGE>
(e) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The Restricted
Stock Award agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on the Restricted Stock.
7. UNRESTRICTED STOCK AWARDS
The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Committee) an Unrestricted Stock Award to any
participant pursuant to which such participant may receive shares of Stock free
of any vesting restrictions ("Unrestricted Stock") under the Plan. Unrestricted
Stock Awards may be granted or sold as described in the preceding sentence in
respect of past services or other valid consideration, or in lieu of cash
compensation due to such participant.
8. TAX WITHHOLDING
(a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. The Company's obligation to deliver stock certificates to any
participant hereunder, or honor any issue or sale of Awards or Stock underlying
Awards, is subject to and conditioned on tax obligations being satisfied by the
participant.
(b) PAYMENT IN STOCK. Subject to approval by the Committee, in its sole
discretion, a participant may elect to have such tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold from
shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due, (ii) transferring to the Company
shares of Stock owned by the participant with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due or (iii) in a combination of (i) and (ii).
9. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
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(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
10. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. The Committee may provide substitute Awards at the same or
reduced exercise or purchase price or with no exercise or purchase price in a
manner not inconsistent with the terms of the Plan, but such price, if any, must
satisfy the requirements which would apply to the substitute or amended Award if
it were then initially granted under this Plan, but no such action shall
adversely affect rights under any outstanding Award without the holder's
consent. If and to the extent determined by the Committee to be required by the
Code to ensure that Incentive Stock Options granted under the Plan are qualified
under Section 422 of the Code or to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the Code, if
and to the extent intended to so qualify, Plan amendments shall be subject to
approval by the Company stockholders entitled to vote at a meeting of
stockholders. Nothing in this Section 10 shall limit the Board's authority to
take any action permitted pursuant to Section 3(c) hereof.
11. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. No shares of Stock shall be issued
pursuant to an Award until all applicable securities law and other legal and
stock exchange or similar requirements have been satisfied. The Committee may
require the placing of such stop-orders and restrictive legends on certificates
for Stock and Awards as it deems appropriate.
(b) DELIVERY OF STOCK CERTIFICATES. Stock certificates to participants
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
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(d) TRADING POLICY RESTRICTIONS. Option exercises and other Awards
under the Plan shall be subject to such Company's insider trading policy-related
restrictions, terms and conditions as may be established by the Committee, or in
accordance with policies set by the Committee, from time to time.
12. EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan shall become effective upon approval by the holders of a
majority of the shares of Stock of the Company present or represented and
entitled to vote at a meeting of stockholders. Subject to such approval by the
stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and
after adoption of this Plan by the Board. This Plan amends in certain respects
and integrates and supersedes versions of the Plan as heretofore in effect.
13. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: October 7, 1998
DATE APPROVED BY STOCKHOLDERS: November 17, 1998
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EXHIBIT 10-5
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE STRIDE & ASSOCIATES, INC.
1998 STOCK OPTION AND GRANT PLAN
---------------------- --------------------
No. of Shares Date of Grant
Pursuant to the Stride & Associates, Inc. 1998 Stock Option and Grant
Plan (the "Plan"), Stride & Associates, Inc., Inc. (including its successors,
the "Company") hereby grants to ________________ (the "Optionee") an option to
purchase ("Option") prior to the fifth (5th) anniversary of the date of grant
("Date of Grant") of this Option (the "Expiration Date"), at an exercise price
per share of $_____, all or any of the number of shares of Common Stock, par
value $.01 per share ("Common Stock"), of the Company indicated above (the
"Option Shares"), subject to the terms and conditions set forth herein and in
the Plan. Any terms not defined herein shall have the same meaning defined in
the Plan.
1. VESTING SCHEDULE. This Stock Option shall vest 33 1/3% on ________,
____ and 8.333% on each fiscal quarter end thereafter for so long as the
Optionee is employed by the Company on each such date and subject to
acceleration, assumption and termination as provided in Section 3(c) of the
Plan. This Stock Option shall be exercisable to the extent vested at any time or
times prior to the Expiration Date, subject to the provisions hereof and of the
Plan.
2. MANNER OF EXERCISE. The Optionee may exercise this Option from time
to time prior to the Expiration Date, by providing written notice to the Company
of an election to purchase some or all of the Option Shares. Said notice shall
specify the number of Option Shares to be purchased and shall be accompanied by
payment therefor in cash, certified check, bank check or wire transfer, in U.S.
funds, payable to the order of the Company in an amount equal to the exercise
price of such Option Shares. Alternatively, the Optionee may make payment for
the exercise price (a) in the form of Option Shares that have been beneficially
owned by the Optionee for at least six months and with a Fair Market Value equal
to the exercise price or (b) by delivering to the Company a promissory note in a
principal amount equal to the exercise price of such Option Shares, bearing
interest at the applicable federal rate, with a maturity date of three years
from issuance (or earlier upon a sale of the Option Shares) and secured by the
Option Shares or (c) by such other method of payment permitted under the Plan.
No certificates for Option Shares so purchased will be issued to Optionee until
the Company has completed all steps required by law to be taken in connection
with the issue and sale of such Option Shares.
3. TRANSFERABILITY. This Agreement may be transferred to a Permitted
Transferee (as such term is defined in the Shareholders Agreement dated the date
hereof among the Company, the Optionee and certain other parties signatory
thereto).
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4. STATUS OF THE STOCK OPTION. This Option is not intended to qualify
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended.
5. CONTRACTUAL RESTRICTIONS. The Optionee acknowledges that the Option
Shares, upon exercise of the Option, shall be bound by the terms of that certain
Shareholders Agreement dated as of June 4, 1998, as amended from time to time,
among the Company and certain holders of its capital stock. The Optionee further
acknowledges and agrees that the Option Shares, upon exercise of the Option,
shall be subject to repurchase by the Company at fair market value as determined
by good faith by the Board of Directors of the Company in the event that the
Optionee's employment with the Company is terminated at any time prior to the
consummation of the initial public offering by the Company.
6. LEGEND. Any certificate representing the Option Shares shall carry
the following legends:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be
offered, sold or otherwise transferred, pledged or hypothecated
unless and until such shares are registered under such Act or an
opinion of counsel satisfactory to the corporation is obtained to
the effect that such registration is not required."
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. This Option shall be
subject to adjustment in the event of certain changes of capitalization of the
Company as set forth in Section 3(b) of the Plan.
8. WITHHOLDING TAXES. The Optionee shall be subject to the tax
withholding obligations as set forth in Section 8 of the Plan.
9. MISCELLANEOUS.
(a) EMPLOYMENT. This Option does not confer upon the Optionee any
rights with respect to continuation of employment by the Company, nor
shall it interfere with any right of the Company to terminate such
employment at anytime.
(b) EQUITABLE RELIEF. The parties hereto agree and declare that
legal remedies are inadequate to enforce the provisions of this Agreement
and that equitable relief, including specific performance and injunctive
relief, may be used to enforce the provisions of this Agreement.
(c) CHANGE AND MODIFICATIONS. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its
terms be effective. This
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Agreement may be changed, modified or terminated only by an agreement in
writing signed by the Company and the Optionee.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
(e) HEADINGS. The headings are intended only for convenience in
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this
Agreement.
(f) SAVING CLAUSE. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no
manner affect the legality or enforceability of any other provision
hereof.
(g) NOTICES. All notices, requests, consents and other
communications shall be in writing and be deemed given when delivered
personally, by telex or facsimile transmission or when received if mailed
by a nationally recognized overnight carrier or by first class registered
or certified mail, postage prepaid. Notices to the Company shall be
addressed to its principal offices and to the Optionee as set forth
underneath his or her signature below, or to such other address or
addresses as may have been furnished by such party in writing to the
other. Notices to any holder of the Option Shares other than the Optionee
shall be addressed to the address furnished by such holder to the Company.
(h) BENEFIT AND BINDING EFFECT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors, assigns, legal representatives, estates, executors,
administrators and heirs.
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The foregoing Option is granted as of the date first written above by
the Company, subject to the terms and conditions contained herein.
STRIDE & ASSOCIATES, INC.
By:
--------------------------------
Name:
Title:
The foregoing Option is hereby accepted and its terms and conditions
are hereby agreed to as of the date first above written.
OPTIONEE:
-----------------------------------
Print Name:
Optionee's Address:
-----------------------------------
-----------------------------------
Social Security No.:
---------------
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Exhibit 10.6
FORM OF
RESTRICTED STOCK AWARD AGREEMENT
UNDER THE STRIDE & ASSOCIATES, INC.
1998 STOCK OPTION AND GRANT PLAN
NAME OF GRANTEE:
NO. AND CLASS OF SHARES:
GRANT DATE:
PER SHARE PURCHASE PRICE:
Pursuant to the Stride & Associates, Inc. 1998 Stock Option and Grant
Plan (the "Plan"), Stride & Associates, Inc., a Delaware corporation
(together with its successors and assigns, the "Company"), hereby grants,
sells and issues to the person named above (the "Grantee"), who is an
officer, employee, director, consultant, advisor or other key person of the
Company or any of its Subsidiaries (as defined in the Plan), the number of
shares of Common Stock, par value $.01 per share, of the Company indicated
above (subject to the provisions below, the "Shares"), for the per share
purchase price specified above, subject to the terms and conditions set forth
herein and in the Plan. The Grantee agrees to the provisions set forth herein
and acknowledges that each such provision is a material condition of the
Company's agreement to issue and sell the Shares to him or her. All references
to amounts herein shall be equitably adjusted to reflect stock splits, stock
dividends, reverse stock splits, mergers, reorganizations, recapitalizations
and similar changes affecting the capital stock of the Company, and any shares
of capital stock of the Company received on or in respect of Shares in
connection with any such event (including any shares of capital stock or any
right, option or warrant to receive the same or any security convertible into
or exchangeable for any such shares or received upon conversion of any such
shares) shall be subject to this Agreement on the same basis and extent at the
relevant time as the Shares in respect of which they were issued, and shall be
deemed Shares as if and to the same extent they were issued on the Grant Date
(as set forth above).
For the purposes of this Agreement, the following terms shall have the
following respective meanings:
"ACT" shall mean the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"COMMON STOCK" shall mean the Company's Common Stock, par value $.01 per
share, together with any shares into which Common Stock may be converted or
exchanged.
"INITIAL PUBLIC OFFERING" shall mean the consummation of the first fully
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4, S-8, S-14 or S-15
or their then equivalents, covering the offer and sale by the Company of its
Common Stock; or such other event as a result of or following which the
Company's Common Stock shall be publicly traded.
<PAGE>
"PERMITTED TRANSFEREES" shall mean the Grantee's spouse, parents, children
(natural or adopted), stepchildren or grandchildren or a trust for their sole
benefit of which the Grantor is the settlor; provided, however, that any such
trust does not require or permit distribution of any Shares during the term of
this Agreement unless such Shares remain subject to the terms of this Agreement.
"RESTRICTED SHARES" shall mean all of the Shares that are not Vested
Shares.
"SALE EVENT" shall mean any of the following transactions: (i) a merger,
reorganization or consolidation of the Company with or into another corporation
(with respect to which less than a majority of the outstanding voting power of
the surviving or consolidated corporation is held by shareholders of the Company
immediately prior to such event), (ii) the sale or transfer of all or
substantially all of the properties and assets of the Company and its
Subsidiaries, (iii) the sale of all of the outstanding stock of the Company to
an unrelated person or entity or (iv) the liquidation or dissolution of the
Company.
"SHARES" shall mean the number of shares of Common Stock being purchased
by the Grantee on the date hereof and any additional shares of Common Stock or
other securities received as a dividend on, or otherwise on account of, the
Shares, as contemplated by the first paragraph of this Agreement.
"TERMINATION EVENT" shall mean the termination of the Grantee's employment
or Service Relationship (as defined in the Plan) with the Company and its
Subsidiaries, for any reason whatsoever whether with or without cause, voluntary
or involuntary.
"VESTED SHARES" shall mean all Shares that have vested in accordance with
Section 2 hereof prior to any Termination Event.
SECTION 1. PURCHASE AND SALE OF SHARES; INVESTMENT REPRESENTATIONS.
1.1. PURCHASE AND SALE. On the date hereof, the Company hereby sells to
the Grantee, and the Grantee hereby purchases from the Company, the number of
Shares set forth above for the per share purchase price set forth above, payable
in cash or a promissory note acceptable to the Company.
1.2. INVESTMENT REPRESENTATIONS. In connection with the purchase and sale
of the Shares contemplated by Section 1.1 above, the Grantee hereby represents
and warrants to the Company as follows:
(a) The Grantee is purchasing the Shares for his or her own account
for investment only, and not for resale or with a view to the distribution
thereof.
(b) The Grantee has had such opportunity as he has deemed adequate
to obtain from the Company such information as is necessary to permit him
or her to evaluate the merits and
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<PAGE>
risks of the foregoing investment in the Company and has consulted with his
or her own advisers with respect to such investment in the Company.
(c) The Grantee is either an "accredited investor" as that term is
defined in Rule 501 promulgated under the Act or has sufficient experience
in business, financial and investment matters to be able to evaluate the
risks involved in the purchase of the Shares and to make an informed
investment decision with respect to such purchase.
(d) The Grantee can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.
(e) The Grantee understands that the Shares are not registered under
the Act or any applicable state securities or "blue sky" laws and may not
be sold or otherwise transferred or disposed of in the absence of an
effective registration statement under the Act and under any applicable
state securities or "blue sky" laws (or exemptions from the registration
requirements thereof). The Grantee further acknowledges that certificates
representing the Shares will bear restrictive legends reflecting the
foregoing.
SECTION 2. VESTING. 100% of the Shares shall become Vested Shares on April
30, 1999.
2.1 ADJUSTMENTS UPON CERTAIN TRANSACTIONS. Upon the occurrence of any
Transaction (as defined in Section 3(c) of the Plan), the Shares shall be
subject to such accelerated vesting, if any, assumption and termination as are
provided for in Section 3(c) of the Plan and any Restricted Shares which are not
assumed or vested after giving effect to such Transaction shall be subject to
repurchase under Section 3 hereof.
SECTION 3. REPURCHASE OF RESTRICTED SHARES.
3.1. REPURCHASE RIGHT. Upon the occurrence of a Termination Event, the
Company or its assigns shall have the right to repurchase (a) all or any portion
of the Restricted Shares held by the Grantee as of the date of such Termination
Event at a repurchase price equal to $68.80 per Restricted Share (the
"Restricted Repurchase Price"); and (b) all or any portion of the Vested Shares
held by the Grantee as of the date of such Termination Event at a repurchase
price equal to the fair market value per Vested Share as determined in good
faith by the Board of Directors of the Company (the "Vested Repurchase Price"
and together with the Restricted Repurchase Price, the "Total Repurchase
Price"). The purchase and sale arrangements contemplated by this Section 3 are
referred to herein as the "Repurchase." Any Shares repurchased hereunder are
referred to as the Repurchased Shares.
3.2. CLOSING PROCEDURE. The Company or its assigns shall effect the
Repurchase by delivering or mailing to the Grantee written notice within six (6)
months after the Termination Event, specifying a date within such six-month
period in which the Repurchase shall be effected. Upon such notification, the
Grantee shall promptly surrender to the Company any certificates representing
the Repurchased Shares being purchased, together with a duly executed stock
power
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<PAGE>
for the transfer of such Repurchased Shares to the Company or the Company's
assignee or assignees. Upon the Company's or its assignee's receipt of the
certificates from the Grantee, the Company or its assignee or assignees shall
deliver to the Grantee a check for the Total Repurchase Price of the Repurchased
Shares being purchased; provided, however, that the Company may pay the Total
Repurchase Price for such Repurchased Shares by offsetting and canceling any
indebtedness then owed by the Grantee to the Company. At such time, the Grantee
shall deliver to the Company the certificate or certificates representing the
Repurchased Shares so repurchased, duly endorsed for transfer, free and clear of
any liens or encumbrances. The Repurchase rights and obligations specified in
this Section 3 shall survive and remain in effect as to Restricted Shares (but
not Vested Shares) following and notwithstanding any public offering by the
Company and certificates representing such Restricted Shares shall bear legends
to such effect.
3.3. REMEDY. Without limitation of any other provision of this Agreement
or other rights, in the event that the Grantee is required to sell his, her or
its Repurchased Shares pursuant to the provisions of this Section 3 and in the
further event that he, she or it refuses or for any reason fails to deliver to
the designated purchaser of such Repurchased Shares the certificate or
certificates evidencing such Repurchased Shares together with a related stock
power, such designated purchaser may deposit the Repurchase Price for such
Repurchased Shares with any bank doing business within fifty (50) miles of the
Company's principal office, or with the Company's independent public accounting
firm, as agent or trustee, or in escrow, for the Grantee, to be held by such
bank or accounting firm for the benefit of and for delivery to him, them or it,
and/or, in the discretion of such bank or accounting firm, pay such Repurchase
Price by offsetting any indebtedness then owed by the Grantee as provided above.
Upon any such deposit and/or offset by the designated purchaser of such amount
and upon notice to the person or entity who was required to sell the Repurchased
Shares to be sold pursuant to the provisions of this Section 3, such Repurchased
Shares shall at such time be deemed to have been sold, assigned, transferred and
conveyed to such purchaser, the holder thereof shall have no further rights
thereto (other than the right to withdraw the payment thereof held in escrow, if
applicable), and the Company shall record such transfer in its stock transfer
book or in any appropriate manner.
3.4. ESCROW. In order to carry out the provisions of this Section 3 more
effectively, the Company may hold the Shares in escrow together with separate
stock powers executed by the Grantee in blank for transfer. The Company shall
not dispose of the Shares except as otherwise provided in this Agreement. In the
event of any Repurchase, the Company is hereby authorized by the Grantee, as the
Grantee's attorney-in-fact, to date and complete the stock powers necessary for
the transfer of the Repurchased Shares being purchased and to transfer such
Repurchased Shares in accordance with the terms hereof. At such time as any
Shares are no longer Repurchased Shares the Company shall, at the written
request of the Grantee, deliver to the Grantee a certificate representing such
Shares with the balance of the Shares, if any, to be held in escrow pursuant to
this Section 3.3.
Section 4. RESTRICTIONS ON TRANSFER OF SHARES.
4.1 NO TRANSFERS UNLESS IN COMPLIANCE WITH LAW AND THIS AGREEMENT. None of
the Shares now owned or hereafter acquired shall be sold, assigned, transferred,
pledged,
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hypothecated, given away or in any other manner disposed of or encumbered,
whether voluntarily or by operation of law (each, a "Transfer"), unless such
Transfer is in compliance with all foreign, federal and state securities laws
(including, without limitation, the Act), and such Transfer is in accordance
with the terms and conditions of this Section 4. In connection with any Transfer
of Shares, the Company may require an opinion of counsel to the transferor,
satisfactory to the Company, that such Transfer is in compliance with all
foreign, federal and state securities laws (including without limitation, the
Act). No Restricted Shares may be Transferred by the Grantee.
4.2 TRANSFERS TO PERMITTED TRANSFEREES. Subject to this Section 4.2, the
Grantee may Transfer any or all of the Vested Shares without receipt of
consideration or for such consideration as such holder shall determine to
Permitted Transferees. The Grantee agrees to give the Company prior written
notice of any Transfer of Shares to a Permitted Transferee. No Transfer
permitted hereby shall be effective unless the Permitted Transferee to whom the
Shares are proposed to be transferred has delivered to the Company a written
acknowledgment, in the form of APPENDIX A hereto, that the Shares to be received
by it are and will remain subject to the provisions of this Agreement (including
without limitation, the provisions of this Section 4) and that the Permitted
Transferee is bound hereby and thereby. The restrictions on transfer of Vested
Shares contained in this Section 4.2 shall terminate upon an Initial Public
Offering.
4.3 TRANSFERS UPON DEATH. Upon the death of the Grantee, the Vested Shares
held by the Grantee may be transferred and distributed by will or other
instrument taking effect at his or her death or by the laws of descent and
distribution to the Grantee's estate, executors, administrators and personal
representatives, and then to such holder's heirs, legatees or distributees
whether or not such heirs, legatees or distributees are Permitted Transferees.
No Transfer permitted under this Section 4.3 shall be effective unless the
transferee to whom the Shares are proposed to be transferred pursuant to this
provision has delivered to the Company a written acknowledgment, in the form of
APPENDIX A hereto, that the Shares to be received by it are subject to the
provisions of this Agreement (including without limitation, the provisions of
this Section 4) and that such transferee is bound hereby and thereby. The
restrictions on transfer of Vested Shares contained in this Section 4.3 shall
terminate upon an Initial Public Offering.
4.4. RIGHT OF FIRST REFUSAL. Prior to making any Transfer of Vested Shares
(other than to a Permitted Transferee in accordance with Section 4.2), the
Grantee shall deliver written notice (the "Transfer Notice") to the Company. The
Transfer Notice shall disclose in reasonable detail the identity of the
prospective transferees, the number of shares to be Transferred (the "Offered
Shares") and the terms and conditions of the proposed Transfer. By giving the
Transfer Notice, the Grantee shall be deemed to have granted the Company an
option to purchase the Offered Shares. The Company may purchase all, but not
less than all, of the Offered Shares upon the same terms and conditions as those
set forth in the Transfer Notice by delivering written notice of such election
to the Grantee within 20 days after the receipt of the Transfer Notice by the
Company (the "Election Period"). If the Company has not elected to purchase or
otherwise acquire all of the Offered Shares prior to the expiration of the
Election Period, the Grantee may Transfer such Shares at a price and on terms no
more favorable to the transferees thereof than specified in the Transfer Notice
during the 30-day period immediately following the expiration of the Election
Period (the "Transfer Period"). Any Offered Shares that are not Transferred
within the Transfer
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<PAGE>
Period shall be subject to the provisions of this Section 4.4 upon any
subsequent Transfer. If the Company has elected to purchase any Offered Shares
hereunder, the Transfer of such Offered Shares shall be consummated as soon as
practical after the delivery of the election notice to the Grantee, but in any
event within 15 days after the expiration of the Election Period. The
restrictions on transfer of Vested Shares contained in this Section 4.4 shall
terminate upon an Initial Public Offering.
4.5 INVALID TRANSFERS. Any attempted disposition of Shares not in
accordance with the terms and conditions of this Agreement shall be null and
void, and the Company shall not reflect on its records any change in record
ownership of any Shares pursuant to any such disposition, shall otherwise refuse
to recognize any such disposition and shall not in any way give effect to any
such disposition of any Shares.
SECTION 5. LEGEND. Any certificate(s) representing the Shares shall carry
substantially the following legends:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including repurchase rights and transfer restrictions)
contained in a certain Restricted Stock Award Agreement between the
Company and the holder of record of this certificate (a copy of
which is available at the offices of the Company for examination)."
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be
offered, sold or otherwise transferred, pledged or hypothecated
unless and until such shares are registered under such Act or an
opinion of counsel satisfactory to the corporation is obtained to
the effect that such registration is not required."
SECTION 6. WITHHOLDING TAXES. The Grantee acknowledges and agrees that the
Company or any of its Subsidiaries has the right to deduct from payments of any
kind otherwise due to the Grantee, or from the Shares held pursuant to Section
3.3 hereof, any federal, state or local taxes of any kind required by law to be
withheld with respect to the purchase of the Shares by the Grantee. In
furtherance of the foregoing the Grantee agrees to elect, in accordance with
Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
recognize ordinary income in the year of acquisition of the Shares, and to pay
(or make arrangements with the Company for the payment of) all withholding taxes
shown as due on his or her Section 83(b) election form, or otherwise ultimately
determined to be due with respect to such election, based on the excess, if any,
of the Fair Market Value (as defined in the Plan) of such Shares as of the date
of the purchase of such Shares by the Grantee over the purchase price for such
Shares.
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SECTION 7. OTHER CONTRACTUAL RESTRICTIONS; MARKET STAND-OFF.
7.1. CONTRACTUAL RESTRICTIONS. The Grantee, and to the extent applicable
the Grantee's legal representative or any Permitted Transferee, shall agree to
be bound by, and upon receipt of shares of Stock hereunder to execute an
acknowledgment to, that certain Shareholders' Agreement dated as of June 4,
1998, as amended from time to time, among the Company and certain holders of its
capital stock.
7.2 MARKET STAND-OFF. The Grantee agrees, and to the extent applicable the
Grantee's legal representative or each Permitted Transferee shall agree, if
requested by the Company and any underwriter engaged by the Company, not to sell
or otherwise transfer or dispose of any securities of the Company (including,
without limitation pursuant to Rule 144 under the Act (or any successor or
similar exemptive rule hereafter in effect)) held by him, her or it for such
period following the effective date of any registration statement of the Company
filed under the Act as the Company or such underwriter shall specify reasonably
and in good faith, provided that such period shall not exceed 180 days.
SECTION 8. MISCELLANEOUS PROVISIONS.
8.1. RECORD OWNER; DIVIDENDS. The Grantee and any Permitted Transferees,
during the duration of this Agreement, shall be considered the record owners of
and shall be entitled to vote the Shares. The Grantee and any Permitted
Transferees shall be entitled to receive all dividends and any other
distributions declared on the Shares; provided, however, that the Company is
under no duty to declare any such dividends or to make any such distribution.
8.2. EQUITABLE RELIEF. The parties hereto agree and declare that legal
remedies are inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
8.3. CHANGE AND MODIFICATIONS. This Agreement may not be orally changed,
modified or terminated, nor shall any oral waiver of any of its terms be
effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Grantee.
8.4. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
8.5. HEADINGS. The headings are intended only for convenience in finding
the subject matter and do not constitute part of the text of this Agreement and
shall not be considered in the interpretation of this Agreement.
8.6. SAVING CLAUSE. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
7
<PAGE>
8.7. NOTICES. All notices, requests, consents and other communications
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by a nationally recognized
overnight carrier or by first class registered or certified mail, postage
prepaid. Notices to the Company shall be addressed to its principal offices and
to the Grantee as set forth underneath his or her signature below, or to such
other address or addresses as may have been furnished by such party in writing
to the other. Notices to any holder of the Shares other than the Grantee shall
be addressed to the address furnished by such holder to the Company.
8.8. BENEFIT AND BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their respective successors,
assigns, legal representatives, estates, executors, administrators and heirs.
The Company has the right to assign this Agreement, and such assignee shall
become entitled to all the rights of the Company hereunder to the extent of such
assignment.
8.9 ASSIGNMENT OF REPURCHASE RIGHT. At the discretion of the Board of
Directors of the Company, the Company shall have the right to assign the right
to exercise its obligation and rights with respect to the Repurchase to any
person or persons, in whole or in part in any particular instance, upon the same
terms and conditions applicable to the exercise thereof by the Company, and such
assignee or assignees of the Company shall then take and hold any Shares so
acquired subject to such terms as may be specified by the Company in connection
with any such assignment.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have executed this
Restricted Stock Award Agreement as of the date first above written.
STRIDE & ASSOCIATES, INC.
By:
-----------------------
Name:
Title:
GRANTEE:
------------------
Name:
Grantee's Address:
--------------------------
--------------------------
Social Security No.:
-----------------
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Restricted Stock Award Agreement
and understand the contents thereof.
- ------------------------------------
9
<PAGE>
APPENDIX A
ACKNOWLEDGMENT AND JOINDER AGREEMENT
The undersigned hereby acknowledges that the shares of Common Stock, par
value $.01 per share, of Stride & Associates, Inc. (the "Company") acquired from
the transferor are subject to the terms and conditions of that certain
Restricted Stock Award Agreement (the "Agreement") dated as of June 4, 1998 by
and between the Company and the undersigned, including but not limited to a
right of repurchase by the Company and certain restrictions on transfer pursuant
to Sections 3 and 4 thereof. For the purposes of the Agreement, the undersigned
shall be included within the term "Grantee" (as defined in the Agreement) and
the undersigned agrees to bound by all of the obligations applicable to the
Grantee thereunder, including Sections 3 and 4 thereof. The address to which
notices may be sent to the undersigned is as follows:
Address:
--------------------------
--------------------------
--------------------------
Date:
------------------------
---------------------------
Name:
10
<PAGE>
Exhibit 10.7
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT
(issued to Rachel C. Burnett,
John J. Devine, Alan P. Matthews and
Michael C. Robichaud)
UNDER THE STRIDE & ASSOCIATES, INC.
1998 STOCK OPTION AND GRANT PLAN
June 4, 1998
---------------------- --------------------
No. of Shares Date of Grant
Pursuant to the Stride & Associates, Inc. 1998 Stock Option and Grant
Plan (the "Plan"), Stride & Associates, Inc., Inc. (including its successors,
the "Company") hereby grants to ________________ (the "Optionee") an option to
purchase ("Option") prior to the fifth (5th) anniversary of the date of grant
("Date of Grant") of this Option (the "Expiration Date"), at an exercise price
per share of $103.20, all or any of the number of shares of Common Stock, par
value $.01 per share ("Common Stock"), of the Company indicated above (the
"Option Shares"), subject to the terms and conditions set forth herein and in
the Plan. Any terms not defined herein shall have the same meaning defined in
the Plan.
1. FULLY VESTED OPTIONS. This Option is fully vested and exercisable
as of the Date of Grant until the Expiration Date.
2. MANNER OF EXERCISE. The Optionee may exercise this Option from
time to time prior to the Expiration Date, by providing written notice to the
Company of an election to purchase some or all of the Option Shares. Said
notice shall specify the number of Option Shares to be purchased and shall be
accompanied by payment therefor in cash, certified check, bank check or wire
transfer, in U.S. funds, payable to the order of the Company in an amount equal
to the exercise price of such Option Shares. Alternatively, the Optionee may
make payment for the exercise price (a) in the form of Option Shares that have
been beneficially owned by the Optionee for at least six months and with a Fair
Market Value equal to the exercise price or (b) by delivering to the Company a
promissory note in a principal amount equal to the exercise price of such
Option Shares, bearing interest at the applicable federal rate, with a
maturity date of three years from issuance (or earlier upon a sale of the
Option Shares) and secured by the Option Shares or (c) by such other method of
payment permitted under the Plan. No certificates for Option Shares so
purchased will be issued to Optionee until the Company has completed all steps
required by law to be taken in connection with the issue and sale of such
Option Shares.
3. TRANSFERABILITY. This Agreement may be transferred to a Permitted
Transferee (as such term is defined in the Shareholders Agreement dated the date
hereof among the Company, the Optionee and certain other parties signatory
thereto).
4. STATUS OF THE STOCK OPTION. This Option is not intended to qualify
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended.
<PAGE>
5. CONTRACTUAL RESTRICTIONS. The Option acknowledges that the Option
Shares, upon exercise of the Option, shall be bound by the terms of that certain
Shareholders Agreement dated as of June 4, 1998, as amended from time to time,
among the Company and certain holders of its capital stock.
6. LEGEND. Any certificate representing the Option Shares shall carry
the following legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the
corporation is obtained to the effect that such registration
is not required."
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. This Option shall be
subject to adjustment in the event of certain changes of capitalization of the
Company as set forth in Section 3(b) of the Plan; provided, however, that the
number of Option Shares indicated above has been calculated after giving effect
to the 5,000-for-one stock split effected by the Company on June 4, 1998.
8. WITHHOLDING TAXES. The Optionee shall be subject to the tax
withholding obligations as set forth in Section 8 of the Plan.
9. MISCELLANEOUS.
(a) EMPLOYMENT. This Option does not confer upon the Optionee
any rights with respect to continuation of employment by the Company, nor shall
it interfere with any right of the Company to terminate such employment at
anytime.
(b) EQUITABLE RELIEF. The parties hereto agree and declare
that legal remedies are inadequate to enforce the provisions of this Agreement
and that equitable relief, including specific performance and injunctive relief,
may be used to enforce the provisions of this Agreement.
(c) CHANGE AND MODIFICATIONS. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
2
<PAGE>
(e) HEADINGS. The headings are intended only for convenience
in finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(f) SAVING CLAUSE. If any provision(s) of this Agreement shall
be determined to be illegal or unenforceable, such determination shall in no
manner affect the legality or enforceability of any other provision hereof.
(g) NOTICES. All notices, requests, consents and other
communications shall be in writing and be deemed given when delivered
personally, by telex or facsimile transmission or when received if mailed by a
nationally recognized overnight carrier or by first class registered or
certified mail, postage prepaid. Notices to the Company shall be addressed to
its principal offices and to the Optionee as set forth underneath his or her
signature below, or to such other address or addresses as may have been
furnished by such party in writing to the other. Notices to any holder of the
Option Shares other than the Optionee shall be addressed to the address
furnished by such holder to the Company.
(h) BENEFIT AND BINDING EFFECT. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective successors, assigns, legal representatives, estates, executors,
administrators and heirs.
******
3
<PAGE>
The foregoing Option is granted as of the date first written above by
the Company, subject to the terms and conditions contained herein.
STRIDE & ASSOCIATES, INC.
By: -------------------------
Name:
Title:
The foregoing Option is hereby accepted and its terms and conditions
are hereby agreed to as of the date first above written.
OPTIONEE:
-------------------------------
Print Name:
Optionee's Address:
-------------------------------
-------------------------------
Social Security No.:
-----------
4
<PAGE>
Exhibit 10.8
FORM OF
RESTRICTED STOCK AWARD AGREEMENT
(issued to Glen P. Froio,
Bethann G. Gilfeather and other
senior level employees)
(AMENDED AND RESTATED AS OF NOVEMBER 16, 1998)
UNDER THE STRIDE & ASSOCIATES, INC.
1998 STOCK OPTION AND GRANT PLAN
NAME OF GRANTEE:
-----------------------
NO. AND CLASS OF SHARES: SHARES OF COMMON STOCK
-------------------------------
GRANT DATE: JUNE 4, 1998
--------------
PER SHARE PURCHASE PRICE: $ 0.01
---------
Pursuant to the Stride & Associates, Inc. 1998 Stock Option and Grant
Plan (the "Plan"), Stride & Associates, Inc., a Delaware corporation (together
with its successors and assigns, the "Company"), hereby grants, sells and issues
to the person named above (the "Grantee"), who is an officer, employee,
director, consultant, advisor or other key person of the Company or any of its
Subsidiaries (as defined in the Plan), the number of shares of Common Stock, par
value $.01 per share, of the Company indicated above (subject to the provisions
below, the "Shares"), for the per share purchase price specified above, subject
to the terms and conditions set forth herein and in the Plan. The Grantee agrees
to the provisions set forth herein and acknowledges that each such provision is
a material condition of the Company's agreement to issue and sell the Shares to
him or her. All references to amounts herein shall be equitably adjusted to
reflect stock splits (other than the 5,000-for-1 stock split effected by the
Company on June 4, 1998 which has been taken into account in calculating the
number of Shares indicated above), stock dividends, reverse stock splits,
mergers, reorganizations, recapitalizations and similar changes affecting the
capital stock of the Company, and any shares of capital stock of the Company
received on or in respect of Shares in connection with any such event (including
any shares of capital stock or any right, option or warrant to receive the same
or any security convertible into or exchangeable for any such shares or received
upon conversion of any such shares) shall be subject to this Agreement on the
same basis and extent at the relevant time as the Shares in respect of which
they were issued, and shall be deemed Shares as if and to the same extent they
were issued on the Grant Date (as set forth above).
This Restricted Stock Award Agreement amends and restates in its
entirety the Restricted Stock Award Agreement dated June 4, 1998 between the
Company and the Grantee, it being understood that the Company desires to make
such amendments in order to further reward and encourage the Grantee's continued
service with the Company.
For the purposes of this Agreement, the following terms shall have the
following respective meanings:
"ACT" shall mean the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
<PAGE>
"COMMON STOCK" shall mean the Company's Common Stock, par value $.01
per share, together with any shares into which Common Stock may be converted or
exchanged.
"INITIAL PUBLIC OFFERING" shall mean the consummation of the first
fully underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4, S-8, S-14 or S-15
or their then equivalents, covering the offer and sale by the Company of its
Common Stock; or such other event as a result of or following which the
Company's Common Stock shall be publicly traded.
"PERMITTED TRANSFEREES" shall mean the Grantee's spouse, parents,
children (natural or adopted), stepchildren or grandchildren or a trust for
their sole benefit of which the Grantor is the settlor; provided, however, that
any such trust does not require or permit distribution of any Shares during the
term of this Agreement unless such Shares remain subject to the terms of this
Agreement.
"RESTRICTED SHARES" shall mean all of the Shares that are not Vested
Shares.
"SALE EVENT" shall mean any of the following transactions: (i) a
merger, reorganization or consolidation of the Company with or into another
corporation (with respect to which less than a majority of the outstanding
voting power of the surviving or consolidated corporation is held by
shareholders of the Company immediately prior to such event), (ii) the sale or
transfer of all or substantially all of the properties and assets of the Company
and its Subsidiaries, (iii) the sale of all of the outstanding stock of the
Company to an unrelated person or entity or (iv) the liquidation or dissolution
of the Company.
"SHARES" shall mean the number of shares of Common Stock being
purchased by the Grantee on the date hereof and any additional shares of Common
Stock or other securities received as a dividend on, or otherwise on account of,
the Shares, as contemplated by the first paragraph of this Agreement.
"TERMINATION EVENT" shall mean the termination of the Grantee's
employment or Service Relationship (as defined in the Plan) with the Company and
its Subsidiaries "for cause" (as defined in the Plan) or voluntarily by the
Grantee.
"VESTED SHARES" shall mean all Shares that have vested in accordance
with Section 2 hereof.
SECTION 1. PURCHASE AND SALE OF SHARES; INVESTMENT REPRESENTATIONS.
1.1. PURCHASE AND SALE. On the date hereof, the Company hereby sells to
the Grantee, and the Grantee hereby purchases from the Company, the number of
Shares set forth above for the per share purchase price set forth above, payable
in cash or a promissory note acceptable to the Company.
2
<PAGE>
1.2. INVESTMENT REPRESENTATIONS. In connection with the purchase and
sale of the Shares contemplated by Section 1.1 above, the Grantee hereby
represents and warrants to the Company as follows:
(a) The Grantee is purchasing the Shares for his or her own
account for investment only, and not for resale or with a view to the
distribution thereof.
(b) The Grantee has had such opportunity as he has deemed
adequate to obtain from the Company such information as is necessary to permit
him or her to evaluate the merits and risks of the foregoing investment in the
Company and has consulted with his or her own advisers with respect to such
investment in the Company.
(c) The Grantee is either an "accredited investor" as that
term is defined in Rule 501 promulgated under the Act or has sufficient
experience in business, financial and investment matters to be able to evaluate
the risks involved in the purchase of the Shares and to make an informed
investment decision with respect to such purchase.
(d) The Grantee can afford a complete loss of the value of
the Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.
(e) The Grantee understands that the Shares are not
registered under the Act or any applicable state securities or "blue sky" laws
and may not be sold or otherwise transferred or disposed of in the absence of an
effective registration statement under the Act and under any applicable state
securities or "blue sky" laws (or exemptions from the registration requirements
thereof). The Grantee further acknowledges that certificates representing the
Shares will bear restrictive legends reflecting the foregoing.
SECTION 2. VESTING.
2.1. VESTING SCHEDULE. The Shares shall become Vested Shares as
follows; PROVIDED, HOWEVER, that no Shares shall become Vested Shares on or
after the occurrence of any Termination Event unless and until the Company
waives its rights of Repurchase (as defined below) under Section 3 hereof:
Three Year Vesting: 33 1/3% of the Shares shall become Vested
Shares on the first anniversary of the Grant
Date and 8 1/3% of the Shares shall become
Vested Shares at the end of each fiscal
quarter thereafter.
2.2. ACCELERATION OF VESTING SCHEDULE. Notwithstanding the vesting
schedule set forth above in Section 2.1:
(a) Upon consummation of a Sale Event, all of the Restricted
Shares then held by the Grantee shall become Vested Shares automatically at the
time of consummation of such Sale Event in accordance with Section 3(c) of the
Plan;
3
<PAGE>
(b) Upon consummation of an Initial Public Offering, all of
the Restricted Shares then held by the Grantee shall become Vested Shares
automatically at the time of consummation of such Initial Public Offering; and
(c) If Grantee's employment or Service Relationship with the
Company or any of its Subsidiaries is terminated other than as a result of a
Termination Event, then all of the Restricted Shares then held by the Grantee
shall become Vested Shares automatically at the time of such termination.
SECTION 3. REPURCHASE OF RESTRICTED SHARES.
3.1. REPURCHASE RIGHT. Upon the occurrence of a Termination Event, the
Company or its assigns shall have the right to repurchase all or any portion of
the Restricted Shares held by the Grantee as of the date of such Termination
Event at a repurchase price equal to $0.01 per Restricted Share (the "Repurchase
Price"). The purchase and sale arrangements contemplated by this Section 3 are
referred to herein as the "Repurchase."
3.2. CLOSING PROCEDURE. The Company or its assigns shall effect the
Repurchase by delivering or mailing to the Grantee written notice within six (6)
months after the Termination Event, specifying a date within such six-month
period in which the Repurchase shall be effected. Upon such notification, the
Grantee shall promptly surrender to the Company any certificates representing
the Shares being purchased, together with a duly executed stock power for the
transfer of such Shares to the Company or the Company's assignee or assignees.
Upon the Company's or its assignee's receipt of the certificates from the
Grantee, the Company or its assignee or assignees shall deliver to the Grantee a
check for the Repurchase Price of the Restricted Shares being purchased;
provided, however, that the Company may pay the Repurchase Price for such
Restricted Shares by offsetting and canceling any indebtedness then owed by the
Grantee to the Company. At such time, the Grantee shall deliver to the Company
the certificate or certificates representing the Restricted Shares so
repurchased, duly endorsed for transfer, free and clear of any liens or
encumbrances. The Repurchase rights and obligations specified in this Section 3
shall survive and remain in effect as to Restricted Shares following and
notwithstanding any public offering by the Company and certificates representing
such Restricted Shares shall bear legends to such effect
3.3. REMEDY. Without limitation of any other provision of this
Agreement or other rights, in the event that the Grantee is required to sell
his, her or its Restricted Shares pursuant to the provisions of this Section 3
and in the further event that he, she or it refuses or for any reason fails to
deliver to the designated purchaser of such Restricted Shares the certificate or
certificates evidencing such Restricted Shares together with a related stock
power, such designated purchaser may deposit the Repurchase Price for such
Restricted Shares with any bank doing business within fifty (50) miles of the
Company's principal office, or with the Company's independent public accounting
firm, as agent or trustee, or in escrow, for the Grantee, to be held by such
bank or accounting firm for the benefit of and for delivery to him, them or it,
and/or, in the discretion of such bank or accounting firm, pay such Repurchase
Price by offsetting any indebtedness then owed by the Grantee as provided above.
Upon any such deposit and/or offset
4
<PAGE>
by the designated purchaser of such amount and upon notice to the person or
entity who was required to sell the Restricted Shares to be sold pursuant to the
provisions of this Section 3, such Restricted Shares shall at such time be
deemed to have been sold, assigned, transferred and conveyed to such purchaser,
the holder thereof shall have no further rights thereto (other than the right to
withdraw the payment thereof held in escrow, if applicable), and the Company
shall record such transfer in its stock transfer book or in any appropriate
manner.
3.3. ESCROW. In order to carry out the provisions of this Section 3
more effectively, the Company may hold the Restricted Shares in escrow together
with separate stock powers executed by the Grantee in blank for transfer. The
Company shall not dispose of the Restricted Shares except as otherwise provided
in this Agreement. In the event of any Repurchase, the Company is hereby
authorized by the Grantee, as the Grantee's attorney-in-fact, to date and
complete the stock powers necessary for the transfer of the Restricted Shares
being purchased and to transfer such Restricted Shares in accordance with the
terms hereof. At such time as any Shares are no longer Restricted Shares the
Company shall, at the written request of the Grantee, deliver to the Grantee a
certificate representing such Shares with the balance of the Shares, if any, to
be held in escrow pursuant to this Section 3.3.
Section 4. RESTRICTIONS ON TRANSFER OF SHARES.
4.1 NO TRANSFERS UNLESS IN COMPLIANCE WITH LAW AND THIS AGREEMENT.
None of the Shares now owned or hereafter acquired shall be sold, assigned,
transferred, pledged, hypothecated, given away or in any other manner disposed
of or encumbered, whether voluntarily or by operation of law (each, a
"Transfer"), unless such Transfer is in compliance with all foreign, federal and
state securities laws (including, without limitation, the Act), and such
Transfer is in accordance with the terms and conditions of this Section 4. In
connection with any Transfer of Shares, the Company may require an opinion of
counsel to the transferor, satisfactory to the Company, that such Transfer is in
compliance with all foreign, federal and state securities laws (including
without limitation, the Act). No Restricted Shares may be Transferred by the
Grantee.
4.2 TRANSFERS TO PERMITTED TRANSFEREES. Subject to this Section 4.2,
the Grantee may Transfer any or all of the Vested Shares without receipt of
consideration or for such consideration as such holder shall determine to
Permitted Transferees. The Grantee agrees to give the Company prior written
notice of any Transfer of Shares to a Permitted Transferee. No Transfer
permitted hereby shall be effective unless the Permitted Transferee to whom the
Shares are proposed to be transferred has delivered to the Company a written
acknowledgment, in the form of APPENDIX A hereto, that the Shares to be received
by it are and will remain subject to the provisions of this Agreement (including
without limitation, the provisions of this Section 4) and that the Permitted
Transferee is bound hereby and thereby. The restrictions on transfer of Vested
Shares contained in this Section 4.2 shall terminate upon an Initial Public
Offering.
4.3 TRANSFERS UPON DEATH. Upon the death of the Grantee, the Vested
Shares held by the Grantee may be transferred and distributed by will or other
instrument taking effect at his or her death or by the laws of descent and
distribution to the Grantee's estate, executors, administrators and personal
representatives, and then to such holder's heirs, legatees or
5
<PAGE>
distributees whether or not such heirs, legatees or distributees are Permitted
Transferees. No Transfer permitted under this Section 4.3 shall be effective
unless the transferee to whom the Shares are proposed to be transferred pursuant
to this provision has delivered to the Company a written acknowledgment, in the
form of APPENDIX A hereto, that the Shares to be received by it are subject to
the provisions of this Agreement (including without limitation, the provisions
of this Section 4) and that such transferee is bound hereby and thereby. The
restrictions on transfer of Vested Shares contained in this Section 4.3 shall
terminate upon an Initial Public Offering.
4.4. RIGHT OF FIRST REFUSAL. Prior to making any Transfer of Vested
Shares (other than to a Permitted Transferee in accordance with Section 4.2),
the Grantee shall deliver written notice (the "Transfer Notice") to the Company.
The Transfer Notice shall disclose in reasonable detail the identity of the
prospective transferees, the number of shares to be Transferred (the "Offered
Shares") and the terms and conditions of the proposed Transfer. By giving the
Transfer Notice, the Grantee shall be deemed to have granted the Company an
option to purchase the Offered Shares. The Company may purchase all, but not
less than all, of the Offered Shares upon the same terms and conditions as those
set forth in the Transfer Notice by delivering written notice of such election
to the Grantee within 20 days after the receipt of the Transfer Notice by the
Company (the "Election Period"). If the Company has not elected to purchase or
otherwise acquire all of the Offered Shares prior to the expiration of the
Election Period, the Grantee may Transfer such Shares at a price and on terms no
more favorable to the transferees thereof than specified in the Transfer Notice
during the 30-day period immediately following the expiration of the Election
Period (the "Transfer Period"). Any Offered Shares that are not Transferred
within the Transfer Period shall be subject to the provisions of this Section
4.4 upon any subsequent Transfer. If the Company has elected to purchase any
Offered Shares hereunder, the Transfer of such Offered Shares shall be
consummated as soon as practical after the delivery of the election notice to
the Grantee, but in any event within 15 days after the expiration of the
Election Period. The restrictions on transfer of Vested Shares contained in this
Section 4.4 shall terminate upon an Initial Public Offering.
4.5 INVALID TRANSFERS. Any attempted disposition of Shares not in
accordance with the terms and conditions of this Agreement shall be null and
void, and the Company shall not reflect on its records any change in record
ownership of any Shares pursuant to any such disposition, shall otherwise refuse
to recognize any such disposition and shall not in any way give effect to any
such disposition of any Shares.
SECTION 5. LEGEND. Any certificate(s) representing the Shares shall
carry substantially the following legends:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including repurchase rights and transfer
restrictions) contained in a certain Restricted Stock Award
Agreement between the Company and the holder of record of this
certificate (a copy of which is available at the offices of
the Company for examination)."
6
<PAGE>
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the
corporation is obtained to the effect that such registration
is not required."
SECTION 6. WITHHOLDING TAXES. The Grantee acknowledges and agrees that
the Company or any of its Subsidiaries has the right to deduct from payments of
any kind otherwise due to the Grantee, or from the Shares held pursuant to
Section 3.3 hereof, any federal, state or local taxes of any kind required by
law to be withheld with respect to the purchase of the Shares by the Grantee. In
furtherance of the foregoing the Grantee agrees to elect, in accordance with
Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
recognize ordinary income in the year of acquisition of the Shares, and to pay
(or make arrangements with the Company for the payment of) all withholding taxes
shown as due on his or her Section 83(b) election form, or otherwise ultimately
determined to be due with respect to such election, based on the excess, if any,
of the Fair Market Value (as defined in the Plan) of such Shares as of the date
of the purchase of such Shares by the Grantee over the purchase price for such
Shares. In connection therewith, the Company hereby agrees to pay the Grantee a
bonus equal to the amount of income taxes incurred by the Grantee in connection
with the purchase of the Shares and the receipt of the bonus. The bonus amount
shall be applied to pay all withholding or other taxes determined to be due in
connection with the purchase of the Shares and the payment of the bonus.
SECTION 7. OTHER CONTRACTUAL RESTRICTIONS; MARKET STAND-OFF.
7.1. CONTRACTUAL RESTRICTIONS. The Grantee, and to the extent
applicable the Grantee's legal representative or any Permitted Transferee, shall
agree to be bound by, and upon receipt of shares of Stock hereunder to execute
an acknowledgment to, that certain Shareholders' Agreement dated as of June 4,
1998, as amended from time to time, among the Company and certain holders of its
capital stock.
7.2 MARKET STAND-OFF. The Grantee agrees, and to the extent applicable
the Grantee's legal representative or each Permitted Transferee shall agree, if
requested by the Company and any underwriter engaged by the Company, not to sell
or otherwise transfer or dispose of any securities of the Company (including,
without limitation pursuant to Rule 144 under the Act (or any successor or
similar exemptive rule hereafter in effect)) held by him, her or it for such
period following the effective date of any registration statement of the Company
filed under the Act as the Company or such underwriter shall specify reasonably
and in good faith, provided that such period shall not exceed 180 days.
SECTION 8. MISCELLANEOUS PROVISIONS.
8.1. RECORD OWNER; DIVIDENDS. The Grantee and any Permitted
Transferees, during the duration of this Agreement, shall be considered the
record owners of and shall be entitled to vote the Shares. The Grantee and any
Permitted Transferees shall be entitled to receive all dividends
7
<PAGE>
and any other distributions declared on the Shares; provided, however, that the
Company is under no duty to declare any such dividends or to make any such
distribution.
8.2. EQUITABLE RELIEF. The parties hereto agree and declare that legal
remedies are inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
8.3. CHANGE AND MODIFICATIONS. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Grantee.
8.4. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
8.5. HEADINGS. The headings are intended only for convenience in
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
8.6. SAVING CLAUSE. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
8.7. NOTICES. All notices, requests, consents and other communications
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by a nationally recognized
overnight carrier or by first class registered or certified mail, postage
prepaid. Notices to the Company shall be addressed to its principal offices and
to the Grantee as set forth underneath his or her signature below, or to such
other address or addresses as may have been furnished by such party in writing
to the other. Notices to any holder of the Shares other than the Grantee shall
be addressed to the address furnished by such holder to the Company.
8.8. BENEFIT AND BINDING EFFECT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors, assigns, legal representatives, estates, executors, administrators
and heirs. The Company has the right to assign this Agreement, and such assignee
shall become entitled to all the rights of the Company hereunder to the extent
of such assignment.
8.9 ASSIGNMENT OF REPURCHASE RIGHT. At the discretion of the Board of
Directors of the Company, the Company shall have the right to assign the right
to exercise its obligation and rights with respect to the Repurchase to any
person or persons, in whole or in part in any particular instance, upon the same
terms and conditions applicable to the exercise thereof by the Company, and such
assignee or assignees of the Company shall then take and hold any Shares so
acquired subject to such terms as may be specified by the Company in connection
with any such assignment.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have executed this
Restricted Stock Award Agreement as of the date first above written.
STRIDE & ASSOCIATES, INC.
By:
------------------------------
Name:
Title:
GRANTEE:
-----------------------------------
Name:
Grantee's Address:
-----------------------------------
-----------------------------------
Social Security No.: --------------
SPOUSE'S CONSENT
I acknowledge that I have
read the foregoing Restricted
Stock Award Agreement and
understand the contents thereof.
- -----------------------------------------
9
<PAGE>
APPENDIX A
ACKNOWLEDGMENT AND JOINDER AGREEMENT
The undersigned hereby acknowledges that the shares of Common Stock,
par value $.01 per share, of Stride & Associates, Inc. (the "Company") acquired
from the transferor are subject to the terms and conditions of that certain
Restricted Stock Award Agreement (the "Agreement") dated as of June 4, 1998 by
and between the Company and the undersigned, including but not limited to a
right of repurchase by the Company and certain restrictions on transfer pursuant
to Sections 3 and 4 thereof. For the purposes of the Agreement, the undersigned
shall be included within the term "Grantee" (as defined in the Agreement) and
the undersigned agrees to bound by all of the obligations applicable to the
Grantee thereunder, including Sections 3 and 4 thereof. The address to which
notices may be sent to the undersigned is as follows:
Address: _____________________
_____________________
_____________________
Date: _______________
-------------------------------
Name:
10
<PAGE>
Exhibit 10.10
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement") is made and entered into as of the 19th day of March, 1999, by
and between Stride & Associates, Inc., a Delaware corporation (the "Company"),
and Michael Robichaud, an individual residing in Concord, Massachusetts (the
"Executive"), and amends and restates that certain Employment Agreement (the
"June Agreement") made and entered into on June 4, 1998 by and between the
Company and the Executive.
BACKGROUND
On the date of the June Agreement the Company executed that certain
Securities Purchase and Redemption Agreement (the "Securities Purchase
Agreement") by and between the Company, certain shareholders of the Company and
the investors named therein ) the "Investors"). A condition to the obligations
of the Investors under the Securities Purchase Agreement was the execution of
this Agreement by the Executive. The Executive is currently a key employee of
the Company. The Executive and the Company entered into the June Agreement and
to formalize the terms and conditions of the Executive's relationship with the
Company. The Executive is a shareholder of the Company. On the date hereof the
Company and the Executive desire to amend and restate the June Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings unless the context specifically requires otherwise:
1.01 "CAUSE" shall mean only one or more of the following:
(a) the conviction of the Executive of a felony or a crime involving
moral turpitude under any state or federal law (or the entry of a plea of guilty
or no contest by the Executive with respect thereto);
<PAGE>
(b) any willful failure by the Executive to fulfill, in any material
respect, his duties and responsibilities (other than by reason of death or
Disability, as defined below) as set out in Sections 2.01 and 2.03 for a period
of thirty days after written notice of such failure form the Company to the
Executive;
(c) the failure or refusal of the Executive to adhere to any
established lawful policy of the Company for a period of thirty days after
written notice of such failure or refusal from the Company to the Executive;
(d) the commission by the Executive of any (i) fraud, (ii)
embezzlement, or (iii) misappropriation of funds or breach of fiduciary duty or
other act of dishonesty against the Company which, in the case of the actions
described in this clause (iii) results in material harm to the Company; or
(e) any material breach by the Executive of his obligations under the
provision of the Confidentiality and Non-Competition Agreement that continues
for a period of thirty days after written notice thereof from the Company.
1.02 "CONFIDENTIALITY AND NON-COMPETITION AGREEMENT" shall mean the
Confidentiality and Non-Competition Agreement dated the date hereof between the
Company and the Executive which shall be in the form attached hereto as EXHIBIT
A.
1.03 "DISABILITY" shall mean the Executive's inability to perform his
duties, obligations and responsibilities under this Agreement by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.
SECTION II
EMPLOYMENT
2.01 POSITION. Upon the terms and conditions set forth in this
Agreement, the Company agrees to employ the Executive in the capacity of
President and Chief Executive Officer, and the Executive accepts such
employment. In addition, during the Term the Executive shall serve on the Board
of Directors of the Company.
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<PAGE>
2.02 TERM OF EMPLOYMENT. The initial term of Executive's employment
shall be for a period of three (3) years commencing on June 4, 1998 (the
"Term"), unless earlier terminated pursuant to Section 4.01.
2.03 DUTIES.
(a) The Executive shall have the responsibility and authority to
manage the operations of the Company on a daily basis, together with such other
duties and responsibilities as shall be prescribed from time to time by the
Board of Directors consistent with the foregoing. During the Term commencing on
the date of this Agreement, the Executive shall devote substantially all of his
working time, attention and energy during normal working hours to the affairs of
the Company; provided, however, that nothing shall restrict the Executive's
ability to engage in religious, charitable or other community or non-profit
activities that do not impair his ability to fulfill his duties under this
Agreement.
(b) During the Term, the Executive shall perform his duties to the
best of his ability, pursuant to the policies and regulations of the Company,
and shall use his best efforts to promote the success of the present and future
businesses of the Company.
2.04 CONFIDENTIALITY AND NON-COMPETITION AGREEMENT. As a condition to
the Executive's employment hereunder, the Executive shall execute and deliver to
the Company the Confidentiality and Non-Competition Agreement substantially in
the form of EXHIBIT A hereto, and shall fulfill his obligations set forth
therein.
SECTION III
COMPENSATION AND RELATED MATTERS
3.01 COMPENSATION.
(a) The Executive will receive a salary from the Company for his
services under this Agreement at an annual rate of $400,000, paid in accordance
with the Company's normal payroll practices.
(b) At the end of each fiscal year during the term of this
Agreement the Executive shall be eligible to receive an annual incentive
bonus in an amount determined by the Compensation Committee of the Board of
Directors or, if no such committee exists, the Board of Directors in the
event the Company's financial performance, as reflected in the Company's
audited financial statements for such fiscal year, meets performance
objectives set by the Compensation Committee of the Board of Directors or, if
no such committee exists, the Board of Directors from time to time during the
term of the Agreement.
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<PAGE>
3.02 EXPENSES. The Company will reimburse the Executive for his
reasonable out-of-pocket expenses, subject to delivery of appropriate
documentation, incurred in connection with the performance of services
hereunder.
3.03 BENEFITS. The Executive will, at all times during his employment
with the Company, be entitled to participate in all hospital, health and
accident insurance programs and other routine employee benefits maintained by
the Company for its other similarly situated employees. Included in such
benefits shall be six weeks of vacation per year and $1,000,000 of life
insurance; provided that the Company shall be required to provide such life
insurance only so long as the premiums payable with respect thereto are within a
normal range for individuals of the same age as the Executive.
SECTION IV
TERMINATION
4.01 TERMINATION. Notwithstanding the provisions of Section 2.02, the
Executive's employment under this Agreement may be terminated prior to
expiration of the Term under the following circumstances:
(a) TERMINATION BY THE COMPANY FOR CAUSE. The Executive's
employment under this Agreement may be terminated for Cause without further
liability on the part of the Company effective immediately upon a vote of the
Board of Directors and written notice to the Executive.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. Subject to the
payment of Termination Benefits pursuant to Section 4.02, the Executive's
employment under this Agreement may be terminated by the Company without Cause
upon written notice to the Executive by a vote of the Board of Directors;
provided that the Company may not terminate without Cause prior to the first
anniversary of the date of execution of this Agreement.
(c) TERMINATION UPON DEATH OR DISABILITY. Subject to the
payment of Termination Benefits pursuant to Section 4.02, the Executive's
employment under this Agreement (i) may be terminated by the Company upon the
Disability of the Executive after prior written notice to the Executive by a
vote of the Board of Directors or (ii) automatically without notice upon the
death of the Executive.
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<PAGE>
(d) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The
Executive may terminate his employment with the Company for Good Reason and
shall be entitled to receive the Termination Benefits pursuant to Section 4.02.
Good Reason shall be the occurrence of any of the following events:
(i) a significant change in the Executive's
responsibilities and/or duties which constitutes, when
compared to the Executive's responsibilities and/or his duties
before change, a demotion which chance continues for a period
of thirty days after written notice from the Executive;
(ii) a material loss of title or office; or
(iii) the relocation of the Company's current Boston
office at which the Executive is principally employed to a
location more than thirty (30) miles from such Boston office,
which relocation is not approved by the Executive.
(e) TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON.
The Executive's employment under this Agreement may be terminated by the
Executive for any reason other than Good Reason by written notice to the Board
of Directors at least thirty (30) days prior to such termination.
4.02 PAYMENT ON TERMINATION. Upon termination hereunder the Executive
shall not be required to seek other employment, nor shall any compensation paid
by any other employer reduce the severance benefit payable to the Executive
pursuant to this Section 4.02. The Executive shall not be entitled to any
severance benefit from the Company in the event of termination of the
Executive's employment by the Company (a) for Cause, (b) upon disability, (c)
upon the Executive's death, or (d) upon expiration of the term of this
Agreement. In the event the Executive's employment hereunder is terminated by
the Company for Cause, the Executive shall not be eligible for any part of the
bonus payable pursuant to Section 3.01(b) hereof. Payment of severance under
this Section 4.02 shall constitute liquidated damages and the sole and exclusive
remedy available to the Executive upon termination of his employment for any and
all claims the Executive may have against the Company, its directors, its
officers, and controlling persons. Unless otherwise specifically provided in
this Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date of
termination of the Executive's employment under this Agreement, provided that
upon termination for any reason other than pursuant to Section 4.01(a), the
Company shall provide to the Executive (or his estate or other legal
representatives, as the case may be) any accrued but unpaid compensation and
benefits through the date of termination (including, without limitation any pro
rated cash bonus payable under Section 3.01(b)). Notwithstanding the foregoing,
in the event of termination of the Executive's employment with the Company
pursuant to Section 4.01(b) or (d) above, the Company shall
- 5 -
<PAGE>
also provide to the Executive the following termination benefits (collectively,
"Termination Benefits") for a period of time equal to twelve (12) months
following termination:
(a) continuation of the Executive's Salary at the rate then
in effect pursuant to Section 3.01(a); and
(b) continuation of hospital, health and insurance
benefits, with the cost of the regular premium for such benefits paid by the
Company.
4.03 NON-RENEWAL. If the Executive continues his employment beyond the
Term without reaching agreement on an extension of this Agreement or an new
employment agreement and the Executive's employment is terminated other than for
Cause, the Company shall pay to the Executive the severance benefits specified
in Section 4.02 for a six-month period commencing on such termination.
SECTION V
MISCELLANEOUS
5.01 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts without giving
effect to its conflict of laws principles.
5.02 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the Company and the Executive with respect to his employment
with the Company and supersedes all prior agreements relating to the same
subject matter, including any prior employment agreement between the Executive
and the Company or any of its subsidiaries. This Agreement cannot be amended,
changed or supplemented except in writing signed by the parties or their duly
authorized agents or attorneys in fact.
5.03 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, successors and permitted assigns.
5.04 ASSIGNMENT. This Agreement is nonassignable except that the
Company's rights, duties and obligations under this Agreement may be assigned
and delegated to any subsidiary or affiliate of the Company or to the acquiror
of the Company pursuant to merger, sale of stock or substantially all the assets
of the Company.
5.05 SEVERABILITY. If any one or more of the provisions of this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity,
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<PAGE>
legality and enforceability of any such provision in every other respect and the
remaining provisions of this Agreement shall not in any way be impaired.
5.06 NOTICES. All notices, requests, demands and other communications
under or in connection with this Agreement shall be in writing, shall be sent by
registered or certified mail, return receipt requested and shall be deemed to
have been given or made when received at the following offices:
If to the Company: Stride & Associates, Inc.
222 Berkeley Street, Suite 1620
Boston, Massachusetts 02116
Attention:
If to the Executive: Mr. Michael Robichaud
45 Bronson Way
Concord, Massachusetts 01742
The above addresses may be changed by written notice given as above provided.
5.07 CONSENT TO JURISDICTION. Each of the Company and the Executive, by
its or his execution hereof, (i) hereby irrevocably submits to the exclusive
jurisdiction of the state courts of The Commonwealth of Massachusetts for the
purpose of any claim or action arising out of or based upon this Agreement or
relating to the subject matter hereof, (ii) hereby waives, to the extent not
prohibited by applicable law, and agrees not to assert by way of motion, as a
defense or otherwise, in any such claim or action, any claim that is not subject
personally to the jurisdiction of the above-named courts, that its or his
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named court is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and (iii)
hereby agrees not to commence any claim or action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before the
above-named courts nor to make any motion or take any other action seeking or
intending to cause the transfer or removal of any such claim or action to any
court other than the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each of the Company and the Executive hereby consents to
service of process in any such proceeding in any manner permitted by
Massachusetts law, and agrees that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant to Section
5.06 hereof is reasonably calculated to give actual notice.
5.08 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will take effect as an original and all of which
will evidence one and the same agreement.
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<PAGE>
5.09 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
- 8 -
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties as
an instrument under SEAL as of the date first appearing above.
THE COMPANY:
Stride & Associates, Inc.
By: /s/ Anthony J. M. Groves
------------------------------
Name: Anthony J. M. Groves
Title: Chief Financial Officer
EXECUTIVE:
/s/ Michael Robichaud
------------------------------
Michael Robichaud
- 9 -
<PAGE>
Exhibit 10.11
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION FROM SUCH REGISTRATION.
PROMISSORY NOTE
July 14, 1998
US$160,001.28
FOR VALUE RECEIVED, the undersigned ("Debtor") hereby promises to pay to
Stride & Associates, Inc., a Delaware corporation ("Payee"), at such place or
places as may be specified by Payee or any holder hereof, in legal tender of the
United States of America, the principal amount of $160,001.28 (the "Principal"),
with interest at the rate of 6.00% per annum, compounded annually, on the unpaid
balance. Interest shall accrue commencing on the date hereof and shall be due
and payable in full at the Repayment Date (as hereinafter defined). The Debtor
shall pay to Payee, within ten (10) days after receipt thereof, the net
after-tax proceeds from any sale by the Debtor of the shares ("Shares") of
Common Stock, par value $.01 per share, of Stride & Associates, Inc. in
reduction of the Principal and accrued interest thereon until such time as such
Principal and interest have been repaid in full, and in connection with each
such payment shall pay accrued but unpaid interest on the amount so prepaid. For
purposes hereof, net after-tax proceeds refers to the amount received by the
Debtor upon any sale of such Shares, less brokerage commissions or underwriting
discounts, other expenses of every kind, including documentary, excise and other
taxes, if any, directly relating to the sale and an amount equal to the federal,
state and local taxes on any gain from such sale (as determined by multiplying
the amount of such gain by the combined maximum federal, state and local tax
rate applicable to the sale of such Shares by the Debtor, taking into account
the holding period for such Shares and any federal income tax deduction for
state and local income taxes). In any event, any Principal then unpaid shall be
due and payable, with accrued interest thereon, on the fourth (4th) anniversary
of date hereof (the "Repayment Date").
This Note is subject to the terms of and the payment hereof is secured by
a certain Pledge Agreement dated as of the date hereof by and between Debtor and
Payee (the "Pledge Agreement").
In case an Event of Default, as defined in the Pledge Agreement, shall
occur, the aggregate unpaid balance of Principal and accrued interest thereon
may be declared to be due and payable in the manner and with the effect provided
in the Pledge Agreement. The obligation of the undersigned Debtor to pay the
Recourse Amount (as hereinafter defined) shall
<PAGE>
be absolute and unconditional, and the Payee shall have full recourse against
the Debtor's assets (including, but not limited to, the collateral pledged
pursuant to the Pledge Agreement) to recover the Recourse Amount. The Recourse
Amount as of any time shall mean 25% of the Principal reduced by 25% of each
payment of Principal made by or on behalf of the Debtor from any source. With
respect to amounts due and payable hereunder in excess of the Recourse Amount,
the Payee shall have no recourse against the Debtor or any of his assets other
than the collateral pledged pursuant to the Pledge Agreement, and Payee shall
look only to its rights as provided in the Pledge Agreement for the repayment of
amounts in excess of the Recourse Amount.
Debtor may discharge the obligations undertaken hereby, at any time, by
repaying the outstanding Principal and accrued interest thereon, without
penalty. Debtor may, without penalty, make a partial prepayment of Principal
and/or accrued interest thereon in any amount at any time and may thereby reduce
any required future payment hereunder by the amount of such prepayment.
Debtor expressly waives presentment for payment, protest and demand,
notice of protest, demand and dishonor and expressly agrees that this Note may
be extended from time to time without in any way affecting the liability of
Debtor. No delay or omission on the part of Payee in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
This Note may from time to time be extended by Payee, with or without
notice to Debtor, and any related right may be waived, exchanged, surrendered or
otherwise dealt with, all without affecting the liability of Debtor, in each
case in the sole discretion of Payee.
This Note may be changed, modified or terminated only by an agreement
in writing that is signed by the Debtor and Payee. This Note shall be governed
by and construed in accordance with the laws of The Commonwealth of
Massachusetts, and shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns.
DEBTOR:
/s/ Anthony Groves
---------------------
Name: Anthony Groves
2
<PAGE>
Exhibit 10.12
SUBORDINATED DEBENTURE
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES LAWS OF ANY
STATE. THIS DEBENTURE MAY NOT BE TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR
OTHERWISE UNLESS (i) A REGISTRATION STATEMENT FOR THE DEBENTURES UNDER THE ACT
IS IN EFFECT OR (ii) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, WHICH
OPINION IS REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR THE SECURITIES LAWS OF ANY STATE.
THIS DEBENTURE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE
MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND
INTERCREDITOR AGREEMENT (THE "SUBORDINATION AGREEMENT"), DATED AS OF JUNE 4,
1998, AMONG THE COMPANY, BANKBOSTON, N.A. AS AGENT ("BANK"), SUMMIT SUBORDINATED
DEBT FUND II, L.P. AND SUMMIT INVESTORS III, L.P. TO THE INDEBTEDNESS (INCLUDING
INTEREST) OWED BY THE COMPANY TO THE BANK PURSUANT TO THE REVOLVING CREDIT AND
TERM LOAN AGREEMENT, DATED AS OF JUNE 4, 1998, BETWEEN THE COMPANY AND THE BANK
(AS AMENDED , SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME AND IN
EFFECT) AND EACH HOLDER OF THIS DEBENTURE BY ITS ACCEPTANCE HEREOF, SHALL BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
Subordinated Debenture
Due August 4, 2003
$97,539 June 4, 1998
No. D-1
FOR VALUE RECEIVED, Stride & Associates, Inc., a Delaware corporation (the
"Company"), hereby promises to pay to Summit Investors III, L.P., a Delaware
limited partnership, or its registered assigns, the sum of Ninenty Seven
Thousand Five Hundred Thirty Nine Dollars ($97,539) on August 4, 2003, together
with interest, computed on the basis of the actual number of days elapsed over a
365-day year, on the unpaid principal balance hereof until paid in full at the
Applicable Interest Rate (as defined below) from the date hereof, payable in
cash quarterly in arrears on the last day of each of March, June, September, and
December of each year during which any amounts due hereunder remain outstanding,
commencing on June 30, 1998, and until such unpaid balance becomes due and
payable (whether at maturity or at a date fixed for mandatory or optional
redemption or prepayment or by acceleration or otherwise).
<PAGE>
The "Applicable Interest Rate" shall mean the rate of twelve percent (12%)
per annum completed on the basis of a 365-day year and the actual number of days
elapsed or, during the continuance of an Event of Default (as defined in the
Agreement), fourteen percent (14%) per annum.
All payments of principal (including any prepayments or redemptions) and
interest hereunder shall be made by the Company in lawful money of the United
States of America in immediately available federal funds not later than 2:00
p.m., Boston, Massachusetts, time, on the date each such payment is due, by
crediting an account in the United States as the holder of this Debenture may
designate in writing to the Company before the scheduled payment date.
This Debenture is one of a duly authorized issuance of two (2) Debentures
of the Company designated as its "Subordinated Debentures due August 4, 2003"
(herein called the "Debentures"), in the aggregate principal amount of
$10,000,000 and issued under a Securities Purchase and Redemption Agreement,
dated as of June 4, 1998 (herein called the "Agreement"), among the Company, and
the investors and shareholders of the Company named therein, to which Agreement
and all agreements supplemental thereto reference is hereby made for a statement
of the respective rights and duties thereunder of the Company and the holders of
the Debentures, and the terms upon which the Debentures are, and are to be,
delivered.
The principal of this Debenture is subject to mandatory and optional
prepayment, together with accrued interest, all as more particularly set forth
in the Agreement.
Notwithstanding anything herein contained to the contrary, the indebtedness
evidenced by the Debenture is, to the extent provided in the Subordination
Agreement, subordinate and subject in right of payment to the prior payment in
full of all Senior Debt (as defined in the Subordination Agreement), and this
Debenture is issued subject to such provisions, and each holder of Debentures,
by accepting the same, agrees to and shall be bound by such provisions and
agrees to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Agreement.
In case an Event of Default, as defined in the Agreement, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, immediately due and payable,
in the manner, with the effect and subject to the conditions provided in the
Agreement. The Agreement provides that such declaration may in certain events be
rescinded or annulled by the holders of a majority in principal amount of the
Debentures then outstanding.
No reference herein to the Agreement and no provisions of this Debenture or
of the Agreement shall alter or impair the obligation of the Company, which,
subject to the terms of the Subordination Agreement, is absolute and
unconditional, to pay the principal of and interest on this Debenture at the
times, places, and rates, and in the coin or currency, herein prescribed.
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As is more fully set forth in the Agreement, this Debenture is transferable
by the registered owner hereof, in person or by duly authorized attorney, on the
books of the Company to be kept for that purpose, upon surrender and
cancellation of this Debenture and upon presentation of a duly executed written
instrument of transfer satisfactory to the Company, and thereupon a new
Debenture or Debentures, of the same aggregate principal amount and in
authorized denominations, will be issued to the transferee or transferees in
exchange therefor; and this Debenture, with or without other Debentures may in
like manner be exchanged for one or more new Debentures of other authorized
denominations but of the same aggregate principal amount, all subject to the
terms and conditions set forth in the Agreement. Any such transfer or exchange
shall be without charge by the Company.
All terms used in this Debenture which are defined in the Agreement shall
have the meanings assigned to them in the Agreement.
This Debenture shall be deemed to be a contract made under the laws of The
Commonwealth of Massachusetts and shall for all purposes be construed in
accordance with the laws of said Commonwealth without giving effect to the
conflicts of laws provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed as an instrument under seal.
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichaud
-------------------------------------
Name: Michael Robichaud
Title: President
- 3 -
<PAGE>
Exhibit 10.13
SUBORDINATED DEBENTURE
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES LAWS OF ANY
STATE. THIS DEBENTURE MAY NOT BE TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR
OTHERWISE UNLESS (i) A REGISTRATION STATEMENT FOR THE DEBENTURES UNDER THE
ACT IS IN EFFECT OR (ii) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR THE SECURITIES LAWS OF ANY
STATE.
THIS DEBENTURE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE
MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND
INTERCREDITOR AGREEMENT (THE "SUBORDINATION AGREEMENT"), DATED AS OF JUNE 4,
1998, AMONG THE COMPANY, BANKBOSTON, N.A. AS AGENT ("BANK"), SUMMIT
SUBORDINATED DEBT FUND II, L.P. AND SUMMIT INVESTORS III,L.P. TO THE
INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE COMPANY TO THE COMPANY TO THE
BANK PURSUANT TO THE REVOLVING CREDIT AND TERM LOAN AGREEMENT, DATED AS OF
JUNE 4, 1998, BETWEEN THE COMPANY AND THE BANK (AS AMENDED, SUPPLEMENTED OR
OTHERWISE MODIFIED FROM TIME TO TIME AND IN EFFECT) AND EACH HOLDER OF THIS
DEBENTURE BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE
SUBORDINATION AGREEMENT.
Subordinated Debenture
Due August 4, 2003
$9,902,461 June 4, 1998
No. D-2
FOR VALUE RECEIVED, Stride & Associates, Inc., a Delaware corporation
(the "Company"), hereby promises to pay to Summit Subordinated Debt Fund II,
L.P., a Delaware limited partnership, or its registered assigns, the sum of
Nine Million Nine Hundred Two Thousand Four Hundred Sixty One Dollars
($9,902,461) on August 4, 2003, together with interest, computed on the
basis of the actual number of days elapsed over a 365-day year, on the unpaid
principal balance hereof until paid in full at the Applicable Interest Rate
(as defined below) from the date hereof, payable in cash quarterly in arrears
on the last day of each of March, June, September, and December of each year
during which any amounts due hereunder remain outstanding, commencing on
June 30, 1998, and until such unpaid balance becomes due and payable (whether
at maturity or at a date fixed for mandatory or optional redemption or
prepayment or by acceleration or otherwise).
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The "Applicable Interest Rate" shall mean the rate of twelve percent
(12%) per annum completed on the basis of a 365-day year and the actual
number of days elapsed or, during the continuance of an Event of Default (as
defined in the Agreement), fourteen percent (14%) per annum.
All payments of principal (including any prepayments or redemptions) and
interest hereunder shall be made by the Company in lawful money of the United
States of America in immediately available federal funds not later than
2:00 p.m., Boston, Massachusetts, time, on the date each such payment is due,
by crediting an account in the United States as the holder of this Debenture
may designate in writing to the Company before the scheduled payment date.
This Debenture is one of a duly authorized issuance of two (2)
Debentures of the Company designated as its "Subordinated Debentures due
August 4, 2003" (herein called the "Debentures"), in the aggregate principal
amount of $10,000,000 and issued under a Securities Purchase and
Redemption Agreement, dated as of June 4, 1998 (herein called the
"Agreement"), among the Company, and the investors and shareholders of the
Company named therein, to which Agreement and all agreements supplemental
thereto reference is hereby made for a statement of the respective rights and
duties thereunder of the Company and the holders of the Debentures, and the
terms upon which the Debentures are, and are to be, delivered.
The principal of this Debenture is subject to mandatory and optional
prepayment, together with accrued interest, all as more particularly set
forth in the Agreement.
Notwithstanding anything herein contained to the contrary, the
indebtedness evidenced by the Debenture is, to the extent provided in the
Subordination Agreement, subordinate and subject in right of payment to the
prior payment in full of all Senior Debt (as defined in the Subordination
Agreement), and this Debenture is issued subject to such provisions, and each
holder of Debentures, by accepting the same, agrees to and shall be bound by
such provisions and agrees to take such action as may be neccesary or
appropriate to effectuate the subordination as provided in the Agreement.
In case an Event of Default, as defined in the Agreement, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, immediately due and
payable, in the manner, with the effect and subject to the conditions
provided in the Agreement. The Agreement provides that such declaration may in
certain events be rescinded or annulled by the holders of a majority in
principal amount of the Debentures then outstanding.
No reference herein to the Agreement and no provisions of this Debenture
or of the Agreement shall alter or impair the obligation of the Company,
which, subject to the terms of the Subordination Agreement, is absolute and
unconditional, to pay the principal of and interest on this Debenture at the
times, places, and rates, and in the coin or currency, herein prescribed.
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As is more fully set forth in the Agreement, this Debenture is
transferable by the registered owner hereof, in person or by duly authorized
attorney, on the books of the Company to be kept for that purpose, upon
surrender and cancellation of this Debenture and upon presentation of a duly
executed written instrument of transfer satisfactory to the Company, and
thereupon a new Debenture or Debentures, of the same aggregate principal
amount and in authorized denominations, will be issued to the transferee or
transferees in exchange therefor; and this Debenture, with or without other
Debentures may in like manner be exchanged for one or more new Debentures of
other authorized denominations but of the same aggregate principal amount,
all subject to the terms and conditions set forth in the Agreement. Any such
transfer or exchange shall be without charge by the Company.
All terms used in this Debenture which are defined in the Agreement
shall have the meanings assigned to them in the Agreement.
This Debenture shall be deemed to be a contract made under the laws of
the Commonwealth of Massachusetts and shall for all purposes be construed in
accordance with the laws of said Commonwealth without giving effect to the
conflicts of laws provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed as an instrument under seal.
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichand
---------------------------
Name: Michael Robichand
Title: President
3
<PAGE>
EXHIBIT 10.18
SUBORDINATION AND INTERCREDITOR AGREEMENT
SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement"), dated as of
June 4, 1998, among BANKBOSTON, N.A., a national banking association having its
head office at 100 Federal Street, Boston, Massachusetts 02110, in its capacity
as agent (the "Agent") for the Banks (as hereinafter defined), SUMMIT INVESTORS
III, L.P., a Delaware limited partnership having its head office at 600 Atlantic
Avenue, Boston, Massachusetts 02110 ("Summit Investors"), SUMMIT SUBORDINATED
DEBT FUND II, L.P., a Delaware limited partnership having its head office at 600
Atlantic Avenue, Boston, Massachusetts 02110 ("Summit Subdebt", and together
with Summit Investors, collectively referred to herein as the "Subordinating
Creditors" and each individually a "Subordinating Creditor"), and STRIDE &
ASSOCIATES, INC., a Delaware corporation having its head office at 222 Berkeley
Street, Suite 1620, Boston, Massachusetts 02116 (the "Borrower").
WHEREAS, pursuant to a Revolving Credit and Term Loan Agreement dated as
of June 4, 1998 (as amended and in effect from time to time, including any
replacement agreement therefor, the "Credit Agreement"), among the lending
institutions party thereto (the "Banks"), the Agent and the Borrower, the Banks
have agreed, upon the terms and subject to the conditions contained therein, to
make loans and otherwise extend credit to the Borrower; and
WHEREAS, each Subordinating Creditor has extended credit to the Borrower
pursuant to a certain Securities Purchase and Redemption Agreement dated as of
June 4, 1998 (as amended with the consent of the Agent as provided herein and in
effect from time to time, the "Subordinated Debenture"), among the Subordinating
Creditors and the Borrower; and
WHEREAS, it is a condition precedent to the Banks' willingness to make
loans and otherwise extend credit to the Borrower pursuant to the Credit
Agreement that the Borrower and each Subordinating Creditor enter into this
Agreement with the Agent; and
WHEREAS, in order to induce the Banks to make loans and otherwise extend
credit to the Borrower pursuant to the Credit Agreement, the Borrower and each
Subordinating Creditor have agreed to enter into this Agreement with the Agent;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. DEFINITIONS. Terms not otherwise defined herein have the same
respective meanings given to them in the Credit Agreement. In addition, the
following terms shall have the following meanings:
SENIOR DEBT. All principal, interest, fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses and
other
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reimbursement or indemnity obligations created or evidenced by the Credit
Agreement or any of the other Loan Documents or any prior, concurrent, or
subsequent notes, instruments or agreements of indebtedness, liabilities or
obligations of any type or form whatsoever relating thereto in favor of the
Agent or any of the Banks. Senior Debt shall expressly include any and all
interest accruing or out of pocket costs or expenses incurred after the date of
any filing by or against the Borrower of any petition under the federal
Bankruptcy Code or any other bankruptcy, insolvency or reorganization act
regardless of whether the Agent's or any Bank's claim therefor is allowed or
allowable in the case or proceeding relating thereto.
SUBORDINATED DEBT. All principal, interest, fees, costs, enforcement
expenses (including legal fees and disbursements), collateral protection
expenses and other reimbursement and indemnity obligations created or evidenced
by the Subordinated Debenture (including the Subordinated Notes as such term is
defined in the Credit Agreement) or any prior, concurrent or subsequent notes,
instruments or agreements of indebtedness, liabilities or obligations of any
type or form whatsoever relating thereto in favor of the Subordinating
Creditors.
SUBORDINATED DOCUMENTS. Collectively, the Subordinated Debenture, any
promissory notes executed in connection therewith and any and all guaranties and
security interests, mortgages and other liens directly or indirectly guarantying
or securing any of the Subordinated Debt, and any and all other documents or
instruments evidencing or further guarantying or securing directly or indirectly
any of the Subordinated Debt, whether now existing or hereafter created.
2. GENERAL. The Subordinated Debt and any and all Subordinated Documents
shall be and hereby are subordinated and the payment thereof is deferred until
the full and final payment in cash of the Senior Debt, whether now or hereafter
incurred or owed by the Borrower. Notwithstanding the immediately preceding
sentence, the Borrower shall be permitted to pay, and each Subordinating
Creditor shall be permitted to receive the following:
(a) any regularly scheduled payment of interest on the Subordinated
Debt subject to the following limitations:
(i) Upon the occurrence of any failure by the Borrower to pay
any principal of or premium, if any, or any interest on any
Obligation or any fee or other amount owing to any holder of the
Senior Debt when the same becomes due and payable, whether at
maturity or a date fixed for the payment of any installment or
prepayment thereof or by declaration or acceleration or otherwise
(but after giving effect to any applicable grace periods so provided
in the Credit Agreement) (hereinafter referred to as a "Payment
Default"), no payment shall be made on the Subordinated Debt until
the earlier to occur of (x) the date on which all Payment Defaults
have been cured or waived by the holders of the Senior Debt in
writing or (y) payment in full in cash of the Senior
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<PAGE>
Debt, the discharge of all Indebtedness and other Obligations under
the Credit Agreement and the permanent reduction of all Commitments
thereunder to zero;
(ii) If an Event of Default other than a Payment Default shall
have occurred, no payment of interest on the Subordinated Debt shall
be made for a period (the "Blockage Period") of time commencing upon
delivery by the Agent to the Borrower and the holders of the
Subordinated Debt of written notice specifying the Event of Default
(the "Blockage Notice") and continuing until the earlier to occur of
(A) 180 days from the date of delivery of the Blockage Notice, or
(B) the date on which all such Events of Default described in the
Blockage Notice have been cured or waived by the holders of the
Senior Debt in writing, PROVIDED that if such Event of Default is
waived by holders of the Senior Debt under the Credit Agreement or
is cured and any other Event of Default occurs or shall have
occurred then no payments shall be permitted under the foregoing
provisions of this paragraph (ii) until the expiration of 180 days
after receipt by the holders of the Subordinated Debt of written
notice from the Agent of such other Event of Default (or until the
cure thereof or waiver thereof by the holders of the Senior Debt if
such cure thereof or waiver occurs during such 180 day period).
Notwithstanding anything to the contrary contained herein, the
holders of the Senior Debt shall not be entitled to block payments
pursuant to any Blockage Notice delivered hereunder for more than
180 days during any 360 day period.
(iii) If any holder of Subordinated Debt receives payment from
the Borrower, such payment shall be deemed to constitute a
representation of the Borrower to the holders of the Senior Debt
that no Event of Default exists or would exist as a result of such
payment of interest, and that such payment is permitted to be paid
by the Borrower under this Agreement. In addition, the holders of
the Subordinated Debt shall be entitled to keep and retain such
payment unless the Agent shall have notified the holders of the
Subordinated Debt than an Event of Default in fact existed on the
date of such payment, in which case the holders of the Subordinated
Debt shall forthwith deliver such payment or an amount of cash equal
thereto to the Agent for application in payment of the Senior Debt;
provided that notwithstanding the foregoing, the holders of the
Senior Debt shall not be entitled to recover any such payment if (1)
such Event of Default was known to holders of the Senior Debt prior
to the time of such payment actually having been made and (2) the
holders of the Senior Debt did not send a Blockage Notice or
otherwise request such amounts be turned over pursuant to the terms
hereof within thirty (30) days after having been paid to the holders
of the Subordinated Debt; and
(b) any payments of principal on the Subordinated Debt that are
expressly permitted to be made under the Credit Agreement.
3
<PAGE>
3. ENFORCEMENT. No Subordinating Creditor will take or omit to take any
action or assert any claim with respect to the Subordinated Debt or otherwise
which is inconsistent with the provisions of this Agreement. Without limiting
the foregoing, no Subordinating Creditor will assert, collect or enforce the
Subordinated Debt or any part thereof or take any action to foreclose or realize
upon the Subordinated Debt or any part thereof or enforce any of the
Subordinated Documents except (a) in each such case as necessary, so long as no
Event of Default has occurred and is then continuing under the Credit Agreement
or would occur after giving effect thereto, to collect any sums expressly
permitted to be paid by the Borrower pursuant to Section 2, or (b) to the
extent (but only to such extent) that the commencement of a legal action may
be required to toll the running of any applicable statute of limitation.
Until the Senior Debt has been finally paid in full in cash, no Subordinating
Creditor shall have any right of subrogation, reimbursement, restitution,
contribution or indemnity whatsoever from any assets of the Borrower or any
guarantor of or provider of collateral security for the Senior Debt. The
Subordinating Creditor further waives any and all rights with respect to
marshalling.
4. PAYMENTS HELD IN TRUST. Each Subordinating Creditor will hold in trust
and immediately pay over to the Agent for the account of the Banks and the
Agent, in the same form of payment received, with appropriate endorsements, for
application to the Senior Debt any cash amount that the Borrower pays to such
Subordinating Creditor with respect to the Subordinated Debt, or as collateral
for the Senior Debt any other assets of the Borrower that such Subordinating
Creditor may receive with respect to the Subordinated Debt, in each case except
with respect to payments expressly permitted pursuant to Section 2.
5. DEFENSE TO ENFORCEMENT. If any Subordinating Creditor, in contravention
of the terms of this Agreement, shall commence, prosecute or participate in any
suit, action or proceeding against the Borrower, then the Borrower may interpose
as a defense or plea the making of this Agreement, and the Agent or any Bank may
intervene and interpose such defense or plea in its name or in the name of the
Borrower. If any Subordinating Creditor, in contravention of the terms of this
Agreement, shall attempt to collect any of the Subordinated Debt or enforce any
of the Subordinated Documents, then the Agent, any Bank or the Borrower may, by
virtue of this Agreement, restrain the enforcement thereof in the name of the
Agent or such Bank or in the name of the Borrower. If any Subordinating
Creditor, in contravention of the terms of this Agreement, obtains any cash or
other assets of the Borrower as a result of any administrative, legal or
equitable actions, or otherwise, such Subordinating Creditor agrees forthwith to
pay, deliver and assign to the Agent, for the account of the Banks and the
Agent, with appropriate endorsements, any such cash for application to the
Senior Debt and any such other assets as collateral for the Senior Debt.
6. BANKRUPTCY, ETC.
6.1 PAYMENTS RELATING TO SUBORDINATED DEBT. At any meeting of creditors of
the Borrower or in the event of any case or proceeding, voluntary or
involuntary, for the distribution, division or application of all or part of the
assets of the Borrower or the proceeds
4
<PAGE>
thereof, whether such case or proceeding be for the liquidation, dissolution or
winding up of the Borrower or its business, a receivership, insolvency or
bankruptcy case or proceeding, an assignment for the benefit of creditors or a
proceeding by or against the Borrower for relief under the federal Bankruptcy
Code or any other bankruptcy, reorganization or insolvency law or any other law
relating to the relief of debtors, readjustment of indebtedness, reorganization,
arrangement, composition or extension or marshalling of assets or otherwise, the
Agent is hereby irrevocably authorized at any such meeting or in any such
proceeding to receive or collect for the benefit of the Banks and the Agent any
cash or other assets of the Borrower distributed, divided or applied by way of
dividend or payment, or any securities issued on account of any Subordinated
Debt, and apply such cash to or to hold such other assets or securities as
collateral for the Senior Debt, and to apply to the Senior Debt any cash
proceeds of any realization upon such other assets or securities that the Agent
in its discretion elects to effect, until all of the Senior Debt shall have been
paid in full in cash, rendering to the Subordinating Creditors any surplus to
which the Subordinating Creditors are then entitled.
6.2 SECURITIES BY PLAN OF REORGANIZATION OR READJUSTMENT. Notwithstanding
the foregoing provisions of Section 6.1, each Subordinating Creditor shall be
entitled to receive and retain any securities of the Borrower or any other
corporation or other entity provided for by a plan of reorganization or
readjustment (a) the payment of which securities is subordinate at least to
the extent provided in this Agreement with respect to Subordinated Debt, to
the payment of all Senior Debt under any such plan of reorganization or
readjustment and (b) all other terms of which are acceptable to the Banks and
the Agent.
6.3 SUBORDINATED DEBT VOTING RIGHTS. At any such meeting of creditors or
in the event of any such case or proceeding, each Subordinating Creditor shall
retain the right to vote and otherwise act with respect to the Subordinated Debt
(including, without limitation, the right to vote to accept or reject any plan
of partial or complete liquidation, reorganization, arrangement, composition or
extension), PROVIDED that no Subordinating Creditor shall vote with respect to
any such plan or take any other action in any way so as to contest (a) the
validity of any Senior Debt or any collateral therefor or guaranties thereof,
(b) the relative rights and duties of any holders of any Senior Debt established
in any instruments or agreements creating or evidencing any of the Senior Debt
with respect to any of such collateral or guaranties or (c) any Subordinating
Creditor's obligations and agreements set forth in this Agreement.
7. SUBORDINATION. The Senior Debt, the Credit Agreement and the other Loan
Documents and any and all other documents and instruments evidencing or creating
the Senior Debt and all guaranties, mortgages, security agreements, pledges and
other collateral guarantying or securing the Senior Debt or any part thereof
shall be senior to the Subordinated Debt and all of the Subordinated Documents
irrespective of the time of the execution, delivery or issuance of any thereof.
The Subordinating Creditors hereby acknowledge and agree that the Subordinated
Debt is unsecured, is not guaranteed by any Person, the terms of such
Subordinated Documents do not provide for such Subordinated Debt to be secured
or
5
<PAGE>
guaranteed, and the Subordinating Creditors will not accept any security or
guarantees of the Subordinated Debt without the prior written consent of the
Agent.
8. BANKS' FREEDOM OF DEALING. Each Subordinating Creditor agrees, with
respect to the Senior Debt and any and all collateral therefor or guaranties
thereof, that the Borrower and the Banks may agree to (a) increase the amount of
the Senior Debt, provided that for purposes of this Agreement, that portion of
the Senior Debt which is entitled to the subordination provisions contained
herein shall be limited to all Obligations under the Credit Agreement and the
other Loan Documents PROVIDED that the aggregate principal amount thereof does
not exceed $34,000,000 at any time outstanding less the amount of any mandatory
principal payments made under the Credit Agreement that has permanently reduced
the borrowing capacity of the Borrower thereunder or (b) otherwise modify the
terms of any of the Senior Debt, and the Banks may grant extensions of the time
of payment or performance to and make compromises, including releases of
collateral or guaranties, and settlements with the Borrower and all other
persons, in each case without the consent of any Subordinating Creditor or the
Borrower and without affecting the agreements of any Subordinating Creditor or
the Borrower contained in this Agreement; PROVIDED however, that nothing
contained in this Section 8 shall constitute a waiver of the right of the
Borrower itself to agree or consent to a settlement or compromise of a claim
which the Agent or any Bank may have against the Borrower.
9. MODIFICATION OR SALE OF THE SUBORDINATED DEBT. No Subordinating
Creditor will, at any time while this Agreement is in effect, modify any of the
terms of any of the Subordinated Debt or any of the Subordinated Documents
except as expressly permitted by the Credit Agreement; nor will any
Subordinating Creditor sell, transfer, pledge, assign, hypothecate or otherwise
dispose of any or all of the Subordinated Debt to any person other than a person
who agrees in a writing, satisfactory in form and substance to the Agent, to
become a party hereto and to succeed to the rights and to bound by all of the
obligations of a Subordinating Creditor hereunder. In the case of any such
disposition by any Subordinating Creditor, such Subordinating Creditor will
notify the Agent at least ten (10) days prior to the date of any of such
intended disposition.
10. BORROWER'S OBLIGATIONS ABSOLUTE. Nothing contained in this Agreement
shall impair, as between the Borrower and any Subordinating Creditor, the
obligation of the Borrower to pay to such Subordinating Creditor all amounts
payable in respect of the Subordinated Debt as and when the same shall become
due and payable in accordance with the terms thereof, or prevent such
Subordinating Creditor (except as expressly otherwise provided in Section 3 or
Section 6) from exercising all rights, powers and remedies otherwise
permitted by Subordinated Documents and by applicable law upon a default in
the payment of the Subordinated Debt or under any Subordinated Document, all,
however, subject to the rights of the Agent and the Banks as set forth in
this Agreement.
11. TERMINATION OF SUBORDINATION. This Agreement shall continue in full
force and effect, and the obligations and agreements of each Subordinating
Creditor and the Borrower hereunder shall continue to be fully operative, until
all of the Senior Debt shall have been paid
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<PAGE>
and satisfied in full in cash and such full payment and satisfaction shall be
final and not avoidable. To the extent that the Borrower or any guarantor of or
provider of collateral for the Senior Debt makes any payment on the Senior Debt
that is subsequently invalidated, declared to be fraudulent or preferential or
set aside or is required to be repaid to a trustee, receiver or any other party
under any bankruptcy, insolvency or reorganization act, state or federal law,
common law or equitable cause (such payment being hereinafter referred to as a
"Voided Payment"), then to the extent of such Voided Payment, that portion of
the Senior Debt that had been previously satisfied by such Voided Payment shall
be revived and continue in full force and effect as if such Voided Payment had
never been made. In the event that a Voided Payment is recovered from the Agent
or any Bank, an Event of Default shall be deemed to have existed and to be
continuing under the Credit Agreement from the date of the Agent's or such
Bank's initial receipt of such Voided Payment until the full amount of such
Voided Payment is restored to the Agent or such Bank. During any continuance of
any such Event of Default, this Agreement shall be in full force and effect with
respect to the Subordinated Debt. To the extent that any Subordinating Creditor
has received any payments with respect to the Subordinated Debt subsequent to
the date of the Agent's or any Bank's initial receipt of such Voided Payment and
such payments have not been invalidated, declared to be fraudulent or
preferential or set aside or are required to be repaid to a trustee, receiver,
or any other party under any bankruptcy act, state or federal law, common law or
equitable cause, such Subordinating Creditor shall be obligated and hereby
agrees that any such payment so made or received shall be deemed to have been
received in trust for the benefit of the Agent or such Bank, and such
Subordinating Creditor hereby agrees to pay to the Agent for the benefit of the
Agent or (as the case may be) such Bank, upon demand, the full amount so
received by such Subordinating Creditor during such period of time to the extent
necessary fully to restore to the Agent or such Bank the amount of such Voided
Payment. Upon the payment and satisfaction in full in cash of all of the Senior
Debt, which payment shall be final and not avoidable, this Agreement will
automatically terminate without any additional action by any party hereto.
12. NOTICES. All notices and other communications which are required and
may be given pursuant to the terms of this Agreement shall be in writing and
shall be sufficient and effective in all respects if given in writing or
telecopied, delivered or mailed by registered or certified mail, postage
prepaid, as follows:
If to the Agent: BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attention: John B. Desmond, Vice President
with a copy to: Marion Giliberti Barish, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
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If to the Subordinating
Creditors: Summit Partners
600 Atlantic Avenue
Boston, Massachusetts 02110
Attention: Mr. Thomas S. Roberts
with a copy to: James Westra, Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
If to the Borrower: Stride & Associates, Inc.
222 Berkeley Street, Suite 1620
Boston, Massachusetts 02116
Attention: Chief Executive Officer
or such other address or addresses as any party hereto shall have designated by
written notice to the other parties hereto. Notices shall be deemed given and
effective upon the earlier to occur of (a) the third day following deposit
thereof in the U.S. mail or (b) receipt by the party to whom such notice is
directed.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A
SEALED INSTRUMENT UNDER SUCH LAWS.
14. WAIVER OF JURY TRIAL. EACH OF THE SUBORDINATING CREDITORS AND THE
BORROWER EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE SUBORDINATING CREDITORS
AND THE BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER
IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. EACH OF THE SUBORDINATING CREDITORS AND THE BORROWER (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY BANK HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY BANK WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE AGENT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
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15. SUBROGATION, ETC. Subject to the indefeasible repayment in full in
cash of all Senior Debt, the holders of the Subordinated Debt shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of assets of the Borrower made on the Senior Debt until the
Subordinated Debt shall be paid in full and, for the purposes of such
subrogation, no payments or distributions to the holders of Senior Debt of any
cash, property or securities to which the holders of the Subordinated Debt would
be entitled except for the provisions of this Agreement, and no payment pursuant
to the provisions of this Agreement to the holders of Senior Debt, by the
holders of the Subordinated Debt, shall, as between the Borrower, the creditors
of the Borrower (other than the holders of Senior Debt) and the holders of the
Subordinated Debt, be deemed to be a payment by the Borrower to or on account of
Senior Debt; it being understood that the provisions of this Agreement are and
are intended solely for the purpose of defining the relative rights of the
holders of the Subordinated Debt on the one hand, and the holders of Senior Debt
on the other hand.
16. MISCELLANEOUS. This Agreement may be executed in several counterparts
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against which
enforcement is sought. The Agent, acting upon the instructions of the requisite
Banks, may, in their sole and absolute discretion, waive any provisions of this
Agreement benefiting the Agent and the Banks; PROVIDED, HOWEVER, that such
waiver shall be effective only if in writing and signed by the Agent and shall
be limited to the specific provision or provisions expressly so waived. This
Agreement shall be binding upon the successors and assigns of each Subordinating
Creditor and the Borrower and shall inure to the benefit of the Agent and the
Banks, the Agent's and the Banks' respective successors and assigns, any lender
or lenders refunding or refinancing any of the Senior Debt and their respective
successors and assigns, but shall not otherwise create any rights or benefits
for any third party. In the event that any lender or lenders refund or refinance
any of the Senior Debt, the terms "Credit Agreement", "Loan Documents", "Event
of Default" and the like shall refer MUTATIS MUTANDIS to the agreements and
instruments in favor of such lender or lenders and to the related definitions
contained therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BANKBOSTON, N.A., As Agent
By: /s/ John B. Desmond
-------------------------------
John B. Desmond, Vice President
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SUMMIT INVESTORS III, L.P.
By: /s/ Tom Roberts
---------------------------------
Title
SUMMIT SUBORDINATED DEBT FUND II, L.P.
By: /s/ Tom Roberts
--------------------------------
Title:
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichaud
--------------------------------
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COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss June 4, 1998
Then personally appeared the above-named Tom Roberts, of Summit
Investors III, L.P. and acknowledged the foregoing instrument to be his free
act and deed and the free act and deed of Summit Investors III, L.P.
Before me, /s/ Mary Harrington
---------------------------------------
Notary Public
My Commission expires: 9/13/02
-----------------
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss June 4, 1998
Then personally appeared the above-named Tom Roberts, of Summit
Subordinated Debt Fund II, L.P. and acknowledged the foregoing instrument to
be his free act and deed and the free act and deed of Summit Debt Fund II,L.P.
Before me,
/s/ Mary Harrington
---------------------------------------
Notary Public
My Commission expires: 9/13/02
-----------------
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss June 4, 1998
Then personally appeared the above-named Michael Robichaud, President of
Stride & Associates, Inc. and acknowledged the foregoing instrument to be his
free act and deed and the free act and deed of Stride & Associates, Inc.
Before me,
/s/ Mary Harrington
---------------------------------------
Notary Public
My Commission expires: 9/13/02
-----------------
11
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Exhibit 10.19
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 4, 1998, between STRIDE &
ASSOCIATES, INC., a Delaware corporation (the "Company"), and BANKBOSTON,
N.A., a national banking association, as agent (hereinafter, in such
capacity, the "Agent") for itself and other banking institutions
(hereinafter, collectively, the "Banks") which are or may become parties to a
Revolving Credit and Term Loan Agreement dated as of June 4, 1998 (as amended
and in effect from time to time, the "Credit Agreement"), among the Company,
the Banks and the Agent.
WHEREAS, it is a condition precedent to the Banks' making any loans
or otherwise extending credit to the Company under the Credit Agreement that
the Company execute and deliver to the Agent, for the benefit of the Banks
and the Agent, a security agreement in substantially the form hereof; and
WHEREAS, the Company wishes to grant security interests in favor of
the Agent, for the benefit of the Banks and the Agent, as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. All capitalized terms used herein without
definitions shall have the respective meanings provided therefor in the
Credit Agreement. All terms defined in the Uniform Commercial Code of the
Commonwealth of Massachusetts and used herein shall have the same definitions
herein as specified therein.
2. GRANT OF SECURITY INTEREST.
2.1 COLLATERAL GRANTED. The Company hereby grants to the
Agent, for the benefit of the Banks and the Agent, to secure the payment and
performance in full of all of the Obligations, a security interest in and so
pledges and assigns to the Agent, for the benefit of the Banks and the Agent,
the following properties, assets and rights of the Company, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof (all of the same being hereinafter called the "Collateral"):
All personal and fixture property of every kind and nature
including without limitation all furniture, fixtures,
equipment, raw materials, inventory, other goods, accounts,
contract rights, rights to the payment of money, insurance
refund claims and all other insurance claims and proceeds,
tort claims, chattel paper, documents, instruments,
securities and other investment property, deposit accounts,
rights to proceeds of letters of credit and all general
intangibles including, without limitation, all tax refund
claims, license fees, patents, patent applications,
trademarks,
<PAGE>
trademark applications, trade names, copyrights, copyright
applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights,
computer programs, computer software, engineering drawings,
service marks, customer lists, goodwill, and all licenses,
permits, agreements of any kind or nature pursuant to which
the Company possesses, uses or has authority to possess or
use property (whether tangible or intangible) of others or
others possess, use or have authority to possess or use
property (whether tangible or intangible) of the Company,
and all recorded data of any kind or nature, regardless of
the medium of recording including, without limitation, all
software, writings, plans, specifications and schematics.
2.2 DELIVERY OF INSTRUMENTS, ETC.
(a) Pursuant to the terms hereof, the Company has
endorsed, assigned and delivered to the Agent all negotiable or
non-negotiable instruments, certificated securities and chattel
paper pledged by it hereunder, together with instruments of transfer
or assignment duly executed in blank as the Agent may have
specified. In the event that the Company shall, after the date of
this Agreement, acquire any other negotiable or non-negotiable
instruments, certificated securities or chattel paper to be pledged
by it hereunder, the Company shall forthwith endorse, assign and
deliver the same to the Agent, accompanied by such instruments of
transfer or assignment duly executed in blank as the Agent may from
time to time specify.
(b) To the extent that any securities now or
hereafter acquired by the Company are uncertificated and are issued
to the Company or its nominee directly by the issuer thereof, the
Company shall cause the issuer to note on its books the security
interest of the Agent in such securities and shall cause the issuer,
pursuant to an agreement in form and substance satisfactory to the
Agent, to agree to comply with instructions from the Agent as to
such securities, without further consent of the Company or such
nominee. To the extent that any securities, whether certificated or
uncertificated, or other financial assets now or hereafter acquired
by the Company are held by the Company or its nominee through a
securities intermediary, the Company shall (i) cause such securities
intermediary to note on its books the security interest of the Agent
in such securities or other financial assets and to confirm such
notation promptly to the Agent and (ii), at the request of the
Agent, cause such securities intermediary, pursuant to an agreement
in form and substance satisfactory to the Agent, to agree to comply
with entitlement orders or other instructions from the Agent as to
such securities or other financial assets, without further consent
of the Company or such nominee. The Agent agrees with the Company
that the Agent shall not give any such entitlement orders or
instructions to any such issuer or securities intermediary unless an
Event of Default has occurred and is continuing and the Agent has
elected to exercise its rights and remedies as contemplated by
Section 14.
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<PAGE>
(c) To the extent that the Company is a
beneficiary under any written letter of credit now or hereafter
issued in favor of the Company, the Company shall deliver such
letter of credit to the Agent. The Agent shall from time to time, at
the request and expense of the Company, make such arrangements with
the Company as are in the Agent's reasonable judgment necessary and
appropriate so that the Company may make any drawing to which the
Company is entitled under such letter of credit, without impairment
of the Agent's perfected security interest in the Company's rights
to proceeds of such letter of credit or in the actual proceeds of
such drawing. At the Agent's request, the Company shall, for any
letter of credit, whether or not written, now or hereafter issued in
favor of the Company as beneficiary, execute and deliver to the
issuer and any confirmer of such letter of credit an assignment of
proceeds form, in favor of the Agent and satisfactory to the Agent
and such issuer or (as the case may be) such confirmer, requiring
the proceeds of any drawing under such letter of credit to be paid
directly to the Agent for application as provided in the Credit
Agreement.
2.3 EXCLUDED COLLATERAL. Notwithstanding the foregoing
provisions of this Section 2, such grant of security interest shall not
extend to, and the term "Collateral" shall not include, any chattel paper and
general intangibles which are now or hereafter held by the Company as
licensee, lessee or otherwise, to the extent that (a) such chattel paper and
general intangibles are not assignable or capable of being encumbered as a
matter of law or under the terms of the license, lease or other agreement
applicable thereto (but solely to the extent that any such restriction shall
be enforceable under applicable law), without the consent of the licensor or
lessor thereof or other applicable party thereto and (b) such consent has not
been obtained; PROVIDED, HOWEVER, that the foregoing grant of security
interest shall extend to, and the term "Collateral" shall include, (i) any
and all proceeds of such chattel paper and general intangibles to the extent
that the assignment or encumbering of such proceeds is not so restricted and
(ii) upon any such licensor, lessor or other applicable party consent with
respect to any such otherwise excluded chattel paper or general intangibles
being obtained, thereafter such chattel paper or general intangibles as well
as any and all proceeds thereof that might have theretofore have been
excluded from such grant of a security interest and the term "Collateral".
3. TITLE TO COLLATERAL, ETC. The Company is the owner of the
Collateral free from any adverse lien, security interest or other
encumbrance, except for the security interest created by this Security
Agreement and other liens permitted by the Credit Agreement. None of the
Collateral constitutes, or is the proceeds of, "farm products" as defined in
Section 9-109(3) of the Uniform Commercial Code of the Commonwealth of
Massachusetts. None of the account debtors in respect of any accounts,
chattel paper or general intangibles and none of the obligors in respect of
any instruments included in the Collateral is a governmental authority
subject to the Federal Assignment of Claims Act.
4. CONTINUOUS PERFECTION. The Company's place of business or, if
more than one, chief executive office is indicated on the Perfection
Certificate delivered to the Agent herewith (the "Perfection Certificate").
The Company will not change the same, or the name, identity
3
<PAGE>
or corporate structure of the Company in any manner, without providing at
least thirty (30) days prior written notice to the Agent. The Collateral, to
the extent not delivered to the Agent pursuant to Section 2.2, will be kept
at those locations listed on the Perfection Certificate and the Company will
not remove the Collateral from such locations, without providing at least
thirty (30) days prior written notice to the Agent.
5. NO LIENS. Except for the security interest herein granted and
liens permitted by the Credit Agreement, the Company shall be the owner of
the Collateral free from any lien, security interest or other encumbrance,
and the Company shall defend the same against all claims and demands of all
persons at any time claiming the same or any interests therein adverse to the
Agent or any of the Banks. The Company shall not pledge, mortgage or create,
or suffer to exist a security interest in the Collateral in favor of any
person other than the Agent, for the benefit of the Banks and the Agent,
except for liens permitted by the Credit Agreement.
6. NO TRANSFERS. The Company will not sell or offer to sell or
otherwise transfer the Collateral or any interest therein except as permitted
under the Credit Agreement.
7. INSURANCE. The Company will maintain insurance as provided for in
the Credit Agreement.
8. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW. The Company will
keep the Collateral in good order and repair, normal wear and tear excepted,
and will not use the same in violation of law or any policy of insurance
thereon. The Agent, or its designee, may inspect the Collateral at any
reasonable time, wherever located. The Company will pay promptly when due all
taxes, assessments, governmental charges and levies upon the Collateral or
incurred in connection with the use or operation of such Collateral or
incurred in connection with this Agreement. The Company has at all times
operated, and the Company will continue to operate, its business in
compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and
local statutes and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances.
9. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
9.1 EXPENSES INCURRED BY AGENT. In its discretion, upon the
occurrence and during the continuation of an Event of Default the Agent may
discharge taxes and other encumbrances at any time levied or placed on any of
the Collateral, make repairs thereto and pay any necessary filing fees. The
Company agrees to reimburse the Agent on demand for any and all expenditures
so made. The Agent shall have no obligation to the Company to make any such
expenditures, nor shall the making thereof relieve the Company of any default.
9.2 AGENT'S OBLIGATIONS AND DUTIES. Anything herein to the
contrary notwithstanding, the Company shall remain liable under each contract
or agreement comprised
4
<PAGE>
in the Collateral to be observed or performed by the Company thereunder.
Neither the Agent nor any Bank shall have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement
or the receipt by the Agent or any Bank of any payment relating to any of the
Collateral, nor shall the Agent or any Bank be obligated in any manner to
perform any of the obligations of the Company under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Bank in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Bank may be entitled at
any time or times. The Agent's sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Uniform Commercial Code of the Commonwealth of
Massachusetts or otherwise, shall be to deal with such Collateral in the same
manner as the Agent deals with similar property for its own account.
10. SECURITIES AND DEPOSITS. The Agent may at any time, at its
option, upon the occurrence and during the continuation of an Event of
Default transfer to itself or any nominee any securities constituting
Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations. Whether or not any Obligations are
due, the Agent may demand, sue for, collect, or make any settlement or
compromise which it deems desirable with respect to the Collateral.
Regardless of the adequacy of Collateral or any other security for the
Obligations, any deposits or other sums at any time credited by or due from
the Agent or any Bank to the Company may at any time upon the occurrence and
during the continuation of an Event of Default be applied to or set off
against any of the Obligations.
11. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS. If an Event
of Default shall have occurred and be continuing, the Company shall, at the
request of the Agent, notify account debtors on accounts, chattel paper and
general intangibles of the Company and obligors on instruments for which the
Company is an obligee of the security interest of the Agent in any account,
chattel paper, general intangible or instrument and that payment thereof is
to be made directly to the Agent or to any financial institution designated
by the Agent as the Agent's agent therefor, and the Agent may itself, if an
Event of Default shall have occurred and be continuing, without notice to or
demand upon the Company, so notify account debtors and obligors. After the
making of such a request or the giving of any such notification, the Company
shall hold any proceeds of collection of accounts, chattel paper, general
intangibles and instruments received by the Company as trustee for the Agent,
for the benefit of the Banks and the Agent, without commingling the same with
other funds of the Company and shall turn the same over to the Agent in the
identical form received, together with any necessary endorsements or
assignments. The Agent shall apply the proceeds of collection of accounts,
chattel paper, general intangibles and instruments received by the Agent to
the Obligations, such proceeds to be immediately entered after final payment
in cash or solvent credits of the items giving rise to them.
5
<PAGE>
12. FURTHER ASSURANCES. The Company, at its own expense, shall do,
make, execute and deliver all such additional and further acts, things,
deeds, assurances and instruments as the Agent may require and which is
commercially reasonable more completely to vest in and assure to the Agent
and the Banks their respective rights hereunder or in any of the Collateral,
including, without limitation, (a) executing, delivering and, where
appropriate, filing financing statements and continuation statements under
the Uniform Commercial Code, (b) obtaining governmental and other third party
consents and approvals, including without limitation any consent of any
licensor, lessor or other applicable party referred to in Section 2.3, (c)
obtaining waivers from mortgagees and landlords and (d) taking all actions
required by Sections 8-313 and 8-321 of the Uniform Commercial Code (1990) or
Sections 8-106 and 9-115 of the Uniform Commercial Code (1994), as applicable
in each relevant jurisdiction, with respect to certificated and
uncertificated securities.
13. POWER OF ATTORNEY.
13.1 APPOINTMENT AND POWERS OF AGENT. The Company hereby
irrevocably constitutes and appoints the Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of the Company or in the Agent's own name, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and
to execute any and all documents and instruments that may be necessary or
desirable to accomplish the purposes of this Agreement and, without limiting
the generality of the foregoing, hereby gives said attorneys the power and
right, on behalf of the Company, without notice to or assent by the Company,
to do the following:
(a) upon the occurrence and during the continuance
of an Event of Default, generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the
Collateral in such manner as is consistent with the Uniform
Commercial Code of the Commonwealth of Massachusetts and as fully
and completely as though the Agent were the absolute owner thereof
for all purposes, and to do at the Company' expense, at any time, or
from time to time, all acts and things which the Agent deems
necessary to protect, preserve or realize upon the Collateral and
the Agent's security interest therein, in order to effect the intent
of this Agreement, all as fully and effectively as the Company might
do, including, without limitation, (i) the filing and prosecuting of
registration and transfer applications with the appropriate federal
or local agencies or authorities with respect to trademarks,
copyrights and patentable inventions and processes, (ii) upon
written notice to the Company, the exercise of voting rights with
respect to voting securities, which rights may be exercised, if the
Agent so elects, with a view to causing the liquidation in a
commercially reasonable manner of assets of the issuer of any such
securities and (iii) the execution, delivery and recording, in
connection with any sale or other disposition of any Collateral, of
the endorsements, assignments or other instruments of conveyance or
transfer with respect to such Collateral; and
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<PAGE>
(b) to file such financing statements with respect
hereto, with or without the Company's signature, or a photocopy of
this Agreement in substitution for a financing statement, as the
Agent may deem appropriate and to execute in the Company's name such
financing statements and amendments thereto and continuation
statements which may require the Company's signature.
13.2 RATIFICATION BY COMPANY. To the extent permitted by
law, the Company hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
13.3 NO DUTY ON AGENT. The powers conferred on the Agent
hereunder are solely to protect the interests of the Agent and the Banks in
the Collateral and shall not impose any duty upon the Agent to exercise any
such powers. The Agent shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees or agents shall be responsible
to the Company for any act or failure to act, except for the Agent's own
gross negligence or willful misconduct.
14. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Agent may, without notice to or demand upon the Company,
declare this Agreement to be in default, and the Agent shall thereafter have
in any jurisdiction in which enforcement hereof is sought, in addition to all
other rights and remedies, the rights and remedies of a secured party under
the Uniform Commercial Code, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Agent may, so far as
the Company can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Agent may in
its discretion require the Company to assemble all or any part of the
Collateral at such location or locations within the state(s) of the Company's
principal office(s) or at such other locations as the Agent may designate.
Unless the Collateral is perishable or threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
to the Company at least five (5) Business Days prior written notice of the
time and place of any public sale of Collateral or of the time after which
any private sale or any other intended disposition is to be made. The Company
hereby acknowledges that five Business Days prior written notice of such sale
or sales shall be reasonable notice. In addition, the Company waives any and
all rights that it may have to a judicial hearing in advance of the
enforcement of any of the Agent's rights hereunder, including, without
limitation, its right following an Event of Default to take immediate
possession of the Collateral and to exercise its rights with respect thereto.
To the extent that any of the Obligations are to be paid or performed by a
person other than the Company, the Company waives and agrees not to assert
any rights or privileges which it may have under Section 9-112 of the Uniform
Commercial Code of the Commonwealth of Massachusetts.
15. NO WAIVER, ETC. The Company waives demand, notice, protest, notice
of acceptance of this Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect to both the
Obligations and the Collateral, the Company assents to
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<PAGE>
any extension or postponement of the time of payment or any other indulgence,
to any substitution, exchange or release of or failure to perfect any
security interest in any Collateral, to the addition or release of any party
or person primarily or secondarily liable, to the acceptance of partial
payment thereon and the settlement, compromising or adjusting of any thereof,
all in such manner and at such time or times as the Agent may deem advisable.
The Agent shall have no duty as to the collection or protection of the
Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of any rights pertaining
thereto beyond the safe custody thereof as set forth in Section 9.2. The
Agent shall not be deemed to have waived any of its rights upon or under the
Obligations or the Collateral unless such waiver shall be in writing and
signed by the Agent with the consent of the Majority Banks. No delay or
omission on the part of the Agent in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right on any future occasion.
All rights and remedies of the Agent with respect to the Obligations or the
Collateral, whether evidenced hereby or by any other instrument or papers,
shall be cumulative and may be exercised singularly, alternatively,
successively or concurrently at such time or at such times as the Agent deems
expedient.
16. MARSHALLING. Neither the Agent nor any Bank shall be required to
marshal any present or future collateral security (including but not limited
to this Agreement and the Collateral) for, or other assurances of payment of,
the Obligations or any of them or to resort to such collateral security or
other assurances of payment in any particular order, and all of the rights of
the Agent hereunder and of the Agent or any Bank in respect of such
collateral security and other assurances of payment shall be cumulative and
in addition to all other rights, however existing or arising. To the extent
that it lawfully may, the Company hereby agrees that it will not invoke any
law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Agent's rights under this Agreement or under
any other instrument creating or evidencing any of the Obligations or under
which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Company hereby irrevocably waives the
benefits of all such laws.
17. PROCEEDS OF DISPOSITIONS; EXPENSES. The Company shall pay to the
Agent on demand any and all expenses, including reasonable attorneys' fees
and disbursements, incurred or paid by the Agent in protecting, preserving or
enforcing the Agent's rights under or in respect of any of the Obligations or
any of the Collateral. After deducting all of said expenses, the residue of
any proceeds of collection or sale of the Obligations or Collateral shall, to
the extent actually received in cash, be applied to the payment of the
Obligations in such order or preference as is provided in the Credit
Agreement, proper allowance and provision being made for any Obligations not
then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Section 9-504(l)(c) of
the Uniform Commercial Code of the Commonwealth of Massachusetts, any excess
shall be returned to the Company, and the Company shall remain liable for any
deficiency in the payment of the Obligations.
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18. OVERDUE AMOUNTS. Until paid, all amounts due and payable by the
Company hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Credit Agreement.
19. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
The Company agrees that any suit for the enforcement of this Agreement may be
brought in the courts of the Commonwealth of Massachusetts or any federal
court sitting therein and consents to the non-exclusive jurisdiction of such
court and to service of process in any such suit being made upon the Company
by mail at the address specified in Section 20 of the Credit Agreement. The
Company hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient court.
20. WAIVER OF JURY TRIAL. THE COMPANY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
the Company waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition
to, actual damages. The Company (a) certifies that neither the Agent or any
Bank nor any representative, agent or attorney of the Agent or any Bank has
represented, expressly or otherwise, that the Agent or any Bank would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that, in entering into the Credit Agreement and the other Loan
Documents to which the Agent or any Bank is a party, the Agent and the Banks
are relying upon, among other things, the waivers and certifications
contained in this Section 20.
21. MISCELLANEOUS. The headings of each section of this Agreement
are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon the Company and its respective successors and assigns, and shall
inure to the benefit of the Agent, the Banks and their respective successors
and assigns. If any term of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no
way be affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Company acknowledges receipt of a copy of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, the Company has
caused this Agreement to be duly executed as of the date first above written.
STRIDE & ASSOCIATES, INC.
By: /s/ Michael Robichaud
---------------------------------
Title
Accepted:
BANKBOSTON, N.A.,
as Agent
By: /s/ John B. Desmond
----------------------------------------
Title: Vice President
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 4th day of June, 1998, personally appeared Michael Robichaud
to me known personally, and who, being by me duly sworn, deposes and says that
he is the President of Stride & Associates, Inc., and that said instrument was
signed and sealed on behalf of said corporation by authority of its Board of
Directors, and said Michael Robichaud acknowledged said instrument to be the
free act and deed of said corporation.
/s/ Mary C. Harrington
--------------------------------
Notary Public
My commission expires: 9/13/02
10
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Stride & Associates,
Inc. on Form S-1 of our report dated February 1, 1999 (May __, 1999 as to Note
14), appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
New York, New York
May ___, 1999
----------------------
The financial statements included herein reflect the approval by the Company's
stockholders of the Company's five-for-one stock split of the Company's common
stock as described in Note 14 to the financial statements. The above consent is
in the form that will be signed by Deloitte & Touche LLP upon the effectiveness
of such event assuming that from February 1, 1999 to the effective date of such
event, no other events shall have occurred that would affect the accompanying
financial statements or notes thereto.
/S/ Deloitte & Touche LLP
New York, New York
March 30, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,683
<SECURITIES> 0
<RECEIVABLES> 3,472
<ALLOWANCES> 640
<INVENTORY> 0
<CURRENT-ASSETS> 6,903
<PP&E> 1,480
<DEPRECIATION> 642
<TOTAL-ASSETS> 8,348
<CURRENT-LIABILITIES> 6,200
<BONDS> 0
0
25,299
<COMMON> 35
<OTHER-SE> 4,574
<TOTAL-LIABILITY-AND-EQUITY> 8,348
<SALES> 28,804
<TOTAL-REVENUES> 28,804
<CGS> 9,849
<TOTAL-COSTS> 13,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,856
<INCOME-PRETAX> 3,794
<INCOME-TAX> 1,935
<INCOME-CONTINUING> 1,859
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,859
<EPS-PRIMARY> 0.07<F1>
<EPS-DILUTED> 0.06
<FN>
<F1>For puposes of this exhibit, primary means basic.
</FN>
</TABLE>
